02/07/2017 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB80 | |
| HB85 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 80 | TELECONFERENCED | |
| *+ | HB 85 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 7, 2017
8:00 a.m.
MEMBERS PRESENT
Representative Zach Fansler, Co-Chair
Representative Justin Parish, Co-Chair
Representative Harriet Drummond
Representative Dean Westlake
Representative George Rauscher
Representative Dan Saddler
Representative David Talerico
MEMBERS ABSENT
Representative DeLena Johnson (alternate)
Representative Jonathan Kreiss-Tomkins (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 80
"An Act adopting the Municipal Property Assessed Clean Energy
Act; authorizing municipalities to establish programs to impose
assessments for energy improvements in regions designated by
municipalities; imposing fees; and providing for an effective
date."
- MOVED CSHB 80(ENE) OUT OF COMMITTEE
HOUSE BILL NO. 85
"An Act relating to the general grant land entitlement for the
Petersburg Borough; and providing for an effective date."
- MOVED HB 85 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 80
SHORT TITLE: MUNI ENERGY IMPROVEMNT: ASSESSMNTS/BONDS
SPONSOR(s): REPRESENTATIVE(s) WOOL
01/25/17 (H) READ THE FIRST TIME - REFERRALS
01/25/17 (H) ENE, CRA
01/26/17 (H) ENE AT 11:00 AM CAPITOL 17
01/26/17 (H) Heard & Held
01/26/17 (H) MINUTE(ENE)
02/02/17 (H) ENE AT 11:00 AM CAPITOL 17
02/02/17 (H) Moved CSHB 80(ENE) Out of Committee
02/02/17 (H) MINUTE(ENE)
02/03/17 (H) ENE RPT CS(ENE) 5DP 2NR
02/03/17 (H) DP: JOHNSTON, WESTLAKE, SPOHNHOLZ,
CLAMAN, WOOL
02/03/17 (H) NR: RAUSCHER, JOHNSON
02/07/17 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 85
SHORT TITLE: MUNICIPAL LAND SELECTIONS: PETERSBURG
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS
01/27/17 (H) READ THE FIRST TIME - REFERRALS
01/27/17 (H) CRA, FIN
02/07/17 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
REPRESENTATIVE ADAM WOOL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 80, as prime sponsor.
SEAN SKALING, Assistant Executive Director/Energy Policy
Director
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation, titled
"Commercial Property Assessed Clean Energy (C-PACE)," during the
hearing on HB 80.
GENE THERRIAULT, Energy Policy Assistant
Alaska Energy Authority /Alaska Industrial Development and
Export Authority (AEA/AIDEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Offered information and answered questions
during the hearing on HB 80.
BRITTANY SMART, Special Assistant
Mayor's Office
Fairbanks North Star Borough
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 80.
JONATHAN KREISS-TOMKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, introduced HB 85.
BARETT WILBER, Staff
Representative Jonathan Kreiss-Tomkins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 85 on behalf of Representative
Kreiss-Tomkins, prime sponsor.
MARTY PARSONS, Deputy Director
Central Office
Division of Mining, Land and Water
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
85.
MARK JENSEN, Mayor
City & Borough of Petersburg
POSITION STATEMENT: testified in support of HB 85.
LIZ CABRERA, Director
Community Development
Petersburg City & Borough
Petersburg, Alaska
POSITION STATEMENT: Testified in support of HB 85.
ACTION NARRATIVE
8:00:28 AM
CO-CHAIR JUSTIN PARISH called the House Community and Regional
Affairs Standing Committee meeting to order at 8:00 a.m.
Representatives Drummond, Talerico, Westlake, Fansler, and
Parish were present at the call to order. Representatives
Rauscher and Saddler arrived as the meeting was in progress.
HB 80-MUNI ENERGY IMPROVEMNT:ASSESSMNTS/BONDS
8:01:19 AM
CO-CHAIR PARISH announced that the first order of business would
be HOUSE BILL NO. 80, "An Act adopting the Municipal Property
Assessed Clean Energy Act; authorizing municipalities to
establish programs to impose assessments for energy improvements
in regions designated by municipalities; imposing fees; and
providing for an effective date." [Before the committee was
CSHB 80(ENE).]
8:01:42 AM
CO-CHAIR FANSLER moved to adopt CSHB 80(ENE) [as clarification
that the committee would work from CSHB 80(ENE) rather than the
original bill version]. No objection was stated.
8:02:16 AM
REPRESENTATIVE ADAM WOOL, Alaska State Legislature, presented HB
80, as prime sponsor. He noted there are two related acronyms:
commercial property assessed clean energy (C-PACE) and property
assessed clean energy (PACE). He stated that under HB 80,
individuals who own commercial property would be allowed to get
a loan to improve the energy efficiency of a building or to make
the exhaust cleaner. The funding could then be paid back
through an assessed property tax. The borough or municipality
in which the building is located would also have to agree to
this funding mechanism. By allowing the building owner to pay
back the interest over a longer period of time, the interest on
the payments would be lower, he indicated; therefore, there
would be a low default rate. Representative Wool noted that if
the building is sold, then the loan would stay with the
building. He said this factor would incentivize people to make
improvements, "even if they don't plan on being at this location
indefinitely." He summarized that the proposed legislation
would incentivize low interest loans to improve energy
efficiency in commercial buildings, using a borough or
municipality with a tax system already in place as a way to pay
back the loans. He said the proposed provision under HB 80
would be voluntary; HB 80 would put the mechanism in place that
is currently in place in 33 other states.
8:04:59 AM
REPRESENTATIVE TALERICO asked for confirmation that the program
would be voluntary for municipalities.
