Legislature(1995 - 1996)
03/18/1996 01:45 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 18, 1996
1:45 P.M.
TAPE HFC 96-78, Side 1, #000 - end.
TAPE HFC 96-78, Side 2, #000 - end.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 1:45 p.m.
PRESENT
Co-Chair Foster Representative Mulder
Representative Brown Representative Navarre
Representative Kelly Representative Parnell
Representative Kohring Representative Therriault
Representative Martin
Co-Chair Hanley and Representative Grussendorf were absent
from the meeting.
ALSO PRESENT
Representative Carl Moses; Lamar Cotten, Deputy Director,
Department of Community and Regional Affairs; Jim Baldwin,
Assistant Attorney General, Department of Law; Agathan
Krukoff, Aleut Corporation; Chris Gates, Attorney, Aleut
Corporation; Representative Joe Green; Tim Benintendi,
Staff, Representative Moses.
SUMMARY
HB 232 An Act establishing an economic development tax
credit; and providing for an effective date.
HB 232 was rescheduled to another time.
HB 466 An Act establishing the Adak Reuse Authority.
CSHB 466 (FIN) was reported out of Committee with
a "do pass" recommendation and with a fiscal
impact note by the Department of Community and
Regional Affairs and with a zero fiscal note by
the Department of Military and Veterans Affairs.
HOUSE BILL NO. 373
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"An Act relating to educational benefits for family
members of deceased members of the armed services."
Representative Martin MOVED to withdraw HB 373 from
consideration by the House Finance Committee. There being
NO OBJECTION, it was so ordered.
HOUSE BILL NO. 466
"An Act establishing the Adak Reuse Authority."
REPRESENTATIVE CARL MOSES, Sponsor HB 466, testified in
support of the legislation. He provided members with a
proposed committee substitute for HB 466, #9-LS1580\G,
3/14/96 (copy on file).
TIM BENINTENDI, STAFF, REPRESENTATIVE CARL MOSES provided
members with a memorandum dated 3/18/96, summarizing changes
made by the proposed committee substitute (Attachment 1).
He noted that the proposed committee substitute provides
that two of the four public members of the Adak Reuse
Authority must be residents of the area within the
boundaries defined by the Aleut Regional Corporation. This
change occurs on page 1, line 15 though page 2, line 3.
Mr. Benintendi observed that "jointly operate" was changed
to "for the operation of" on page 3, lines 18 - 19. He
explained that this would preclude joint operating
agreements with federal entities.
Representative Brown noted that Mr. Vassar commented on the
need for general authority to finance activities within the
facility during the 3/12/96, House Finance Committee
meeting. Mr. Benintendi responded that item 5 of Attachment
1 addresses this issue. Language was deleted on page 5,
line 10 that restricted the Adak Reuse Authority's ability
to use state grants, appropriations, or other transfers to
satisfy bond obligations or establish collateral. The
restriction on the Adak Reuse Authority to use rents, fees
or other charges for financing development or improvement of
unrelated facilities was also deleted from the proposed
committee substitute.
Mr. Benintendi observed that comments during the 3/12/96,
House Finance Committee meeting, indicated that the bill did
not clarify that the Adak Reuse Authority has the ability to
issue bonds. This was clarified on page 4, line 7.
Mr. Benintendi explained that the proposed committee
substitute was amended on page 4, line 28, to allow the Adak
Reuse Authority to expedite regulations.
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Mr. Benintendi noted that a provision was added on page 6,
lines 5 - 6 to require legislative approval of the Adak
Reuse Authority's share of any financing which exceeds $10.0
million dollars.
Representative Brown asked what mechanism the Legislature
would use to approve the bond issuance. Representative
Mulder compared the provision to requirements under AIDEA.
Mr. Benintendi referred to page 11, lines 8 - 11. He noted
that previous language required that project applicants be
current with state tax matters. This language was expanded
to clarify that applicants are considered current if they
are meeting payment schedules, have a tax case under appeal,
or are meeting terms of tax dispute settlements.
