Legislature(2011 - 2012)BARNES 124

03/24/2011 08:00 AM House COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 196 BULK FUEL LOANS/POWER PROJECT FUND TELECONFERENCED
Heard & Held
*+ HB 170 MUNI TAX EXEMPTION FOR CERTAIN VOLUNTEERS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                         March 24, 2011                                                                                         
                           8:07 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Cathy Engstrom Munoz, Chair                                                                                      
Representative Neal Foster, Vice Chair                                                                                          
Representative Alan Austerman                                                                                                   
Representative Alan Dick                                                                                                        
Representative Dan Saddler                                                                                                      
Representative Sharon Cissna                                                                                                    
Representative Berta Gardner                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 196                                                                                                              
"An Act relating  to the power project fund and  to the bulk fuel                                                               
revolving loan  fund; establishing a  bulk fuel loan  account and                                                               
making the bulk  fuel loan account and the bulk  fuel bridge loan                                                               
account separate accounts  in the bulk fuel  revolving loan fund;                                                               
providing for  technical assistance to rural  borrowers under the                                                               
bulk  fuel bridge  loan program;  relating to  the administration                                                               
and  investment of  the  bulk  fuel revolving  loan  fund by  the                                                               
division in  the Department of Commerce,  Community, and Economic                                                               
Development responsible  for community and regional  affairs; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 170                                                                                                              
"An  Act  relating  to  municipal   property  tax  exemptions  on                                                               
residences of certain volunteer  emergency services personnel and                                                               
the  widows   and  widowers   of  volunteer   emergency  services                                                               
personnel; and providing for an effective date."                                                                                
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 196                                                                                                                  
SHORT TITLE: BULK FUEL LOANS/POWER PROJECT FUND                                                                                 
SPONSOR(s): REPRESENTATIVE(s) EDGMON                                                                                            
                                                                                                                                
03/16/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/16/11       (H)       CRA, FIN                                                                                               
03/24/11       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
BILL: HB 170                                                                                                                  
SHORT TITLE: MUNI TAX EXEMPTION FOR CERTAIN VOLUNTEERS                                                                          
SPONSOR(s): REPRESENTATIVE(s) FEIGE                                                                                             
                                                                                                                                
02/23/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/11       (H)       CRA, FIN                                                                                               
03/24/11       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE BRYCE EDGMON                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HB 196.                                                                          
                                                                                                                                
KATHIE WASSERMAN, Executive Director                                                                                            
Alaska Municipal League (AML)                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 196.                                                                          
                                                                                                                                
DEL CONRAD, CEO                                                                                                                 
Rural Alaska Fuel Services (RAFS)                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 196.                                                                          
                                                                                                                                
PATRICK PLETNIKOFF, Mayor                                                                                                       
City of Saint George                                                                                                            
Saint George, Alaska                                                                                                            
POSITION STATEMENT:  Testified in support of HB 196.                                                                          
                                                                                                                                
MEERA KOHLER, President & CEO                                                                                                   
Alaska Village Electric Corporation (AVEC)                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of the intent of HB
196.                                                                                                                            
                                                                                                                                
DOUG IHLY, Tribal Administration                                                                                                
Chignik Lake Traditional Council                                                                                                
Chignik Lake Village                                                                                                            
Chignik Lake, Alaska                                                                                                            
POSITION STATEMENT:  During hearing of HB 196, expressed support                                                              
for the proposal to [combine the bulk fuel loan] programs.                                                                      
                                                                                                                                
SCOTT RUBY, Director                                                                                                            
Division Programs                                                                                                               
Division of Community & Regional Affairs                                                                                        
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided information on HB 196.                                                                          
                                                                                                                                
SARA FISHER-GOAD, Executive Director                                                                                            
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During hearing of HB 196, answered                                                                       
questions.                                                                                                                      
                                                                                                                                
ADAM BERG, Staff                                                                                                                
Representative Bryce Edgmon                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During hearing of HB 196, answered                                                                       
questions.                                                                                                                      
                                                                                                                                
REPRESENTATIVE ERIC FEIGE                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HB 170.                                                                          
                                                                                                                                
MICHAEL PASCHALL, Staff                                                                                                         
Representative Eric Feige                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During hearing of HB 170, answered                                                                       
questions.                                                                                                                      
                                                                                                                                
TIMOTHY ROONEY, Borough Manager                                                                                                 
City of Wrangell                                                                                                                
Wrangell, Alaska                                                                                                                
POSITION STATEMENT:  Testified in opposition to HB 170.                                                                       
                                                                                                                                
KATHIE WASSERMAN, Executive Director                                                                                            
Alaska Municipal League (AML)                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 170.                                                                       
                                                                                                                                
PAUL DELAS, President                                                                                                           
Board of Directors                                                                                                              
Chena Goldstream Fire & Rescue (CGFR)                                                                                           
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 170.                                                                          
                                                                                                                                
JEFF TUCKER, President                                                                                                          
Alaska Fire Chiefs Association;                                                                                                 
Fire Chief, North Star Volunteer Fire Department                                                                                
North Pole, Alaska                                                                                                              
POSITION STATEMENT:  Characterized HB 170 as a good tool.                                                                     
                                                                                                                                
PAT CARLSON, Assessor                                                                                                           
Fairbanks North Star Borough                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Expressed concerns with HB 170.                                                                          
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:07:15 AM                                                                                                                    
                                                                                                                                
CHAIR  CATHY  ENGSTROM  MUNOZ  called  the  House  Community  and                                                             
Regional  Affairs Standing  Committee  meeting to  order at  8:07                                                               
a.m.  Representatives Foster,  Austerman, Dick,  Saddler, Cissna,                                                               
and Gardner were present at the call to order.                                                                                  
                                                                                                                                
           HB 196-BULK FUEL LOANS/POWER PROJECT FUND                                                                        
                                                                                                                                
8:07:46 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ announced  that the first order of  business would be                                                               
HOUSE BILL  NO. 196, "An Act  relating to the power  project fund                                                               
and to  the bulk  fuel revolving loan  fund; establishing  a bulk                                                               
fuel loan account  and making the bulk fuel loan  account and the                                                               
bulk fuel bridge loan account  separate accounts in the bulk fuel                                                               
revolving loan fund; providing for  technical assistance to rural                                                               
borrowers under  the bulk fuel  bridge loan program;  relating to                                                               
the  administration and  investment  of the  bulk fuel  revolving                                                               
loan  fund  by  the  division  in  the  Department  of  Commerce,                                                               
Community,  and Economic  Development  responsible for  community                                                               
and regional affairs; and providing for an effective date."                                                                     
                                                                                                                                
8:07:53 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BRYCE EDGMON,  Alaska State  Legislature, sponsor                                                               
of  HB 196,  explained that  HB 196  would [move  the] Bulk  Fuel                                                               
Revolving Loan Fund Program (BFRLF)  to the Division of Community                                                               
& Regional  Affairs (DCRA),  which already  houses the  Bulk Fuel                                                               
Bridge Loan  Program, in order  to make it easier  for applicants                                                               
to access  the BFRLF.   Currently, if  an applicant is  denied by                                                               
the  BFRLF,  the  applicant  would  have  to  submit  a  separate                                                               
application  for the  Bulk Fuel  Bridge Loan  Program.   However,                                                               
under the  proposal in HB  196 both  programs would be  housed in                                                               
DCRA  and an  applicant could  submit one  application for  both.                                                               
Furthermore,  housing  both  programs   with  DCRA  provides  the                                                               
ability to  use local government  specialists that  are scattered                                                               
throughout the state.  Representative  Edgmon pointed out that HB
196 does have a fiscal note,  the detail for which he deferred to                                                               
staff.                                                                                                                          
                                                                                                                                
8:10:26 AM                                                                                                                    
                                                                                                                                
KATHIE  WASSERMAN, Executive  Director,  Alaska Municipal  League                                                               
(AML), related that AML is in favor  of HB 196 as it has actually                                                               
experienced  the problems  HB 196  addresses.   In fact,  AML has                                                               
observed that  much of the hindrance  in getting fuel to  some of                                                               
the communities was because of  the gap in time between obtaining                                                               
information from  the Alaska Energy  Authority and getting  it to                                                               
DCRA/DCCED, which resulted in fuel  being shipped in via plane at                                                               
an increased cost.   Ms. Wasserman mentioned that AML  has a good                                                               
relationship with  DCCED and is  able to  discuss municipalities,                                                               
but  that  same type  of  relationship  doesn't exist  with  AEA.                                                               
Therefore, AML  encourages the passage  of HB 196 to  make things                                                               
more efficient and effective for municipalities.                                                                                
                                                                                                                                