REPRESENTATIVE WOOL confirmed that is correct. He added that
[HB 80] is supported by the Alaska Municipal League (AML) and
several boroughs.
8:05:27 AM
CO-CHAIR PARISH offered his understanding that a previous
iteration of this legislation had passed the House.
REPRESENTATIVE WOOL confirmed that in 2016, [during the Twenty-
Ninth Alaska State Legislature], similar legislation had passed
the House with a vote of 38-0 but did not get through the
Senate. He indicated that HB 80 included the addition of
language regarding clean energy.
8:06:12 AM
SEAN SKALING, Assistant Executive Director/Energy Policy
Director, Alaska Energy Authority (AEA), Department of Commerce,
Community & Economic Development (DCCED), gave a PowerPoint
presentation, titled "Commercial Property Assessed Clean Energy
(C-PACE)." He directed attention to slide 2, which he said
shows that C-PACE is a tool to take down barriers to commercial
property owners in financing energy improvements to their
buildings. He said, "The key is it's a voluntary repayment on
the property tax bill." He directed attention to slide 3 and
said he would walk the committee through a scenario of how the
program would work for a particular building. He noted that
Gene Therriault had wished to impart information prior to the
PowerPoint.
8:07:50 AM
GENE THERRIAULT, Energy Policy Assistant, Alaska Energy
Authority/Alaska Industrial Development and Export Authority
(AEA/AIDEA), Department of Commerce, Community & Economic
Development (DCCED), indicated that the proposed repayment
mechanism could give municipalities and utilities better access
to funding sources. He relayed that in the past he served on a
national board of energy officials across the nation, where he
researched programs and funding sources other states used in
relation to energy efficiency. He said he discovered a couple
loan programs offered by the Rural Utility Service (RUS) - a
subset of the United States Department of Agriculture and Rural
Development (USDA). The first program is called the Energy
Efficiency and Conservation Loan Program (EECLP), which he said
gets about $250 million annually that is available nationwide
for areas of the population that are RUS eligible. Those funds
are underutilized, and RUS is interested in working with states
to get more of those funds deployed. He said he checked the RUS
Internet homepage in January 2017 to find out the current
interest rate. He stated that under the EECLP program, for a
municipality or utility that wants to access these funds and
loan money out to a consumer for a 10-year period of time, the
current interest rate is 2.07 percent, which he said is a
relatively low-cost capital that can be accessed from RUS via a
municipality or utility and made available to an end consumer.
The municipality or utility could then add to that cost in order
to cover administrative costs.
8:10:49 AM
MR. THERRIAULT indicated that within EECLP regulation is an
expressed interest in finding the means of helping to ensure
that the default rates on the loans are low. He said the PACE
mechanism is one that helps to lower the default rate, because
the repayment is being done through an existing relationship
between the borough or city and the property owner. Each year,
if the municipality levies a property tax, it sends a bill to
the commercial property owner, who in turns pays the taxes and
any assessments on the property. The way the PACE mechanism
works is that the property owner is deciding to pay back the
loan through a voluntary assessment that appears on the tax
bill. The local government has all the collection powers that
it has to collect its general taxes and any assessments to make
sure the PACE loan repayment gets made. He said because of the
strength of that repayment mechanism, the default rates on PACE
loans nationwide are relatively low at less than 1 percent,
which means they are low-risk. He added, "And that is what
helps you get access to the low-cost capital."
MR. THERRIAULT stated that in the regulations for EECLP there is
specific reference to an "on-bill repayment mechanism" or other
financial recruitment mechanisms as may be approved by RUS. He
said when AEA began to look at what it would need to do to
implement PACE in the state of Alaska, it corresponded with RUS
and got a letter in response saying [RUS] understood the PACE
mechanism deployed in many other states as one that would lower
the rates of default and be "attractive to access the EECLP
funds."
8:13:02 AM
MR. THERRIAULT stated that the second program is called the
Rural Energy Savings Program (RESP). It is one that was on the
federal books for quite a while but did not receive federal
funding until 2016, when the total amount available was about
$50 million nationwide. He indicated that there are attractive
components to the RESP fund. For example, for the borrowing
entity - a utility or municipality working with a utility - the
interest rate that comes with these funds is zero. The
borrowing entity can then add on up to a 3 percent interest rate
to cover the local administrative cost. He said the regulations
for RESP also speak to mechanisms that ensure that default rates
on the loans are low. He indicated the use of "on bill"
financing is allowed, as long as the requirement does not
prohibit the use of any additional repayment mechanism that has
been demonstrated to have appropriate risk mitigation features.
He said the PACE mechanism helps to reduce the rates of default.
MR. THERRIAULT said, "If the state of Alaska actually puts the
PACE mechanism into place, it doesn't guarantee that utilities
will have access to it, but these pools of money - when you look
into the regulations - specifically point out that they're
looking for mechanisms that help to lower the rate of default;
and that PACE mechanism is one such mechanism." He stated that
he wanted the committee to be aware that there are some
potential non-general fund (GF) sources of money that may be
accessed with certain mechanisms in place.
8:15:41 AM
REPRESENTATIVE SADDLER asked Mr. Therriault to clarify his
working relationship with AIDEA and AEA.
MR. THERRIAULT answered that he is a temporary employee with
AIDEA, but because of the sister relationship between AIDEA and
AEA, he is able to work on issues for both entities.