Mr. Benintendi noted that the proposed committee substitute
deleted language which restricted a future municipality's
option to accept the indebtedness of the Adak Reuse
Authority when succession occurs.
Representative Brown referred to page 14, line 18. She
questioned the relationship of the State to the Adak Reuse
Authority and to the municipality that would take over the
Adak Reuse Authority. She asked if the Adak Reuse Authority
would still be subject to provisions of the Executive Budget
Act after it is integrated with a municipality.
JIM BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW
responded that once the Adak Reuse Authority is merged with
a municipality it would not be subject to the Executive
Budget Act. The Adak Reuse Authority would become a
municipal entity. The assets would no longer be assets of
the State.
Representative Brown asked if the membership provisions of
the Board would still apply. Mr. Baldwin noted that under
the merger the Adak Reuse Authority would be a municipal
agency subject to the control of the borough or city that
assumes responsibility. He estimated that state law would
cease to be in effect.
Representative Parnell noted that on page 13, line 16 the
legislation states: "On integration, the municipality
succeeds to the rights, powers, duties, assets and
liabilities of the Adak Reuse Authority." He questioned if
the Adak Reuse Authority has a duty to comply with the
Executive Budget Act. He asked if the municipality would
succeed to that duty. Mr. Baldwin stated that when a
municipality incorporates another city the other city does
not stay in effect.
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LAMAR COTTEN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY
AND REGIONAL AFFAIRS AND CHAIRMAN, LOCAL REUSE AUTHORITY
PLANNING ACTIVITIES compared the provision to the creation
of a borough. He observed that under state law existing
first class cities within the borough transfer the power of
education, assets, liabilities, and duties to the new
borough. The first class city no longer has any
responsibility, authority or duty to provide education.
Representative Parnell restated the question by
Representative Brown regarding which other provisions are
dissolved upon integration.
Mr. Cotten stressed that the municipality would assume the
Adak Reuse Authority's indebtedness. Representative Parnell
concluded that the only requirement that is placed on the
Adak Reuse Authority that would not pass to the municipality
is the section regarding the Executive Budget Act. Mr.
Cotten agreed with his assessment.
Representative Brown asked if the Governor should continue
to appoint the members of the board. Mr. Baldwin stressed
that the Adak Reuse Authority would become a municipal
entity. He pointed out language regarding the retention of
powers and duties refers to the powers and duties necessary
to support its indebtedness. The Adak Reuse Authority would
be subject to municipal ordinances.
Representative Mulder MOVED to adopt Committee Substitute
for HB 466, #9-LS1580\G, 3/14/96. There being NO OBJECTION,
it was so ordered.
Representative Moses referred to page 13, lines 16 & 17. He
stressed that this language assumes that the Adak Reuse
Authority is dissolved after it is merged with a
municipality.
Representative Martin asked if Atka could incorporate Adak.
Representative Moses did not think that Atka would be
prevented from forming a borough that could incorporate
Adak. Representative Martin asked if the Adak Reuse
Authority should be protected. Representative Moses
emphasized the importance of quick action.
Representative Navarre asked if there are other alternatives
to the formation of an Adak Reuse Authority. Representative
Moses stressed that the legislation follows the general
process for a base closure.
Representative Navarre expressed concern with the level of
bonding authority. He noted that $100.0 million dollars
equals the State's current capital projects improvement
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budget. He asked who will be liable for the bonds spent by
the Adak Reuse Authority.
Mr. Cotten noted that language on page 13, lines 16 and 17
clarifies that the Adak Reuse Authority succeeds to the
municipality the rights, powers, duties, assets and
liabilities of the Adak Reuse Authority.
Representative Navarre emphasized that $10.0 million dollars
for each project is still a significant amount. He
suggested that many projects will be just under $10.0
million dollars. He suggested that the Adak Reuse Authority
not be given bonding authority. He stated that bonding
authority could be considered after the transfer.