8:12:10 AM                                                                                                                    
                                                                                                                                
DEL CONRAD, CEO, Rural Alaska  Fuel Services (RAFS), provided the                                                               
following testimony:                                                                                                            
                                                                                                                                
     I am  here today to  speak in favor  of HB 196.   Since                                                                    
     its inception  in 2004 RAFS  has managed the  Bulk Fuel                                                                    
     Bridge  Loan Program,  helping  roughly 30  communities                                                                    
     finance their  annual fuel  supplies.   These borrowers                                                                    
     are  in significant  financial distress,  and therefore                                                                    
     ineligible for  loans from other  sources.  As  part of                                                                    
     the  program,  we not  only  provide  funding for  fuel                                                                    
     purchases,  we actively  engage  with  the borrowers  -                                                                    
     assisting   them   in  setting   appropriate   pricing,                                                                    
     establishing credit  and collection policies,  and even                                                                    
     holding community  meetings to  explain fuel  and power                                                                    
     costs to the  residents.  There are  currently 11 loans                                                                    
     for about  a total of  $1.6 million outstanding  in the                                                                    
     Bridge  Loan Program.   We  believe that  combining the                                                                    
     two  state   fuel  loan  programs  will   provide  more                                                                    
     efficiency   by  reducing   administrative  costs   and                                                                    
     complexity   for  both   the  loan   program  and   the                                                                    
     borrowers.   By combining the program  [there would be]                                                                    
     one application  and one review process  instead of two                                                                    
     as we  do now.   Essentially,  the Bridge  Loan Program                                                                    
     would become  similar to  a work out  group in  a bank,                                                                    
     working with the distressed  borrowers to improve their                                                                    
     pricing,   collections,  and   cash   flow.     Equally                                                                    
     important,  we believe,  is the  provision that  allows                                                                    
     for the  program administration to be  outsourced.  The                                                                    
     case  for  this was  best  made  by the  Institute  for                                                                    
     Social and  Economic Research (ISER) at  the University                                                                    
     of Alaska in their  report titled "Components of Alaska                                                                    
     Fuel  Cost:   An  Analysis of  the  Market Factors  and                                                                    
     Characteristics  that  Influence  Rural  Fuel  Prices."                                                                    
     This report was  prepared at the request  of the Senate                                                                    
     Finance  Committee and  released in  February of  2010.                                                                    
     In  their discussion  of  fuel  financing programs,  it                                                                    
     stated  the following:   "Consolidating  the Bulk  Fuel                                                                    
     Revolving  Loan  and  RAFS   bulk  fuel  program  would                                                                    
     improve  operational   efficiency,  which   could  free                                                                    
     administrative   costs   and   be   shifted   to   loan                                                                    
     capitalization."   The  Bulk Fuel  Bridge Loan  Program                                                                    
     appears  to  be both  a  more  effective and  efficient                                                                    
     program.  It's more  effective because of the condition                                                                    
     of receiving  a state  subsidized loan,  the community,                                                                    
     borrower,   receives   fuel    sales   operations   and                                                                    
     management training to help the  community learn how to                                                                    
     collect sufficient revenues to  purchase fuel without a                                                                    
     loan in the future.   It appears to be more efficiently                                                                    
     administered through  a contract with  a not-for-profit                                                                    
     organization.                                                                                                              
                                                                                                                                
8:14:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER inquired as  to what specific community or                                                               
situation this proposed change would help.                                                                                      
                                                                                                                                
MR. CONRAD  explained that  currently, a  community must  file an                                                               
application  for  the BFRLF  with  AEA.    If that  applicant  is                                                               
rejected  by AEA,  the applicant  must  file another  application                                                               
with RAFS,  the manager of  the program,  for review.   Upon RAFS                                                               
forwarding the  application to DCRA, it's  approved and financed.                                                               
Therefore,  both  the  state and  borrower  proceed  through  the                                                               
process  twice and  at times  a  considerable amount  of time  is                                                               
required.   In  further response  to Representative  Saddler, Mr.                                                               
Conrad said  he wasn't  aware of any  circumstance in  which fuel                                                               
had to be flown in because of  the delay.  However, he did recall                                                               
situations in which there was a  rush to approve Bulk Fuel Bridge                                                               
Loans before the barge left.                                                                                                    
                                                                                                                                
8:16:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER related her  understanding that using RAFS                                                               
to administer the program isn't anything new.                                                                                   
                                                                                                                                
MR.  CONRAD noted  his agreement,  and reiterated  that RAFS  has                                                               
managed  the Bulk  Fuel Bridge  Loan  Program since  it began  in                                                               
2004.                                                                                                                           
                                                                                                                                
8:17:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA  recalled that in  2008 Nikolai had  to fly                                                               
in fuel due [to the delay in funding].                                                                                          
                                                                                                                                
MR.  CONRAD recalled  that that  the situation  with Nikolai  was                                                               
some  time  ago and  that  the  community obtained  funding  from                                                               
elsewhere, [not from the BRLF].                                                                                                 
                                                                                                                                
8:18:25 AM                                                                                                                    
                                                                                                                                
PATRICK  PLETNIKOFF, Mayor,  City  of Saint  George, related  his                                                               
support for HB 196.   The City of St. George  has worked with the                                                               
RAFS  program  as the  city  and  the surrounding  community  has                                                               
struggled  to  improve  the  city's  position  in  terms  of  its                                                               
economic base.   Although St.  George sits  in the middle  of the                                                               
greatest  fishery  in the  world,  it  doesn't have  an  economy.                                                               
Therefore,  the  city  has  to   utilize  programs  that  may  be                                                               
difficult  with  which to  work.    He  related support  for  the                                                               
proposed consolidation of  the DCRA and RAFS  programs because it                                                               
would simplify  the process.   Currently, the City of  St. George                                                               
has to  first go through  the AEA process, which  usually rejects                                                               
the  city because  of fiscal  constraints or  other issues.   The                                                               
City of  St. George then  prepares another application  to submit                                                               
to RAFS.  If  there's a delay, the city and  its residents face a                                                               
hardship because  they don't have the  credits/or money available                                                               
to purchase the  fuel to keep the city's power  plant going.  The                                                               
city  has been  working with  RAFS and  since 2010  the city  has                                                               
attempted to  correct its problems.   He noted that  although the                                                               
City  of  St.  George  hasn't  participated  in  the  power  cost                                                               
equalization (PCE)  program for some  time, it's critical  to the                                                               
community and its  ability to purchase fuel for  its power plant.                                                               
Mayor  Pletnikoff related  that there  have been  times when  the                                                               
City of  St. George  had to  have fuel  flown in  from Anchorage,                                                               
which ultimately costs $12-$14 per  gallon.  In conclusion, Mayor                                                               
Pletnikoff  reiterated his  support for  HB 196  and pointed  out                                                               
that  utilizing  a  program  such   as  RAFS  would  provide  the                                                               
necessary flexibility to design  financing packages and a program                                                               
that helps get the community on its "fiscal feet."                                                                              
                                                                                                                                
8:21:42 AM                                                                                                                    
                                                                                                                                
CHAIR  MUNOZ inquired  as to  the fuel  storage capacity  for St.                                                               
George and the length of time that capacity generates energy.                                                                   
                                                                                                                                
MAYOR PLETNIKOFF informed the committee  that Delta fuels and the                                                               
village corporation in joint venture  manage the fuel operations.                                                               
Although  there   is  a  million  gallons   of  storage  capacity                                                               
available, it  was taken  out of service  and only  about 120,000                                                               
gallons in  capacity is  available.  The  joint venture  tries to                                                               
keep the capacity full.  However,  bad weather can be an obstacle                                                               
for delivery and can create a hardship.                                                                                         
                                                                                                                                