8:16:35 AM
MR. SKALING returned to the PowerPoint presentation, to slide 3,
titled "C-PACE Scenario." The slide shows a commercial building
that went through AEA's commercial energy audit program some
years ago. He described a typical example: there is a building
with high energy bills, which is hurting the profitability of
the business housed therein; the building owner is interested in
becoming more energy efficient; and the owner hires an energy
auditor, whose audit shows line by line what can be done to make
the building more efficient, possibly including the use of
renewable energy sources. He said in general the improvement
recommendations related to PACE are ones that "can pay for
themselves over their lifetime, at least." An audit may show a
possible savings of 30 percent annually, with an average six-
year pay-back period. The improvement will last between 8 to
20-plus years. Mr. Skaling said the building owner would then
go to a bank for a loan, and the bank may offer a four-year
payback term with an interest rate that the building owner may
not like. Another factor in the scenario is that the building
owner has been thinking about selling his/her building in a
couple years and moving to a larger space. He said ultimately
the hypothesized building owner decides not to go forward with
the energy improvement, because the bank term and six-year
payback period are not in alignment with each other; therefore,
on day one, when the owner starts saving 30 percent, he/she will
be paying back more than the energy savings, when he/she wants
to start reaping the energy savings. Also, because of the
possible move, the building owner is not sure he/she will get
back the value from the building. The building will be more
appealing because of the energy improvements, but other factors
are in play, such as what the market is like and whether a new
buyer will recognize the value of those improvements. He said
it may be years before these cost effective improvements are
implemented. Mr. Skaling summarized, "So, the main sticking
points here are that short loan term and that they might be
moving soon and they might not make their money back. So, PACE
addresses those two things in particular, and they also impact
the interest rate."
8:20:15 AM
MR. SKALING directed attention to slide 4, titled "How C-PACE
Works." He said PACE is a voluntary program that has built in
protections. For example, if a building owner decides to use
the program, the bank that holds the lien on the building has to
approve the loan. He related that 79 percent of the respondents
that went through the commercial energy audit program several
years ago reported that the main reason for not moving forward
with the improvements was because of a lack of financing. He
said there were approximately 180 commercial energy audits
conducted, and quite a bit of work did result from them. He
emphasized that banks and other lending institutions are now
more comfortable with [loans relating to] energy savings,
because there is a structure in place: a real energy audit will
be conducted; there will be real energy savings; so there is
less risk, which helps the banks spread out the terms to a
longer period of time. He further explained that because [a
building owner] pays back the loan voluntarily on his/her tax
assessment, "the payment sticks with the building." He
explained, "So, if you do move out of the building, the benefits
that you've built into the building stay with the building, and
the payments for those stay in the building." He offered a
scenario describing the takeover of payments from the exiting
building owner to the incoming one.
8:22:52 AM
REPRESENTATIVE SADDLER asked what qualifications or standards
may exist in relation to the auditors.
MR. SKALING answered that typically there are standards applied.
He said Alaska has used energy raters at various levels; for
commercial buildings, the state typically specifies [the
American Society of Heating, Refrigerating and Air-Conditioning
Engineers] (ASHRAE) Level II, which comes with a set of
requirements. In response to follow-up questions from
Representative Saddler, he said there is a pool of qualified
auditors in the state, and he surmised they may have more work
if the proposed legislation is passed. He estimated there may
be 5 to 10 [auditors] for the entire state.
8:25:15 AM
MR. SKALING returned to the PowerPoint presentation, to slides 5
and 6, titled "C-PACE Eligible Improvements." Slide 5 lists
items eligible for energy efficiency improvements, including
heating, air conditioning, lights, pumps, controls, and
"anything that will end up saving money" by modernizing
buildings to more current standards. He said AEA has discovered
that energy efficiency improvements are "some of the lowest
hanging fruit" and "most available improvements that can be
made," thus, there is a lot of opportunity in terms of both
heating and electric energy efficiency. Slide 6 lists
alternative energy improvements that could be made under C-PACE:
air-source heat pumps; solar, if economical; biomass, such as
wood heat; and fuel switching to improve efficiency and air
quality.
8:26:48 AM
CO-CHAIR FANSLER asked if "wind and any other winterization
projects" would be included as eligible energy improvements.
MR. SKALING answered, "Yes and no." He indicated that in terms
of weather efficiency, [eligible improvements] would include air
sealing and traditional insulation, such as for windows and
doors. He said "wind" could be eligible, but he said it is not
AEA's experience that "wind, on a building scale, which would
have to be attached to the building, would be economical." He
added, "You'd typically want to have a larger scale wind, and in
a windy place - not necessarily just wherever the building is
situated - so, it's conceivable, although highly, highly
unlikely, I would say, because of the economics."
8:27:53 AM
REPRESENTATIVE SADDLER asked if fuel switching may include folks
in the Interior switching from heating oil to natural gas as a
fuel source.
MR. SKALING responded that's correct, particularly where there
is either air quality improvement or cost savings or reduction
in fuel use - "any of those are written into the bill as
potentially qualifying." In response to follow-up questions, he
said the energy auditors typically will itemize each action they
could envision for the building in question, including the cost
of the measure, the energy savings, the dollar savings, and even
the air emission savings, which he said is not difficult to
calculate once the fuel savings is known.
REPRESENTATIVE SADDLER referred to the phrase "operating as
intended" [found on page 8, line 3, of CSHB 80(ENE)], and he
asked, "Does that include achieving the projected emission
reduction?"
MR. SKALING offered his understanding that it is the intent of
that language to ensure that measures are installed that
actually achieve that which is intended in the original energy
audit that recommended them.
8:29:47 AM
MR. SKALING directed attention to slide 7, titled "Cash Floor
from Energy Improvements." He noted that the green portion of
the graph on slide 7 shows the [post-improvement energy] cost -
both electric and heat. He said at a certain point in time
there is a drop in that cost, which reflects where the energy
efficiency and other improvements were made, and that represents
an approximate, average 30 percent decline seen with commercial
energy audits. He continued, "And now, since this loan has PACE
legislation, the financial institutions are able to offer a
longer loan repayment period, such that the loan repayment is
less than the energy cost savings; so, ... the building owner is
cash flow positive from day one, when the energy efficiency
improvements are made." He said that is one of the keys to the
proposed legislation.