8:22:53 AM                                                                                                                    
                                                                                                                                
MEERA   KOHLER,  President   &  CEO,   Alaska  Village   Electric                                                               
Corporation  (AVEC), began  by relating  that AVEC  is a  utility                                                               
that  serves 53  villages  throughout Western  Alaska  and is  an                                                               
energy partner with  the Denali Commission.   She further related                                                               
that in the  last 10 years, AVEC has  built energy infrastructure                                                               
totaling over  $200 million  in villages that  AVEC serves.   Ms.                                                               
Kohler  informed  the committee  that  AVEC  was instrumental  in                                                               
establishing the Rural Alaska Fuel  Services in 2003.  The intent                                                               
of RAFS  was to provide  fuel tank  farm services and  support in                                                               
rural  Alaska  throughout the  state.    In  May 2004,  AVEC  was                                                               
approached  by the  administration and  established the  original                                                               
Bulk  Fuel Bridge  Loan  Program, primarily  to  deliver fuel  to                                                               
those  communities that  had a  week or  two left  in the  season                                                               
otherwise the  fuel would have  to be flown  in.  At  that point,                                                               
AVEC identified  RAFS as its  partner to administer  the program.                                                               
Two years  later, AVEC withdrew  from the program,  which allowed                                                               
RAFS to  operate the program entirely.   She noted that  RAFS has                                                               
done  a  fine job  administering  the  program.   As  a  regional                                                               
organization  that   involves  Western  Alaska,  she   chaired  a                                                               
committee  reviewing  the  fuel   supply  situation  for  village                                                               
Alaska.  Early on, the  complex and laborious process communities                                                               
must  follow in  order to  participate in  the BFRLF  Program was                                                               
targeted.   As  was  mentioned earlier,  there  is a  duplicative                                                               
process whereby a  community has to apply to  AEA first, although                                                               
it knows it  will be rejected because it has  an outstanding loan                                                               
balance or  something of that  nature.   At that point,  the same                                                               
process  has to  occur with  RAFS.   Therefore, it's  sensible to                                                               
combine  the  two  programs  and  streamline  them  such  that  a                                                               
community  can file  a single  application.   In conclusion,  Ms.                                                               
Kohler related support for the intent  of HB 196, and offered her                                                               
assistance with the process.                                                                                                    
                                                                                                                                
8:26:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER pointed  out  that  the committee  packet                                                               
includes  materials  relating  that combining  the  two  programs                                                               
would   provide    additional   efficiencies    and   advantages.                                                               
Therefore, he  asked if she would  characterize HB 196 as  a step                                                               
toward that.                                                                                                                    
                                                                                                                                
MS. KOHLER answered that HB 196  is a good step in that direction                                                               
and would  move toward streamlining operations,  the process, and                                                               
make it easier  for the communities. Ms. Kohler  related her hope                                                               
that DCRA  will ultimately take  over both programs  and contract                                                               
out [the  administration of  it] to  an entity  such as  RAFS, an                                                               
entity that's definitely qualified to administer the program.                                                                   
                                                                                                                                
8:28:19 AM                                                                                                                    
                                                                                                                                
DOUG  IHLY,  Tribal   Administration,  Chignik  Lake  Traditional                                                               
Council,  Chignik  Lake  Village,  informed  the  committee  that                                                               
Chignik Lake  has been working  with RAFS  for a couple  of years                                                               
and it has  been a pleasant experience.  In  fact, Mr. Conrad has                                                               
worked with the  village to help determine  the necessary charges                                                               
for fuel  and gas  as well  as working  on the  electric utility.                                                               
He,  too, agreed  with  the proposal  to  combine [programs]  and                                                               
eliminate  duplication.   He recalled  when Chignik  Lake applied                                                               
with AEA for a loan, the  village was fairly sure it wouldn't get                                                               
one.    However, they  knew  it  was  necessary  to do  prior  to                                                               
applying with  RAFS.  Still, it  takes time.  In  fact, this last                                                               
year he was  concerned that the process wouldn't  be completed in                                                               
enough time to have the fuel  delivered.  Mr. Ihly explained that                                                               
the village  has to wait  for its commercial fishermen  to finish                                                               
with  the fishing  season before  fuel  can be  hauled in,  which                                                               
results in a limited window between  that time and when the river                                                               
freezes.  Therefore, it's critical that  the loan is in place and                                                               
the village is able to purchase  the fuel necessary to sustain it                                                               
through the winter.   He noted that recently the  village was two                                                               
to three weeks  away from having no fuel, but  the river broke up                                                               
and the village was able to have fuel delivered.                                                                                
                                                                                                                                
8:31:36 AM                                                                                                                    
                                                                                                                                
SCOTT RUBY, Director, Division Programs,  Division of Community &                                                               
Regional Affairs,  Department of  Commerce, Community  & Economic                                                               
Development  (DCCED), reminded  the committee  that the  division                                                               
currently administers the Bulk Fuel  Bridge Loan Fund Program and                                                               
has  since  its  inception.    Furthermore,  the  division  works                                                               
closely with AEA on the BFRLF.   He explained that there were two                                                               
loan programs because in 2004  communities didn't qualify for the                                                               
BFRLF program  and were in  danger of not  having fuel.   At that                                                               
time, those  communities that couldn't  get fuel would  be placed                                                               
in  an  emergency  situation  and  thus  the  state  would  spend                                                               
resources in a more critical  situation to provide for the health                                                               
and safety  of the  communities.   The notion  was to  help these                                                               
communities normalize  such that  they receive  the fuel  and are                                                               
more  responsible for  having  their  own fuel.    At that  time,                                                               
rather than  amending the BFRLF,  funding was made  available for                                                               
the Bulk  Fuel Bridge Loan Program.   The name, Bulk  Fuel Bridge                                                               
Loan,  was derived  from the  fact  that the  funding provided  a                                                               
bridge  such  that a  community's  management  capacity could  be                                                               
built  to qualify  for the  AEA loan  or regular  commercial loan                                                               
programs.   The program operated  that way for several  years and                                                               
was  funded through  several grants,  including  grants from  the                                                               
U.S.  Department of  Agriculture (USDA),  the Denali  Commission,                                                               
and the  state.  When  the Bulk  Fuel Bridge Loan  Program began,                                                               
the administration  of that  program was  contracted out  to AVEC                                                               
and ultimately  to RAFS.   Therefore, the state approved  all the                                                               
loans, while  RAFS serviced all  the loans.    A couple  of years                                                               
later,  a legislative  audit was  performed  that determined  the                                                               
situation was  unacceptable because state funds  were being used,                                                               
but there  were no state regulations  for the program.   In 2008,                                                               
there was  a statutory change  such that funds were  brought into                                                               
the state  system and  regulations, similar to  what AEA  has for                                                               
BFRLF,  were  adopted.   Furthermore,  the  state contracts  with                                                               
RAFS, which  provides the outreach and  technical assistance such                                                               
as invoicing.   The loan  disbursements and tracking of  the loan                                                               
balances is  done by the  Division of Economic Development.   Mr.                                                               
Ruby highlighted that over the years  AEA and DCRA have worked on                                                               
the two applications and they have  reached a point at which they                                                               
are almost  identical.  In  fact, applicants  are told to  make a                                                               
photo copy of  the AEA application.  The  only difference between                                                               
the two  applications is  the promissory note  and the  fuel loan                                                               
agreement where  the entity  with which  the community  is making                                                               
the  agreement is  either AEA  or DCRA.   He  acknowledged though                                                               
that there  is redundancy  since communities  have to  submit two                                                               
different  applications  to  two   different  entities  and  it's                                                               
burdensome that  the communities  have to  certify and  the board                                                               
has  to  consider  two different  submissions  of  two  different                                                               
applications.      Therefore,   HB    196   would   address   the                                                               
aforementioned  such that  there  would be  only one  application                                                               
that's filed.                                                                                                                   
                                                                                                                                
MR. RUBY  informed the committee  that a major point  in previous                                                               
legislation was the interest rate.   Under the BFRLF, AEA charges                                                               
an interest  rate for its  loans.  He  explained that AEA  uses a                                                               
statutory  formula with  an indexed  rate  and those  communities                                                               
with  multi-year loans  are  given  a discount.    The Bulk  Fuel                                                               
Bridge Loan,  on the other hand,  has a 0 percent  interest rate.                                                               
The Bulk Fuel Bridge Loan is  going to communities that are a bad                                                               
credit risk  or are having  management difficulties  in financing                                                               
their loans.   Therefore, the notion behind the  Bulk Fuel Bridge                                                               
Loan was that the 0 percent  loan would help such communities and                                                               
as  the  Bulk Fuel  Bridge  Loan  Program built  capacity,  these                                                               
communities would qualify  for other loans.  Mr.  Ruby noted that                                                               
there has been  discussion that the 0 percent interest  loan is a                                                               
disincentive   to   improve   management.      To   address   the                                                               
aforementioned, under  HB 196 both  loans would have  an interest                                                               
rate such that a first-time  borrower would have an interest rate                                                               
of 0 percent while a second-year  borrower would have a 4 percent                                                               
interest rate.   If  the borrower has  good credit  in subsequent                                                               
years, the interest  rate is reduced by 1 percent  each year with                                                               
a floor  of 2 percent,  so long as  the borrower remains  in good                                                               
standing.   Therefore,  the legislation  creates an  incentive to                                                               
maintain  good management.    Mr. Ruby  told  the committee  that                                                               
currently  both  programs  fund  their  administration  from  the                                                               
general   fund  (GF),   but   HB  196   proposes   to  fund   the                                                               
administration  of the  programs from  the loan  fund itself  and                                                               
thus it's  a self-supporting system.   The interest rate  was set                                                               
such that  the interest from the  repayment of the loans  or from                                                               
the interest generated by the funds  is more than enough to cover                                                               
the administrative costs.                                                                                                       
                                                                                                                                