8:30:51 AM
REPRESENTATIVE RAUSCHER asked if it is the intent of the energy
auditor to help design or just approve the type of energy that
would be used to achieve the desired savings.
MR. SKALING answered that a typical energy audit will include a
recommendation of the type of replacement energy equipment to
use and a range of savings that could be achieved by the
building owner. If the building owner chose to install
equipment that is less efficient, a follow-up audit would detect
that and update the cost savings. He said municipalities would
be able to set their own programs, and "this sets the ...
guidelines and the process so that an energy audit does have to
happen." He mentioned the comfort level of the bank and
indicated that [that comfort level] results from the specifics
of what [energy efficient measures will be made].
REPRESENTATIVE RAUSCHER said he was trying to understand the 30
percent and how the assurances are made that "the loan is worth
their time" and "the program is worth ... what we're trying to
accomplish here."
8:33:44 AM
REPRESENTATIVE SADDLER asked for confirmation that under HB 80
the property owner would be responsible for paying for the
audit; there is no intent to "fold in the cost of that audit
into the financing."
MR. SKALING answered that the financing - "any of the fees
associated with doing this work" - may be folded into that loan.
8:34:22 AM
MR. SKALING continued to slide 8, titled "PACE: How Loan is
Repaid." He directed attention to the box in the middle of the
flow chart that represents the property owner. He said the
property owner gets the loan from the investor and pays back the
loan through a voluntary assessment on the property tax, which
is paid to the city or local government, which then pays back
the investor. This method provides extra assurance to the
investors that the investment will be paid back and the default
rates will be lower than typical default rates.
MR. SKALING turned to slide 9, titled "33 States Enabled PACE."
He said the slide shows which states have enabled PACE
legislation. He commented on the rapid development of the
program. He said the program in Alaska is modeled after that in
Texas, a state with over one dozen communities running PACE
programs.
8:35:54 AM
REPRESENTATIVE RAUSCHER asked whether statistics are available
showing a success rate of the program or any [failures].
MR. SKALING answered that there are statistics, and the main one
of which he is aware is the default rate of less than 1 percent,
which he described as "one of the greatest successes of the
program overall." He deferred to Mr. Therriault for further
statistics.
8:36:57 AM
MR. THERRIAULT offered that "PACE Nation" would have examples of
the various buildings that have been upgraded under its program
and the savings that were achieved. He echoed that the default
rate is low, specifically for the C-PACE programs. He noted
that C-PACE did not get started until 2008 and did not gain
momentum until the last four to five years; therefore, the
information pertaining to success rates is relatively new.
8:37:57 AM
MR. SKALING, in response to a follow-up question from
Representative Rauscher, related that public, residential, and
commercial buildings that utilize the PACE program all tend to
gravitate to a 30 percent savings.
8:39:11 AM
MR. SKALING returned to the PowerPoint presentation, to slide
10, titled "Time to Add Alaska to the Map." He said the slide
simply purports that it is time to add Alaska to the map,
because there is no cost to the state and the program is
voluntary. He directed attention to slide 11, titled, "C-PACE
is a Win-Win-Win." He said property owners would pay lower
utility bills; their properties would be improved; and their
work environment could result in increased productivity from
employees. Lenders would be making new loans, with less risk
and a consistent, statewide process. Contractors and vendors
would be busier, as they are hired to make the improvements, and
there would be more local hire, with contractors keeping up with
new technology and advancements in energy efficiency. He added
that there would also be other benefits, including to tenants of
the buildings, to communities, and to the quality of air.
MR. SKALING drew attention to slide 12, titled "Easy Win for
Alaska." He reminded committee members that similar legislation
had been fully vetted during a previous legislature and had
gained strong support. Further, he reiterated that the program
would be voluntary, with no cost to the state, and would help
local economies. He explained that rather than spending money
on fuel "that quickly leaves the community," hiring people
locally would save money in the long term, and "that money from
that business can be circulating in the community for much
longer."
8:41:25 AM
REPRESENTATIVE SADDLER asked for clarification regarding the
flow chart on slide 8.
MR. SKALING responded that the ECLA and REST programs would
provide the capital typically to the city or local government
for those entities to "re-loan as a pool." He said it is
conceivable that investors could use that money, too, depending
on the rules of the program; however, the money would have to go
to an eligible borrower, which he said he does not think could
include a commercial lending institution. In response to a
follow-up question, he said another option could be for a local
government to amass its own pool of money through bonding or
through "this federal source," and then the relationship
essentially would be between the property owner and the city,
which would be both lending the money and receiving money back
through taxed bills. The other investment option, he said,
would be "any sort of financial institution that's separate from
the [municipality]." He concluded, "A [municipality] may also
use an investor or some sort of financial institution to manage
that cash; these are all things that the ... city and investors
could figure out as the ... money pool became available."
8:43:40 AM
REPRESENTATIVE RAUSCHER asked for the definition of a home rule
municipality.
MR. THERRIAULT answered it is one that is given the power to
establish its own rules. In response to a follow-up question,
he said, "In the front part of the bill here, I think we're
giving this power to first -- well, home rule boroughs, first-
and second-class." He suggested there were other members of the
committee who could offer more details.
8:44:32 AM
REPRESENTATIVE TALERICO proffered that a home rule borough can
do anything that is not prohibited by law under Alaska statute.
8:44:51 AM
REPRESENTATIVE WESTLAKE said, "The implications for at least one
municipality are good and the implications for the state are
even better should this come through."