MR. RUBY  then turned to  the earlier remarks  regarding Nikolai.                                                               
He informed  the committee that  the earlier  discussed situation                                                               
in Nikolai was one in which  the barge couldn't get there because                                                               
the  water  level  was  too  low.    At  the  time,  Nikolai  had                                                               
management capacity  issues as the community  hadn't been holding                                                               
municipal elections for  some time and thus  hadn't qualified for                                                               
its  community  revenue  sharing  payments.   The  DCRA  regional                                                               
office staff  worked with Nikolai  to complete an  election, file                                                               
paperwork,  and got  the city's  budget and  financial statements                                                               
filed.  The  aforementioned resulted in the  release of Nikolai's                                                               
community revenue  sharing funds, which  provided a way  in which                                                               
to pay for the  fuel since it had to be flown  in.  He emphasized                                                               
that  the  situation  in  Alaska  is unique  since  the  fuel  is                                                               
delivered  once a  year  by  water or  plane.   Therefore,  these                                                               
communities  require very  large  capacity to  store fuel,  which                                                               
results in a large  cost to fill up.  He  related that North Star                                                               
Fuel  has been  tracking fuel  prices, which  it reported  as the                                                               
highest in the  last three years.  Mr. Ruby  concluded by stating                                                               
that  fuel  loan  programs  for  rural  Alaska  are  critical  in                                                               
maintaining their infrastructure.                                                                                               
                                                                                                                                
8:42:00 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  AUSTERMAN  pointed  out that  AEA's  fiscal  note                                                               
relates a decrement  of $53,000 and DCRA's fiscal  note relates a                                                               
cost of $80,000,  which results in a $30,000 increase  in cost to                                                               
achieve the  earlier discussed  streamlining and  efficiencies to                                                               
the loan programs.                                                                                                              
                                                                                                                                
MR. RUBY  explained that currently  DCRA receives $219,000  in GF                                                               
each year, although none of it  is used by DCRA to administer the                                                               
program.  Those funds are  either provided through a reimbursable                                                               
services agreement (RSA) to the  Division of Economic Development                                                               
for management servicing  of the loans or it's  contracted out to                                                               
RAFS  to provide  technical assistance.    Therefore, the  fiscal                                                               
note  is misleading  because  DCRA  staff time  that  is used  to                                                               
administer  the program  is not  reflected in  the administrative                                                               
funds DCRA specifically  receives to administer the  program.  He                                                               
deferred to  AEA staff  to explain  its fiscal  note and  how the                                                               
program is administered.  Mr.  Ruby related that in actuality the                                                               
funds  received from  the GF  to administer  the program  is less                                                               
than  what is  used by  the  agencies to  administer the  program                                                               
currently.  He opined that  the aforementioned is the difference.                                                               
Furthermore,  all  the  funds  are   coming  from  the  GF.    He                                                               
reiterated  that under  HB 196  the program  would be  funded and                                                               
paid for  from the  loan fund  and its  interest, and  thus there                                                               
would be a decrement of about $260,000 to the GF.                                                                               
                                                                                                                                
8:45:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA  pointed out that the  situation in Nikolai                                                               
reflects what is happening in  many communities.  She related her                                                               
understanding  that the  lowering  of the  water  table has  been                                                               
attributed to  the reason  the Kuskokwim  River doesn't  reach as                                                               
far as it  once did, which has resulted in  even the community of                                                               
McGrath experiencing problems with receiving barges.                                                                            
                                                                                                                                
MR. RUBY acknowledged that over  the last two summers McGrath has                                                               
experienced  problems  receiving  barges   late  in  the  season.                                                               
However, he  said he didn't know  to what to attribute  that.  He                                                               
noted that there have been  some significant challenges receiving                                                               
barges in the Dillingham region, particularly to Ekwok.                                                                         
                                                                                                                                
REPRESENTATIVE  CISSNA pointed  out  that why  these changes  are                                                               
happening  isn't  being  reviewed.    She  also  highlighted  the                                                               
environmental and  technical changes  and the out  migration from                                                               
villages  that are  occurring  as well.    There's enough  change                                                               
occurring that  the state  needs to determine  how to  review the                                                               
entire fuel  issue, she  opined.  Although  the state  helps with                                                               
these   difficulties,  the   state   does   things  that   aren't                                                               
sustainable.  For instance, to  these communities the state sends                                                               
equipment that requires diesel fuel.   The state isn't looking at                                                               
the  long-term  and  being  analytical  about  it,  she  charged.                                                               
Therefore, she  inquired as to  what is being done  to understand                                                               
this situation.                                                                                                                 
                                                                                                                                
MR. RUBY  deferred to the  energy experts to answer  the question                                                               
regarding the efforts to supplant  diesel.  However, he related a                                                               
critical piece  of that is  the technical assistance  that builds                                                               
management  capacity, which  doesn't  discriminate  based on  the                                                               
type of energy  being used.  Whether it's diesel  or wind energy,                                                               
there  is turn  over  in technical  staff  with basic  management                                                               
skills for those systems.   Through DCRA and its local governance                                                               
specialist as well  as through the contract  with RAFS, technical                                                               
capacity is  built so that  the local  [staff] know how  to price                                                               
fuel  properly,  no  matter  the   type  of  energy  being  used.                                                               
Therefore,   [the  program]   includes  building   the  technical                                                               
capacity in  communities, which is  transferrable to  running any                                                               
energy source or a local government, for that matter.                                                                           
                                                                                                                                
8:51:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  referred  to ISER's  analysis  of  rural                                                               
Alaska's fuel markets.  The  analysis makes some recommendations,                                                               
including co-locating  the BFRLF  and the  Bulk Fuel  Bridge Loan                                                               
programs.    He  asked  if  the  legislation  includes  the  ISER                                                               
recommendation to  make applications valid  for three years.   He                                                               
then asked if  communities routinely have an  application on file                                                               
for  the  program.    The  ISER  analysis  also  recommends  that                                                               
expansion of  the RAFS training could  avoid communities becoming                                                               
dependent on the  loan programs.  He asked if  anything in HB 196                                                               
accomplishes  the aforementioned.    Representative Saddler  then                                                               
inquired as to  the effect of HB 196 removing  the requirement of                                                               
the local governing  body to endorse an application  for the loan                                                               
programs.                                                                                                                       
                                                                                                                                
MR.  RUBY  specified   that  HB  196  would   require  an  annual                                                               
application.   Since it's  the same  application year-after-year,                                                               
communities  are   encouraged  to  refer  to   the  prior  year's                                                               
application and they don't keep a  copy on file.  He informed the                                                               
committee  that AEA  deals with  about 60  communities under  its                                                               
loan  program;  communities  that  are more  capable  and  credit                                                               
worthy  and which  no  one  hears about.    The communities  with                                                               
problems  who have  been referred  to the  Bulk Fuel  Bridge Loan                                                               
Program vary from  11-18 communities.  He noted that  for a large                                                               
number of  communities serviced under this  program [the process]                                                               
is  routine  and  there  aren't  issues.    With  regard  to  the                                                               
recommendation to expand RAFS training,  Mr. Ruby anticipated the                                                               
continuation of  the technical assistance  program under  HB 196.                                                               
Although  the legislation  doesn't specifically  relate that  the                                                               
training  will   be  expanded,  he   related  the   potential  of                                                               
expanding, particularly  since DCRA is continually  reviewing the                                                               
program  to improve  service.   However,  an  expansion would  be                                                               
dependent upon the  resources available and the need.    Speaking                                                               
to the removal of the requirement  of the local governing body to                                                               
endorse an  application for  the programs,  Mr. Ruby  related his                                                               
understanding that it  was removed because it was  an extra step.                                                               
To  his  knowledge, there  has  been  only one  application  that                                                               
wasn't approvable  by AEA because the  application didn't receive                                                               
the local governing  body's endorsement.  He said  the removal of                                                               
the   endorsement   was   part  of   the   streamlining   effort,                                                               
particularly since it was such an infrequent problem.                                                                           
                                                                                                                                