8:45:25 AM
CO-CHAIR PARISH opened public testimony on HB 80.
8:45:53 AM
BRITTANY SMART, Special Assistant, Mayor's Office, Fairbanks
North Star Borough, testified in support of HB 80. She said
while the Mayor's Office understands that the proposed financing
measure can be used by commercial entities to provide energy
efficiency to their facilities, it is most interested in the
implications of HB 80 in improving natural gas conversions and
air quality.
8:46:52 AM
CO-CHAIR PARISH, after ascertaining that there was no one else
who wished to testify, closed public testimony on HB 80.
8:47:15 AM
The committee took an at-ease from 8:47 a.m. to 8:50 a.m.
8:50:15 AM
REPRESENTATIVE TALERICO augmented his prior remark concerning
home rule authority by offering his understanding that the
proposed legislation would add a tool in the Title 29 tool box
that would apply to first- and second-class boroughs; it would
add to the existing taxing and planning authority "the ability
to participate in these programs." He said he is not an expert,
but was a home rule mayor for ten years; therefore, he indicated
he is not as familiar with first- and second-class borough
systems.
8:51:40 AM
REPRESENTATIVE SADDLER said he understands the goal is "making
sure a municipality cannot hold somebody hostage by not issuing
a permit, license, or other authorization" if [that individual]
"has not chosen to take part in this process." Notwithstanding
that, he said the aforementioned language on page 10, lines 7-
13, of CSHB 80(ENE) "sounds like it's making a specific
reference to a person entering a written contract." He asked
for clarification for the record that the language is specifying
that a municipality could not "make issuance of any permit
contingent on any person participating in the program." He
added, "It's not just a written contract aspect; it's
participate in the PACE program at all."
8:52:32 AM
REPRESENTATIVE WOOL offered that his understanding of lines 7-
13, on page 7, is that a person could not be compelled to enter
a written contract. In response to a follow-up comment by
Representative Saddler, Representative Wool confirmed, "It's
voluntary on both ends."
8:54:05 AM
CO-CHAIR FANSLER moved to report CSHB 80(ENE) out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, CSHB 80(ENE) was reported out
of the House Community and Regional Affairs Standing Committee.
8:54:32 AM
The committee took an at-ease from 8:54 a.m. to 9:01 a.m.
9:01:34 AM
CO-CHAIR PARISH noted that CSHB 80(ENE) had been reported out of
committee with an attached zero fiscal note.
HB 85-MUNICIPAL LAND SELECTIONS: PETERSBURG
[Contains discussion of SB 28]
9:01:57 AM
CO-CHAIR PARISH announced that the final order of business would
be HOUSE BILL NO. 85, "An Act relating to the general grant land
entitlement for the Petersburg Borough; and providing for an
effective date."
REPRESENTATIVE RAUSCHER began a motion at the chair's request to
bring HB 85 before the committee; [however, the motion was
subsequently deemed unnecessary].
9:02:25 AM
The committee took an at-ease from 9:02 a.m. to 9:03 a.m.
9:03:19 AM
CO-CHAIR PARISH [confirmed that before the committee was HB 85].
9:03:38 AM
JONATHAN KREISS-TOMKINS, Alaska State Legislature, as prime
sponsor, introduced HB 85. He stated that HB 85 has a companion
bill in the Senate. He noted that as part of the process that
made Petersburg a borough, it was allowed to select land.
Because of idiosyncrasies with the land base from which the
borough is allowed to select, there is a minimal amount of
acreage available. He explained that HB 85 would recalibrate
the acreage to the historic norm that newly formed boroughs in
the past in Alaska have been able to select. Representative
Kreiss-Tomkins noted that he and Representative Talerico had
held a conversation about the issue the day before and learned a
lot about the process. He deferred to his staff to present the
bill in more detail.
9:05:46 AM
BARETT WILBER, Staff, Representative Jonathan Kreiss-Tomkins,
Alaska State Legislature, presented HB 85 on behalf of
Representative Kreiss-Tomkins, prime sponsor. She conveyed the
information from the sponsor's statement, which read as follows
[original punctuation provided]:
HB 85 would allow the Petersburg Borough to select
14,666 acres of land as part of their land entitlement
for incorporating into a borough.
The City of Petersburg dissolved in 2013 to become the
Petersburg Borough. Under AS 29.65.050, the Borough is
entitled to claim a land grant from the state: a
percentage of the vacant, unappropriated, unreserved
land (as calculated by the Alaska Department of
Natural Resources), minus land which belonged to the
old city and State land conveyed to the University of
Alaska, Alaska Mental Health Trust, Southeast State
Forest, and private ownership.
This leaves Petersburg with only 1,438.53 acres, or
.08% of their actual Borough land area, which is well
below the average of other municipalities and is
insufficient to meet the borough's development,
economic, cultural, and resource needs.
Boroughs in Alaska typically request additional land
from the legislature by amending AS 29.65.010 on a
case by case basis, providing a specific date and
amount of land for a newly incorporated municipality.
Fourteen such land grants have been given to boroughs
across the state since 1990.
Petersburg calculated the average amount of land
granted through legislation to new boroughs in
proportion to their size: on average, they've received
.79% of their total land base from the state. This
bill would give Petersburg a reasonable and
proportionate amount based on their size: 14,666
acres.
MS. WILBUR noted that new boroughs have gone through this
process 14 times wherein they have edited land entitlement
grants through statute, and that is what Petersburg is
attempting to do right now.
9:07:27 AM
REPRESENTATIVE SADDLER asked the bill sponsor to cite the
statute that pertains to the awarding of land to a newly formed
borough.
9:07:35 AM
REPRESENTATIVE KREISS-TOMKINS deferred to Ms. Wilbur or the
Department of Natural Resources.
9:08:27 AM
MARTY PARSONS, Deputy Director, Central Office, Division of
Mining, Land and Water, Department of Natural Resources (DNR),
told Representative Saddler that the particular statute he
sought is AS 29.65.030, which established that 10 percent of
vacant, unappropriated, unreserved land be available to a newly
formed municipality or borough to select to create its land
entitlement.
9:09:02 AM
REPRESENTATIVE SADDLER, regarding "historic norms" and the use
of term "traditionally," asked if those standards appear in
statute or "any place else" or is just "a post-facto
construction."
REPRESENTATIVE KREISS-TOMKINS mentioned past legislation of
former Representative Peggy Wilson from Wrangell, Alaska, which
he offered his understanding calibrated the 7.8 percentage of
land that a borough or municipality could select. He expressed
that limiting a small percentage of land to boroughs may be
taking away the incentive of local governments to create,
because "they wouldn't have a land base from which to work and
offer the local control that helps them function."
REPRESENTATIVE SADDLER asked if - since there have been 14
formed municipalities or boroughs that considered it necessary
to get an additional land selection - the bill sponsor had ever
considered changing the formula to avoid the problem of having
the formulaic allocation of land be di minimus.
REPRESENTATIVE KREISS-TOMKINS answered that he generally finds
an appeal to changing a system to make it more functional rather
than addressing a series of stopgap solutions; at the same time
he indicated he may proceed cautiously. He suggested perhaps
"that could be pursued in parallel." He stated that he was
giving his best effort to accelerate the Petersburg issue, but
did not think it should be exclusive of a more holistic
solution. He expressed willingness to confer with the members
of the committee toward that end.
REPRESENTATIVE SADDLER indicated there was a request from the
Nikiski Borough in the works, as well as "other things."
9:12:57 AM
REPRESENTATIVE SADDLER asked what the Borough of Petersburg
would do with land that would help support its economy.
9:13:26 AM
REPRESENTATIVE KREISS-TOMKINS deferred to representatives of the
Borough of Petersburg. Notwithstanding that, he proffered that
the community has a keen interest in developing value-added
industry with seafood and marine services. He said there is a
high cost of living, partly because of a limited land base,
which makes it difficult to develop new housing.
9:14:44 AM
REPRESENTATIVE RAUSCHER asked, "This went through Boundary
Commission, right?"
REPRESENTATIVE KREISS-TOMKINS offered his belief that the
formation of the Petersburg Borough did go through the local
boundary commission.
9:15:03 AM
CO-CHAIR PARISH opened public testimony on HB 85.
9:15:21 AM
MARK JENSEN, Mayor, related that the Petersburg Borough Assembly
had passed Resolution 2017-02, included in the committee packet,
which supports HB 85 and its companion bill, SB 28. He
confirmed that the residents of Petersburg had gone through the
local boundary commission process to form a borough in 2013. He
said the borough is asking for the legislature's support to help
Petersburg acquire up to 14,666 extra acres within its
boundaries.
9:16:51 AM
REPRESENTATIVE SADDLER offered his understanding that about 96
percent of the land encompassed by the borough's boundaries is
[Tongass] National Forest land.
MAYOR JENSEN confirmed that is correct.
REPRESENTATIVE SADDLER stated that in general the large area of
the Tongass National Forest puts a cap on private development
throughout Southeast Alaska. He asked Mayor Jensen, "So, to
further push the point, if there were a little bit less national
forest in your borough areas, would that open up land for
development that could benefit the people of the Petersburg
region?"
MAYOR JENSEN answered that he imagines so.
9:18:32 AM
LIZ CABRERA, Director, Community Development, Petersburg City &
Borough, read her written testimony, which read as follows
[original punctuation provided, with some formatting changes]:
HB 85 increases the general land entitlement of
Alaska's newest borough, Petersburg, to be comparable
to the land entitlement received by all other boroughs
in the state. An amount equal to approximately .79% of
a borough's land mass, which in Petersburg's case is
14,666 acres. For those of you who are unfamiliar with
our community, the Petersburg Borough is located in
central Southeast Alaska and encompasses an area of
3,800 square miles of land and sea. The borough's
population center is located on the northern tip of
Mitkof Island, which is home to a diverse and prolific
commercial fishing fleet and three major seafood
processing facilities.
In 2013, the residents of Petersburg voted to form a
borough for a number of reasons, including having a
greater say on land use decisions in our surrounding
area, having an opportunity to increase our municipal
land base, and many also felt it was important for all
area residents to support our school system through
local taxes. About 12 months after borough formation,
Petersburg received a general land grant entitlement
certification from the state indicating we were
entitled to 1,896 acres under AS 29.65.010. However,
this amount was reduced by the 457.47 acres already
received by the City of Petersburg, even though
certain tracts of the City's 457.47 acres is
restricted from development and only available for
public, charitable, or recreational use. After
deducting the 457.47 acres, the Borough's land
entitlement was 1,438.53 acres. An area roughly 1/3rd
the size of the Anchorage International Airport.
In making this calculation, DNR uses a statutory
formula a municipality is entitled to 10% of VUU
land within its boundaries. The lands available for
selection are designated as VUU or "vacant,
unappropriated and unreserved" land by the State of
Alaska. These lands are either "unclassified" or
classified as "agricultural, grazing, materials,
public recreation, settlement, and resource
management" but for the most part no development has
occurred on any of the VUU lands.
You may wonder why we received such a small land
entitlement to begin with. The majority of land
within the borough, over 96%, is managed by the
federal government as the Tongass National Forest. Of
the non-federal lands within the borough, 1.73% is
owned by the Goldbelt Corporation, 1.34% by the State
of Alaska, and .4% by the Alaska Mental Health Trust
and University of Alaska. Only .3% is in private
ownership and a mere .04% is owned by the
municipality. When DNR applied the land entitlement
formula to the Petersburg Borough, only a very small
amount of land remained in VUU status.