8:55:48 AM                                                                                                                    
                                                                                                                                
SARA  FISHER-GOAD, Executive  Director,  Alaska Energy  Authority                                                               
(AEA), Department of Commerce,  Community & Economic Development,                                                               
explained that part  of an employee's time is  utilized to manage                                                               
this program,  which is seasonal.   The  late summer and  fall is                                                               
when the bulk  of the applications for the program  arrive.  With                                                               
regard to  AEA's fiscal note,  she explained  that AEA has  had a                                                               
long-standing  funding source  for  the BFRLF  in  the amount  of                                                               
$53,000.   The  aforementioned funding  would be  reduced and  no                                                               
longer be  included in AEA's  operating budget.  The  fiscal note                                                               
also reflects  the proposal in HB  196 to remove the  ability for                                                               
the  loan program  to have  a fee  structure associated  with it.                                                               
Therefore, the $25  application fee and the  loan origination fee                                                               
of the BRLF would no longer be  part of the program.  Ms. Fisher-                                                               
Goad then thanked  the sponsor for working with AEA  and Mr. Ruby                                                               
to develop a  consolidated program, which was  highlighted in the                                                               
governor's  energy   report  as   was  the  elimination   of  the                                                               
incongruent interest rates between the two programs.                                                                            
                                                                                                                                
8:58:33 AM                                                                                                                    
                                                                                                                                
CHAIR  MUNOZ  asked  then  if   what  Ms.  Fisher-Goad  described                                                               
accounts for the $80,400 difference in the fiscal note.                                                                         
                                                                                                                                
MS. FISHER-GOAD said  that she didn't believe that  was quite the                                                               
connection.   The AEA  fiscal note merely  reduces the  funds AEA                                                               
would  have available  to  it  in its  operating  budget and  the                                                               
[lack] of fees as well.   With regard to interest rate estimates,                                                               
Ms.  Fisher-Goad related  that  the intent  is  for the  interest                                                               
earnings from the program to fund the program.                                                                                  
                                                                                                                                
CHAIR  MUNOZ related  her understanding  that  AEA's fiscal  note                                                               
shows a reduction  in revenue in the amount of  $53,000 and DCCED                                                               
shows an  increase in revenue in  the amount of $80,000  by 2013.                                                               
She inquired as to the difference.                                                                                              
                                                                                                                                
8:59:49 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE AUSTERMAN  said that  the $53,000 in  AEA's fiscal                                                               
note  is for  services.   Therefore,  he inquired  as  to who  is                                                               
paying the $53,000.                                                                                                             
                                                                                                                                
MS. FISHER-GOAD  explained that  the $53,000  is a  BFRLF funding                                                               
source in AEA's  operating budget, and thus the  expenses pay for                                                               
staff time devoted  to managing the program.   The funding source                                                               
is the BFRLF.                                                                                                                   
                                                                                                                                
9:00:47 AM                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD then  pointed  out that  HB  196 references  the                                                               
Power Project  fund.   She informed the  committee that  prior to                                                               
AEA receiving  a significant capital appropriation  to capitalize                                                               
the BFRLF structure,  AEA was concerned that it would  run out of                                                               
money to  commit to loans.   At the time, the  Power Project Fund                                                               
had  significantly  more  cash   available  than  it  would  use.                                                               
Therefore,  AEA structured  a process  by which  the BFRLF  could                                                               
borrow from the  Power Project Fund if necessary.   Shortly after                                                               
that, AEA  received an  injection of  cash and  thus there  is no                                                               
need  for  the BFRLF  to  borrow  from  the Power  Project  Fund.                                                               
Therefore,  HB 196  deletes that  portion of  statute as  it's no                                                               
longer necessary.                                                                                                               
                                                                                                                                
9:02:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA pointed  out that the state  doesn't have a                                                               
long-term fiscal  program and  the state  isn't looking  at rural                                                               
areas in terms of the resources  that could be developed in those                                                               
areas.  She  expressed interest in analyzing  fuel cost increases                                                               
in  terms of  the health  and social  impacts to  those in  rural                                                               
Alaska.  She asked if there  are any efforts to address the long-                                                               
term problems [related to fuel costs and heating rural Alaska].                                                                 
                                                                                                                                
MS. FISHER-GOAD,  regarding long-term programs, pointed  out that                                                               
AEA manages the Renewable Energy  Fund Program.  That program and                                                               
AEA's  effort  on  energy planning  identifies  where  there  are                                                               
available local resources  that could be developed  to provide an                                                               
alternative to the  importation of diesel fuel.   However, diesel                                                               
fuel  is an  important  part  of the  energy  resource for  rural                                                               
Alaska, particularly  in those areas  with no  other alternative.                                                               
For those communities that must  use diesel, AEA ensures that the                                                               
powerhouses  run   as  efficiently  as  possible   and  that  the                                                               
communities  have access  to the  BFRLF or  the Bulk  Fuel Bridge                                                               
Loan Program in order to  ensure the communities have a long-term                                                               
supply of fuel.  Ms.  Fisher-Goad opined that although she didn't                                                               
believe 100 percent  diesel displacement will be  achieved in the                                                               
communities  eligible for  the bulk  fuel  programs, efforts  are                                                               
being  made to  ensure there  is less  dependency on  diesel fuel                                                               
where possible.                                                                                                                 
                                                                                                                                
9:07:48 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ  inquired as  to how  long it will  take to  make the                                                               
changes proposed in HB 196.                                                                                                     
                                                                                                                                
9:08:01 AM                                                                                                                    
                                                                                                                                
ADAM  BERG,  Staff,  Representative Bryce  Edgmon,  Alaska  State                                                               
Legislature,  pointed  out  that   the  transition  provision  in                                                               
Section  10  of  HB  196  would  allow  DCRA  to  start  adopting                                                               
regulations  in order  to  meet the  January  1, 2012,  effective                                                               
date.                                                                                                                           
                                                                                                                                
9:08:43 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER expressed concern  with the elimination of                                                               
the  requirement to  receive an  endorsement  from the  governing                                                               
body.   If a utility  can take on  debt that impacts  everyone in                                                               
the community, there should be a  process by which the members of                                                               
the community would at least be  made aware of it and participate                                                               
in the decision.                                                                                                                
                                                                                                                                
MR.  BERG  said  that  he  doesn't  disagree.    That  particular                                                               
language  was suggested  by DCCED.   If  the committee  wishes to                                                               
change the  provision, the sponsor  wouldn't have a  problem with                                                               
it, he said.                                                                                                                    
                                                                                                                                
9:09:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA noted  her  agreement with  Representative                                                               
Gardner.   She then questioned  if someone could  discuss further                                                               
why the requirement was eliminated.                                                                                             
                                                                                                                                
MR. RUBY  informed the committee that  originally the requirement                                                               
to  have an  endorsement  from the  governing  body was  included                                                               
because  the BFRLF  had limited  funds.   There was  concern that                                                               
there  would need  to  be prioritization,  over  which the  local                                                               
government would have  some influence.  The  requirement was also                                                               
adopted  for  the  Bulk  Fuel  Bridge  Loan  Program  because  it                                                               
utilized  the existing  statutory  language for  the  BFRLF.   He                                                               
noted that not  all of these loans are awarded  to a governmental                                                               
entity;  some  loans  are  private   entities.    He  recalled  a                                                               
situation in which a private entity  sought a loan, but the local                                                               
government  refused  to  pass the  resolution.    Therefore,  the                                                               
private entity  wasn't eligible  to receive the  loan and  had to                                                               
seek funding elsewhere.  Mr.  Ruby said that although DCCED isn't                                                               
necessarily  opposed to  the requirement  to have  an endorsement                                                               
from the  governing body, one  of the mandates was  to streamline                                                               
the bulk fuel program.                                                                                                          
                                                                                                                                
9:12:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER  inquired  as  to  Representative  Dick's                                                               
opinion on the  elimination of the requirement of  the utility to                                                               
have an endorsement of the governing body.                                                                                      
                                                                                                                                
REPRESENTATIVE  DICK said  that it  would  be nice  if the  local                                                               
utility didn't  have to  work with  the local  government because                                                               
sometimes there is an impasse between the two.                                                                                  
                                                                                                                                
REPRESENTATIVE GARDNER  opined that an individual  who objects to                                                               
the actions of the utility would  have no recourse if there is no                                                               
governmental involvement.                                                                                                       
                                                                                                                                