As we began to evaluate our potential selection, we
realized that our entitlement wasn't adequate for what
we were hoping to accomplish and many other boroughs
also received small land entitlements initially and
then were able to increase these through the
legislature. You'll note in HB 85 that Petersburg is
listed as the 16th borough, so 15 boroughs out of 18
boroughs have received an increase in their
entitlement through the legislature. The most recent
example was in 2010 when both Wrangell and Haines
received additional acreage.
9:22:45 AM
MS. CABRERA continued reading from her written testimony, the
remainder of which read as follows [original punctuation
provided, with some formatting changes]:
Why is this important to Petersburg specifically? As
I mentioned previously, just over 96% of our land base
is federally managed and of our non-federal lands the
major landholder are Goldbelt Corporation and the
State of Alaska. In short, while the borough itself
is relatively large, the majority of land is not and
will never be included in the local tax base1 and most
is not available to generate economic return for our
residents or the state.
The Petersburg Borough would like the opportunity to
move some these lands into private ownership and add
them to our tax base as residential or commercial
developments. We would like the opportunity to secure
new sources of rock for construction and maintenance
of our roads and other projects. And, we'd like the
opportunity to use some of our land to address the
requirements of the Army Corps of Engineers
compensatory mitigation rule, which effects nearly
every new development project within the borough, by
establishing a community wetlands mitigation bank.
This would directly benefit residents by expediting
the process of obtaining a wetlands permit for new
development projects, including projects as small as
single-family residences. 1,400 acres simply does not
provide sufficient developable land to support these
goals.
In our discussions with the Department of Natural
Resources, they explained that the agency generally
does not voice support for this type of legislation,
but neither does the agency oppose Petersburg's
request. We provided a general outline of the lands
we would select under HB 85 and DNR did not express
any concerns about these potential selections.
Lastly, the members of this committee know better than
most that these are difficult times. In our own small
way, we, in Petersburg, want to be part of the
solution, not a casualty of crisis. An increased land
base is a key component to the long-term
sustainability of our municipality.
9:24:51 AM
REPRESENTATIVE SADDLER asked what the characteristics of land
Petersburg hopes to acquire are and how the extra land will help
the community.
MS. CABRERA related that the Department of Natural Resources
(DNR) had already provided a "pool" of land that would be
acceptable, and it ranges from muskeg in the middle of an island
with no road access or utilities, to the top of a mountain, and
to some waterfront property. She explained the land selected by
DNR is not contiguous. She indicated that the Petersburg
Borough put together an ad hoc land selection committee, which
included residents, some of which are licensed land surveyors.
The committee set criteria by which it then figured out which
lands would be suited for what purposes. She said, for example,
some land is suitable for settlement, while some has a rock
quarry on it that would be useful, because Petersburg is almost
out of its rock source. She said the committee is trying to
identify where it might have an entire watershed on which it
could create a "wetlands mitigation bank." She added that
hopefully that would be land for which there is no other use.
9:27:24 AM
REPRESENTATIVE WESTLAKE asked, "How much acreage does the state
have down there for granting your wish?" He asserted that
Alaskans absolutely believe in home rule and creating their own
destinies. He queried, "By everything said and done, will we
[emphasis on 'we'] have land (indisc.) state of Alaska?"
MS. CABRERA responded that while she does not know the entire
amount the state has, she does know that there are 18,000 acres
in vacant, unappropriated, and unreserved (VUU) status. She
said that leaves out a large acreage in the center of
Petersburg's main population area, which includes the airport
and any developed facilities. She explained, "So, all of the
things that the state has used for a state function have already
been developed and set aside. And so, all we're looking at is a
portion of that land that they haven't used anything for." She
said she could get the numbers for the committee.
9:28:56 AM
REPRESENTATIVE TALERICO asked if it would be a fair assessment
to describe Petersburg as a community with a desire and drive to
be self-sufficient.
MS. CABRERA answered yes.
9:29:31 AM
CO-CHAIR PARISH, after ascertaining that there was no one else
who wished to testify, closed public testimony on HB 85.
9:29:59 AM
REPRESENTATIVE SADDLER said the state apparently has a system in
which the formula under statute does not give sufficient land to
local boroughs, thus there is an ad hoc selection process by
modifying AS 29.65.030. He asked Mr. Parsons, "After all the
adjustments are made, what have we come up with? About what
percentage of the VUU land do boroughs actually have now -
obviously with an eye towards looking at possibly modifying the
formula to reflect the ... end state?"
9:30:52 AM
MR. PARSONS answered that AS 29.65.010 provides a list of
communities and boroughs in the state that have received
entitlement. He said it is important to remember that 12 of
those are under that statute as part of an historic
memorialization of pre-1978 land selections, and those were
"approximately 10 percent of the VUU land within the borough."
He indicated that the Aleutians East Borough reduced its
entitlement, because it did not feel comfortable managing the
vast amount of VUU land. Mr. Parsons noted that recently the
City & Borough of Wrangell and the City & Borough of Haines
requested an additional entitlement above and beyond the 10
percent VUU land, but primarily the amount is calculated under
AS 29.65.030, which is 10 percent of the VUU land within the
borough.
REPRESENTATIVE SADDLER asked for confirmation that Mr. Parsons
was saying that historical boundaries are 10 percent, but
Wrangell and Haines - and now Petersburg - have requested more.
MR. PARSONS confirmed that 10 percent is the historical average.