REPRESENTATIVE  CISSNA  reminded  the committee  of  the  earlier                                                               
discussed  situation in  Nikolai when  it had  failed to  hold an                                                               
election.   She  interpreted that  as supporting  the need  to be                                                               
sure that communities  have the democratic process  so that there                                                               
is  broad  representation  of  the community.    The  state,  she                                                               
emphasized,  is pouring  money into  these communities  such that                                                               
they can't make their own decisions.                                                                                            
                                                                                                                                
REPRESENTATIVE  DICK remarked  that he  is struggling  because he                                                               
can see  both sides.  He  agreed that it's important  to have the                                                               
utility  responsive   to  the  community,  but   there  are  some                                                               
communities that have  such dysfunction and the  utility needs to                                                               
continue to function.                                                                                                           
                                                                                                                                
9:17:06 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ announced  that HB 196 would be held  over and public                                                               
testimony would remain open.                                                                                                    
                                                                                                                                
9:17:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA  suggested  that perhaps  the  legislation                                                               
could specify that  a private entity would not have  to have that                                                               
community buy-in.   She then asked  if the passage of  HB 196 has                                                               
an element of timeliness.                                                                                                       
                                                                                                                                
9:18:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  recalled testimony  in the  House Special                                                               
Committee  on Energy  from the  Denali  Commission relating  that                                                               
there are communities in the state  with bulk fuel farms that are                                                               
operated  by private  enterprise as  well as  publicly supported.                                                               
He said  he could  see the  inherent conflict  the aforementioned                                                               
would raise.                                                                                                                    
                                                                                                                                
9:18:34 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DICK said that he would call his communities.                                                                    
                                                                                                                                
9:18:45 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ announced that HB 196 would be held over.                                                                           
                                                                                                                                
        HB 170-MUNI TAX EXEMPTION FOR CERTAIN VOLUNTEERS                                                                    
                                                                                                                                
9:18:55 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ announced  that the final order of  business would be                                                               
HOUSE BILL  NO. 170, "An  Act relating to municipal  property tax                                                               
exemptions on residences of  certain volunteer emergency services                                                               
personnel  and the  widows and  widowers  of volunteer  emergency                                                               
services personnel; and providing for an effective date."                                                                       
                                                                                                                                
9:19:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ERIC FEIGE, Alaska  State Legislature, speaking as                                                               
the sponsor of HB 170, provided the following testimony:                                                                        
                                                                                                                                
     House Bill  170 addresses an  issue that is one  of the                                                                    
     more consistent  problems faced by  volunteer emergency                                                                    
     service   organizations,   that  is   recruitment   and                                                                    
     retention of  volunteer firefighters.   With  little or                                                                    
     no incentive  to volunteer, individuals  find something                                                                    
     else to  do with their  time.  Those that  do volunteer                                                                    
     receive  little  or  no  recognition,  except  for  the                                                                    
     satisfaction of helping a neighbor  in need.  At times,                                                                    
     this is  not enough.   House Bill  170 provides  for an                                                                    
     exemption  to municipal  property  tax  on the  primary                                                                    
     place of abode  for a resident who serves  as an active                                                                    
     volunteer with a fire  department, or emergency medical                                                                    
     or rescue  services agency,  or widow  or widower  of a                                                                    
     similar person who was an  active volunteer at the time                                                                    
     of their  death.   The exemption  applies to  the first                                                                    
     $200,000 of assessed value of real property.                                                                               
                                                                                                                                
REPRESENTATIVE  FEIGE then  explained that  Sections 1-4  provide                                                               
clarification  and  a  definition  for the  term  "volunteer"  as                                                               
stated in AS 18.15.250, as follows:     "(4)   "volunteer"  means                                                               
that  the person  is an  active  volunteer of  a first  responder                                                               
service,  a  rescue service,  an  ambulance  service, or  a  fire                                                               
department that provides emergency  medical or rescue services as                                                               
part of its  duties."  The exact numbers of  individuals who will                                                               
qualify  for this  exemption are  almost impossible  to quantify.                                                               
Based  upon information  from state  agencies, he  estimated that                                                               
statewide  there are  less than  2,000  volunteers living  within                                                               
taxing  municipalities.    Of  those 2,000,  no  data  exists  to                                                               
determine  the  number of  property  owners.   However,  informal                                                               
conversations with  fire departments  suggest that about  half of                                                               
the membership of most departments  own property.  Representative                                                               
Feige  expected   the  exemption  to  primarily   help  with  the                                                               
retention  of  stable community  members  that  provide the  core                                                               
leadership in a  department.  As noted in the  letters of support                                                               
for  HB 170,  many of  the  volunteers are  relatively young  and                                                               
don't own property.   The exemption would help  the department in                                                               
terms of  those volunteers  in middle  management positions.   He                                                               
pointed  out that  HB 170  doesn't make  the exemption  optional,                                                               
although  he  said  he  wasn't  opposed  to  it  being  optional.                                                               
However,  if the  exemption being  elective is  important to  the                                                               
passage of  the legislation, it  could be amended such  that it's                                                               
the  responsibility of  the local  taxing entity  to vote  not to                                                               
extend the  exemption.  Representative Feige  said he anticipated                                                               
that  with  the  passage  of  HB  170,  [fire]  departments  will                                                               
experience  reduced turnover,  improved training  and capability,                                                               
which will ultimately lower their  insurance rating and result in                                                               
lower home insurance rates in the area.                                                                                         
                                                                                                                                
9:25:24 AM                                                                                                                    
                                                                                                                                
CHAIR  MUNOZ noted  that  the mill  rate in  Juneau  is about  12                                                               
mills.   She  inquired  as  to the  mill  rate  in Fairbanks  and                                                               
Anchorage.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  FEIGE  replied  no,   but  related  that  in  his                                                               
district the areawide mill rate is  11 mills and the non areawide                                                               
mill rate is 2 mills for a total  of about 13 mills in the Mat-Su                                                               
Valley.                                                                                                                         
                                                                                                                                
9:25:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE AUSTERMAN  directed attention  to page 1,  line 7,                                                               
and inquired as to the use of the term "may."                                                                                   
                                                                                                                                
REPRESENTATIVE FEIGE  clarified that  "may" doesn't speak  to the                                                               
entire  exemption,  but rather  it  refers  to  the fact  that  a                                                               
municipality  may require  that individuals  receive a  permanent                                                               
fund or that the individuals  would be eligible for the permanent                                                               
fund.                                                                                                                           
                                                                                                                                
9:27:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DICK  said that  he likes the  idea, but  asked if                                                               
this  would be  a  disincentive  for people  who  are renters  to                                                               
volunteer.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  FEIGE  answered that  he  wasn't  sure it  was  a                                                               
disincentive, but  it certainly wouldn't apply  to volunteers who                                                               
rent rather than own property.                                                                                                  
                                                                                                                                
9:27:27 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER related  her  understanding that  Chugiak                                                               
has  a volunteer  firefighter force  that  receives a  retirement                                                               
benefit  and workers'  compensation.   There  are also  volunteer                                                               
firefighters who  receive stipends  and pension benefits.   Would                                                               
the  aforementioned volunteer  firefighters be  "volunteers," she                                                               
asked.  She also inquired as to the definition of "active."                                                                     
                                                                                                                                
REPRESENTATIVE  FEIGE clarified  that  Representative Gardner  is                                                               
referring  to a  paid  on-call volunteer  firefighter versus  the                                                               
separate  category  of  volunteer  that doesn't  get  paid.    He                                                               
related that HB 170 would apply  only to volunteers.  With regard                                                               
to the  definition of "active," Representative  Feige pointed out                                                               
that the  legislation specifies  municipalities determine  how to                                                               
apply that  term.  He  suggested he would  leave it to  the local                                                               
fire chief to  determine who the "active"  volunteers are because                                                               
every year  fire departments that  want to be recognized  as such                                                               
by the  state fire marshal have  to submit rosters to  the state.                                                               
The rosters  specify the various  personnel and whether  they are                                                               
full-time, paid on-call, or volunteer.                                                                                          
                                                                                                                                
REPRESENTATIVE GARDNER asked if a  firefighter who isn't paid but                                                               
receives benefits would be considered a volunteer.                                                                              
                                                                                                                                
REPRESENTATIVE  FEIGE  informed  the  committee  that  state  law                                                               
allows fire departments to  extend workers' compensation benefits                                                               
to volunteer firefighters,  even though they are  not being paid.                                                               
He  explained  that  an  annual  salary  of  $2,000  is  used  to                                                               
determine the  workers' compensation benefit.   Regarding whether                                                               
workers' compensation would qualify  as a benefit, Representative                                                               
Feige said he didn't believe it would.                                                                                          
                                                                                                                                