He added, "Regardless of how many acres are contained within the
boundaries of the borough, it's only those state lands that are
considered VUU that are used in the calculation."
REPRESENTATIVE SADDLER ventured that Petersburg is a special
case because of the preponderance of land that is locked up in
the Tongass National Forest.
MR. PARSONS advised that Haines received an additional amount
[of land] to bring its land to 21 percent of the VUU land within
its borough; Wrangell negotiated for 42 percent of the VUU land
within its borough. He stated that the Wrangell Borough also
contains a large percentage of the Tongass National Forest.
9:33:53 AM
REPRESENTATIVE RAUSCHER asked if passage of HB 85 would open the
door for "past municipalities to ask for a little more."
9:34:16 AM
CO-CHAIR PARISH directed Representative Rauscher's question to
Mr. Parsons and offered his understanding that Representative
Rauscher was asking if the proposed legislation would open the
door for municipalities that had already been granted land
allotments to ask for more.
9:34:26 AM
MR. PARSONS answered that although he could not predict what
would happen, when Wrangell asked for more land, Haines followed
suit; therefore, "it would not be outside the realm of
possibility that other boroughs would ... decide that they would
like to increase their entitlement through this process."
9:35:27 AM
REPRESENTATIVE KREISS-TOMKINS suggested that some history and
precedent might inform the question. He offered his
understanding that in the past when boroughs were formed, they
got their allotment and tried to "take care of it then and
there," and he is not aware of previously formed boroughs coming
back many years after the fact asking for more. He advised that
the Petersburg Borough just formed, so this is all part of the
borough creation process. He ventured that the Denali Borough
had a similar proportion of land during its process; therefore,
it may ask for more, "because in proportional terms, it's all
quite equitable."
9:36:35 AM
REPRESENTATIVE TALERICO added that the Denali Borough, with just
under 2,000 residents, was given a land grant of 44,000 acres.
He continued as follows:
I think probably the real difficulty would be the
borough approaching the state and passing the red-face
test to ask for ... more land. The limit here, I
think, in Petersburg, is all about their economic
development, being sufficient. ... If you look at the
grants that most of the other municipalities have been
given, it's been reasonably substantial piece[s] of
land. ... I know that the Denali Borough was
certainly aware of when the formation of the Wrangell
and Haines [Boroughs] came about, but I don't remember
any discussions of approaching the state to try and
acquire more.
REPRESENTATIVE TALERICO quipped that his borough over-selected
in hopes that the state would not notice, but the state stuck to
its "original acreage." He said he thinks most of the organized
boroughs have a substantial land grant now. He added, "I don't
believe all of the selections have even been done with the
larger municipalities; I think several of them still have land
to select."
9:38:08 AM
REPRESENTATIVE SADDLER asked the bill sponsor what drove the
Petersburg formation from the City of Petersburg to the City &
Borough of Petersburg.
REPRESENTATIVE KREISS-TOMKINS answered that there had been a
spirited discussion in Petersburg. He noted there were areas on
Mitkof Island that were receiving various municipal services but
were not part of the City of Petersburg. The current request
from Petersburg is an attempt to create a more coherent means by
which to deliver local services, including fire and school. He
said there may have been other motivation, as well. He said he
thinks the local boundary commission process was both engaging
and complex, and there were interactions with the City & Borough
of Juneau related to jurisdiction.
REPRESENTATIVE SADDLER asked if the additional acreage being
requested under HB 85 would be sufficient for the City & Borough
of Petersburg to adequately provide fire, road, and educational
services.
REPRESENTATIVE KREISS-TOMKINS answered yes. He commented that
many communities are acknowledging there could be less state
support in the coming years and are moving toward increased
self-sufficiency.
REPRESENTATIVE SADDLER offered that he did not know whether
state educational support had, in fact, been reduced in
Petersburg.
REPRESENTATIVE KREISS-TOMKINS responded that he believed that
statement is accurate.
9:41:45 AM
REPRESENTATIVE SADDLER asked whether DNR had ever considered
changing the formula under which land is made available, such as
increasing the percentage of VUU land, to avoid the "circle back
to pick up some spare acres."
9:42:10 AM
MR. PARSONS answered that because the formula is in statute, it
would take legislative amendment of statute to modify the
percentage of VUU land from which boroughs can select.
REPRESENTATIVE SADDLER said that is true, but pointed out that
the governor does request bills from time to time.
9:42:40 AM
CO-CHAIR PARISH noted that the proposed legislation had another
committee of referral, the House Finance Committee.
9:42:59 AM
CO-CHAIR FANSLER moved to report HB 85 out of committee with
individual recommendations and the accompanying fiscal notes.
9:43:25 AM
REPRESENTATIVE SADDLER objected for purposes of discussion. He
indicated there had been prior discussion about moving bills out
of committee after only a single hearing, and at that time [one
of the committee co-chairs] had said that if a bill had been
heard by a previous committee, then "that might mitigate towards
... passing out a bill after just one hearing." He offered his
understanding that the House Community and Regional Affairs
Standing Committee was the first committee of referral for HB
85, and he questioned, "Is that consistent with your policy?"
9:43:50 AM
CO-CHAIR PARISH answered, "The policy, as clarified by my co-
chair, is going to be pretty case by case. In such cases as the
bill only has one committee of referral, then I think it's very
reasonable to hold it over for at least two hearings. In the
event that it has additional committees of referral and there'll
be additional occasion for public testimony, I see no reason to
hold it over."
9:44:18 AM
REPRESENTATIVE SADDLER removed his objection. There being no
further objection, HB 85 was reported out of the House Community
and Regional Affairs Standing Committee.
9:44:35 AM
The committee took an at-ease from 9:44 a.m. to 9:47 a.m.
9:47:21 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:47 a.m.