REPRESENTATIVE   GARDNER   then    asked   if   those   volunteer                                                               
firefighters  who  participate  in   pension  plans  would  still                                                               
qualify as a volunteer [under HB 170].                                                                                          
                                                                                                                                
9:31:00 AM                                                                                                                    
                                                                                                                                
MICHAEL PASCHALL, Staff, Representative  Eric Feige, Alaska State                                                               
Legislature,  related  that  some states  have  enacted  specific                                                               
pension  programs for  volunteers.   Therefore, he  expected that                                                               
receipt  of  a pension  plan  doesn't  eliminate one  from  being                                                               
classified as a volunteer.                                                                                                      
                                                                                                                                
9:31:28 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ  asked whether  there would be  a legal  problem with                                                               
providing a  benefit to  one class  of individuals  and not  to a                                                               
similar group  performing the  same work but  for which  they are                                                               
paid.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  FEIGE   said  that   didn't  come  up   with  his                                                               
discussion  with Legislative  Legal  and Research  Services.   He                                                               
highlighted  that the  state already  has exemptions  for certain                                                               
classes  of  people.    Furthermore,  these  are  volunteers  who                                                               
support their community.   He recalled starting  a volunteer fire                                                               
department  in his  community.   Prior  to the  existence of  the                                                               
volunteer fire  department, his community was  losing a structure                                                               
every  year.     Having  volunteer  firefighters   present  in  a                                                               
community  provides a  certain measure  of relief.   Furthermore,                                                               
having  the  volunteer fire  department  resulted  in lower  home                                                               
insurance rates for residents who  subscribed to the department's                                                               
services, which more  than offset the cost of  subscribing to the                                                               
fire department for most residents.                                                                                             
                                                                                                                                
9:34:12 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER expressed  concern with  an expansion  of                                                               
the  property  tax  exemption,   particularly  since  he's  heard                                                               
complaints from various local government  entities that the state                                                               
property tax exemption is an  unfair burden on local communities.                                                               
Although the proposal  in HB 170 would  benefit emergency medical                                                               
services  personnel and  volunteer  firefighters,  others in  the                                                               
community will face  increased property taxes to pay for  it.  He                                                               
also  expressed  concern  that   offering  salary,  benefits,  or                                                               
exemptions  as proposed  in  HB  170 would  seem  to [change  the                                                               
volunteer's  status]  and  muddies  the line.    To  extend  this                                                               
proposed  benefit   to  widows  makes  it   a  multi-generational                                                               
exemption,   which  he   indicated   is  of   concern  as   well.                                                               
Representative Saddler  related that he might  view the exemption                                                               
more favorably  if it were  provided to  [volunteer] firefighters                                                               
upon retirement,  which he  likened to  the exemption  for senior                                                               
citizens and disabled veterans.                                                                                                 
                                                                                                                                
REPRESENTATIVE FEIGE reminded the  committee that he is proposing                                                               
an  incentive  program  to  assist the  local  fire  chiefs  with                                                               
obtaining and maintaining  staff at fire departments.   He opined                                                               
that generally, most  communities want to have some  sort of fire                                                               
protection as it's more economical to  do so with volunteers.  As                                                               
mentioned earlier,  one of the  biggest problems for  fire chiefs                                                               
is recruiting  volunteers, which  would ultimately result  in the                                                               
area losing  the service or having  to pay for it,  which is more                                                               
expensive in the long term.                                                                                                     
                                                                                                                                
9:37:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE AUSTERMAN inquired as to  why the sponsor chose an                                                               
exemption in the  amount of $200,000 rather than  staying in line                                                               
with the other  exemption amounts of $150,000.   He also inquired                                                               
as to  whether the  sponsor would  oppose changing  the exemption                                                               
amount to  $150,000.  He then  recalled that the sponsor  said he                                                               
was open to  making the exemption optional rather  than making it                                                               
a state law.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE noted  that legislation,  HB 190,  has been                                                               
introduced  to  increase the  senior  property  tax exemption  to                                                               
$200,000.  However, he said that  he didn't have a problem if the                                                               
committee  decided  to  lower the  volunteer  emergency  services                                                               
personnel exemption  to $150,000.   With  regard to  the optional                                                               
aspect of HB 170, the  legislation is currently written under the                                                               
mandatory  exemptions [of  AS 29.45.030].   Placing  the proposal                                                               
under AS 29.45.050  would place it with  the optional exemptions.                                                               
If  the committee  decides to  include  language in  HB 170  that                                                               
makes  the election  of this  exemption optional,  Representative                                                               
Feige recommended that the language  relate that the local taxing                                                               
authority has  to vote not  to extend  the exemption in  order to                                                               
provide the local fire chiefs more weight in the argument.                                                                      
                                                                                                                                
9:39:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  expressed interest  in the impact  of this                                                               
proposed exemption  on a typical  community.  He related  that in                                                               
his community with a mill rate  of 12 mills, a $200,000 exemption                                                               
would result in about  $2,400 per home.  If one  was to assume 30                                                               
firefighters  and  that  20 have  homes,  the  [exemption]  would                                                               
result in about  $48,000.  Spreading that cost  over 3,500 people                                                               
results in about $13 per person.                                                                                                
                                                                                                                                
9:40:59 AM                                                                                                                    
                                                                                                                                
TIMOTHY ROONEY,  Borough Manager, City of  Wrangell, testified in                                                               
opposition to HB 170.   Although he related support for volunteer                                                               
firefighters,  the community  of  Wrangell cannot  take any  more                                                               
hits  to its  tax  base.   Wrangell is  an  aging community,  and                                                               
therefore the  number of people  moving into the category  of the                                                               
senior exemption  is always  increasing.   Wrangell has  a strong                                                               
volunteer  firefighter  department  of   38  members.    If  each                                                               
received a $200,000-value  tax exemption, it would  cost the city                                                               
$96,000 a year.  Wrangell  raises $1.4 million in property taxes,                                                               
so  this  proposed   exemption  could  result  in   a  7  percent                                                               
reduction.   Mr. Rooney  said that  although it  may be  noble to                                                               
provide  an exemption  to volunteer  firefighters, he  questioned                                                               
where one would stop because  there are plenty of volunteers that                                                               
could be  recognized.   Since Wrangell is  a small  community, it                                                               
takes  volunteers   on  many  levels   to  make   it  successful.                                                               
Therefore, he didn't  believe it's appropriate to  single out one                                                               
volunteer group.   Mr.  Rooney related, "As  a volunteer  I don't                                                               
need  incentive  to  volunteer,  I  do so  to  give  back  to  my                                                               
community and  to the state."   He opined that passage  of HB 170                                                               
would open a  door that will be impossible to  close and one that                                                               
would greatly  impact Wrangell  in the future.   In  closing, Mr.                                                               
Rooney  suggested  that  if each  municipality  is  charged  with                                                               
determining  who  is a  volunteer,  each  municipality should  be                                                               
allowed to vote  to participate in this exemption  rather than to                                                               
opt out.                                                                                                                        
                                                                                                                                
9:43:14 AM                                                                                                                    
                                                                                                                                
KATHIE  WASSERMAN, Executive  Director,  Alaska Municipal  League                                                               
(AML),  related that  AML has  opposed  mandatory exemptions  all                                                               
along because  it has to  consider the impact cumulatively.   She                                                               
reminded the  committee that last  year there was  legislation to                                                               
provide an  exemption for all  fraternal organizations,  the year                                                               
prior there  was legislation proposing an  exemption for teachers                                                               
occupying    homes   for    religious   schools.       Currently,                                                               
municipalities loose  approximately $50  million per year  on the                                                               
senior citizen property tax exemption.   She pointed out that the                                                               
total  loss is  $10 million  less than  they receive  for revenue                                                               
sharing.   Furthermore, although  statute specifies the  state is                                                               
to reimburse  [the municipality for  the senior  citizen property                                                               
tax exemption], that's not the case.   Therefore, AML is leery of                                                               
doing  any  exemption.    Mr.   Wasserman  related  her  complete                                                               
agreement   with   Representative  Feige's   comments   regarding                                                               
firemen.   She noted  that AML's  board includes  a seat  for the                                                               
Alaska Fire  Chief's Association.   Municipalities,  she related,                                                               
must take  care when allowing  more exemptions as it  leaves less                                                               
people to  carry the  load.   Therefore, Ms.  Wasserman suggested                                                               
that  either   this  proposal  be  an   optional  exemption  that                                                               
municipalities vote to opt into, or  the state should pay for the                                                               
exemption.                                                                                                                      
                                                                                                                                
9:46:14 AM                                                                                                                    
                                                                                                                                
PAUL DELAS, President, Board of  Directors, Chena Goldstream Fire                                                               
& Rescue  (CGFR), testified in  support of  HB 170.   He informed                                                               
the committee that he has  been a volunteer with Chena Goldstream                                                               
Fire  & Rescue  since 1989.   Last  year, 63  volunteers at  CGFR                                                               
spent nearly  42,000 hours on shift,  which is an average  of 660                                                               
hours each.  The 11  highest performing volunteers, 20 percent of                                                               
the department,  contributed 43  percent of  the hours  or 18,000                                                               
hours total.  Seven of  those volunteers are homeowners who would                                                               
be positively impacted  by HB 170.  Mr. Delas  told the committee                                                               
that  beyond  the  hours  volunteers spend  on  shift,  they  are                                                               
required to participate in a  minimum of 100 hours taking classes                                                               
and  attending training.    The CGFR  draws  its volunteers  from                                                               
college  students  who  are   fairly  transient  and  established                                                               
residents.   Since  the college  students and  a few  other young                                                               
volunteers  are normally  with CGFR  for  only a  few years,  the                                                               
backbone of CGFR are the  volunteers who are permanent residents.                                                               
Mr. Delas  estimated that it  takes about five years  of training                                                               
and experience to become an  effective lead volunteer.  The long-                                                               
term volunteers  have the  knowledge and  ability to  teach other                                                               
volunteers how  to respond,  he pointed out.   Mr.  Delas related                                                               
that  the minimally  accepted  commitment at  CGFR  is 600  hours                                                               
annually.     However,   some  of   CGFR's  volunteers   actually                                                               
contribute over 2,000  hours, which is the equivalent  of a full-                                                               
time job.  He acknowledged that  many of the hours spent on shift                                                               
are hours  in which  the volunteer  is sleeping  or at  work, but                                                               
being  on shift  is  a promise  to  take care  of  others.   This                                                               
legislation,  he  opined,  is  a  powerful  incentive.    Without                                                               
volunteers,  either  the  service  will  be  eliminated  or  paid                                                               
professionals would have  to be hired.  A  minimally staffed fire                                                               
department with four responders every  day of the year would cost                                                               
about $1 million in salaries and  benefits.  A $70,000 salary and                                                               
benefit  package for  each  paid responder  is  equivalent to  23                                                               
volunteers receiving  the proposed exemption, which  he estimated                                                               
would amount to about $3,000 for  each volunteer in his area.  He                                                               
characterized   this  as   "Wall  Street   style  leveraging   of                                                               
resources."   In conclusion, he  related that the  volunteers who                                                               
own property in  his area are excited about  the possible passage                                                               
of HB  170 and has  generated local  interest for those  who have                                                               
been contemplating becoming a volunteer.                                                                                        
                                                                                                                                
9:51:30 AM                                                                                                                    
                                                                                                                                
CHAIR  MUNOZ  announced  that  Mr.   Van  Sant,  State  Assessor,                                                               
Department  of Commerce,  Community  &  Economic Development,  is                                                               
available for questions.                                                                                                        
                                                                                                                                
9:51:54 AM                                                                                                                    
                                                                                                                                
JEFF  TUCKER, President,  Alaska  Fire  Chiefs Association;  Fire                                                               
Chief,  North Star  Volunteer Fire  Department, characterized  HB
170  as  a  good  tool  for  the  recruitment  and  retention  of                                                               
volunteer firefighters throughout the  state.  He, too, mentioned                                                               
that  returning volunteers  are  the backbone  of volunteer  fire                                                               
departments.                                                                                                                    
                                                                                                                                
9:53:21 AM                                                                                                                    
                                                                                                                                
PAT CARLSON,  Assessor, Fairbanks  North Star Borough,  said that                                                               
although   everyone   supports   volunteers,  the   service   and                                                               
commitment   levels  of   these  volunteers   aren't  recognized.                                                               
Furthermore,  there's  clearly  difficulty  with  attracting  new                                                               
volunteers.   This needs  to be addressed  on a  statewide level.                                                               
He  pointed out  that  with  a mandatory  exemption  there is  no                                                               
option for the local jurisdiction  to create an option that works                                                               
for  it.   Currently,  Fairbanks provides  a homeowner  exemption                                                               
that the  [borough] voted on  and tailored  to ensure that  it is                                                               
fair, equitable,  and documented.   The struggle  with HB  170 is                                                               
the language  "active" versus "volunteer," "rescue  service," and                                                               
"widow" and "widower."   He expressed concern  with the exemption                                                               
for senior  citizens and disabled  veterans, which  is increasing                                                               
in his jurisdiction  by about 8 percent per year,  which may call                                                               
for the higher exemption amount in  HB 170.  He expressed further                                                               
concern because  this forces an  exemption against  the borough's                                                               
base  levy as  well as  against the  fire and  road service  area                                                               
levies.  He then pointed out  that in some jurisdictions there is                                                               
no property tax,  and therefore he questioned  what volunteers in                                                               
those areas will  receive.  Mr. Carlson opined that  the only way                                                               
to fairly  address this matter  is for  the fire chiefs  and that                                                               
the  state  to  develop  a statewide  stipend  that  offsets  the                                                               
tremendous cost for volunteers.   He then reiterated concern with                                                               
regard  to  the  definition  of  "volunteer"  as  it's  from  the                                                               
vaccination  program section  of  statute.   Moreover, using  the                                                               
term "rescue service" provides an opportunity for abuse.                                                                        
                                                                                                                                
9:56:24 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ announced  that HB 170 will be held  over for further                                                               
committee work.   She asked  if the  sponsor wanted to  work with                                                               
the  ideas   brought  forward  today   to  develop   a  committee                                                               
substitute (CS).                                                                                                                
                                                                                                                                
REPRESENTATIVE FEIGE answered that he is amenable to that.                                                                      
                                                                                                                                
9:57:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FEIGE  pointed out that HB  170 primarily benefits                                                               
the  middle  management  volunteers   in  these  [volunteer  fire                                                               
departments].   With regard to  the number  of members in  a fire                                                               
department,  that is  set  by  the community.    Therefore, if  a                                                               
community wants  to limit  its tax  exemption exposure,  they can                                                               
limit the  number of  people they  consider active  volunteers in                                                               
their department.   With regard  to Mr. Carlson's  comments about                                                               
the property tax  exemption in the Fairbanks  North Star Borough,                                                               
Representative  Feige clarified  that the  exemption is  only for                                                               
the first $10,000 of property tax value.                                                                                        
                                                                                                                                
9:58:42 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ reviewed the concerns expressed by the committee.                                                                   
                                                                                                                                
10:00:09 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Community and Regional Affairs Standing Committee meeting was                                                                   
adjourned at 10:00 a.m.                                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
HB170-CCED-DCRA-03-18-11.pdf HCRA 3/24/2011 8:00:00 AM
HB 170
Fire Chiefs Assn Support Letter.pdf HCRA 3/24/2011 8:00:00 AM
HB 170
Girdwood Member Support Letter.txt HCRA 3/24/2011 8:00:00 AM
HB 170
NFIB HB170.PDF HCRA 3/24/2011 8:00:00 AM
HB 170
Salcha Fire Rescue Support Letter.pdf HCRA 3/24/2011 8:00:00 AM
HB 170
Hollis Member Support Letter.txt HCRA 3/24/2011 8:00:00 AM
HB 170
Hanies Asst Chief Support Letter.txt HCRA 3/24/2011 8:00:00 AM
HB196 repealer statutes.docx HCRA 3/24/2011 8:00:00 AM
HB 196
HB196repealstatutes.docx HCRA 3/24/2011 8:00:00 AM
HB 196
Haines Asst. Chief support HB 170.txt HCRA 3/24/2011 8:00:00 AM
HB 170
Valdez Member Major Support Letter.txt HCRA 3/24/2011 8:00:00 AM
HB 170
HB 170 Letter 3-23-11 CES.pdf HCRA 3/24/2011 8:00:00 AM
HB 170
Chena Member Solomon Support Letter.txt HCRA 3/24/2011 8:00:00 AM
HB 170
CGFR-support-for-HB170.pdf HCRA 3/24/2011 8:00:00 AM
HB 170
Alaska Professional Volunteers Support Letter.txt HCRA 3/24/2011 8:00:00 AM
HB 170
Alaska Firefighters Assn Support Letter.tif HCRA 3/24/2011 8:00:00 AM
HB 170