Mr. Cotten pointed out that the Board's membership includes
three cabinet level positions. He maintained that there
will be oversight and involvement by the Administration. He
observed that there is no municipal corporation near the
base. He added that the State only provides education. He
emphasized that the Adak Reuse Authority has to demonstrate
that it has two years of non-general fund money to operate.
Representative Therriault asked if the legislation should
clarify that the Adak Reuse Authority dissolves upon
integration. Mr. Baldwin asked if some statutory provisions
should be added to require the municipality to accept some
responsibilities of the Adak Reuse Authority.
Representative Therriault asked if there are provisions
regarding responsibility for potential contaminates. Mr.
Benintendi stated that the legislation does not include
provisions regarding contaminates. He observed that the
Navy's withdrawal plan calls for the removal of
contaminates. Representative Moses stated that he assumed
that the Adak Reuse Authority would be held harmless in
regards to contaminates.
Mr. Cotten noted that there is a reuse function and an
environmental clean-up function. He noted that there are a
finite amount of federal funds for clean-up. He observed
that 92 hazardous sites have been identified. He stated
that the areas that have the highest potential for reuse
will be given priority for clean-up. He suggested that the
Adak Reuse Authority would use good judgement in regards to
taking title of contaminated areas. He added that the land
technically returns to the U.S. Fish and Wildlife Service.
In response to a question by Representative Mulder,
Representative Moses noted that the Aleutians East Borough
has presented a plan for incorporation of the base to their
assembly. The city of Unalaska has had a survey done
regarding incorporation of the base. There has not been
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great interest in Atka for forming a borough.
Representative Mulder asked if protections should be
included to protect the State's interest. Representative
Moses stated that he could envision enough people in Adak
within two years to incorporate their own first class city
to take the place of the Adak Reuse Authority. He stressed
that the Adak Reuse Authority will be dissolved.
Representative Mulder noted that the legislation does not
protect against a hostile takeover of the Adak Reuse
Authority by an adjourning borough. He pointed out that a
municipality will protect their own best interest, not the
interest of the State.
Representative Moses emphasized that the question should be
what is best for Adak.
In response to a question by Representative Mulder,
Representative Moses stated that the Aleutians East Borough
can assess property tax. Representative Mulder pointed out
that the real and personal property of the Adak Reuse
Authority and its assets, income and receipts are exempt
form taxes and special assessments of the State or a
political subdivision of the State, on page 9. He asked if
this would prevent the assessment of property taxes.
Representative Moses did not think that this language would
prevent the municipality from collecting property taxes.
Mr. Cotten noted that page 10, lines 2 and 3 provides that
the municipality's ability to tax would not be exempted. He
added that annexation proceedings before the Local Boundary
Commission could take 9 months to a year. He questioned if
the State wants to transfer the base. He noted that the
municipality will also assume liability.
(Tape Change, HFC 96-78, Side 1)
Representative Mulder expressed concern that assets could be
stripped.
In response to a question by Representative Mulder,
Representative Moses stated that he could envision the Adak
Reuse Authority bonding for geothermal activities. He did
not envision the need for large capital projects.
Representative Brown stressed the need for clarification
regarding which provisions would apply after the Adak Reuse
Authority is merged with a municipality. She referred to
page 9, lines 26 and 27. She emphasized that this provision
conflicts with language on page 10, subsection (b). She
interpreted the bill to state that real and personal
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property of the Adak Reuse Authority is exempted from
taxation from local or state government. She asked what
would happen to the private party that uses the financing
mechanism provided by the Adak Reuse Authority. She
questioned if the new municipality would have the authority
to change the rules.
Representative Brown stressed that the State may not know
what environmental contaminations are present. She asked if
the statutes could be amended to clarify that the State and
Adak Reuse Authority do not accept liability for
environmental damage done by the Navy.
Representative Martin reiterated concerns regarding the Adak
Reuse Authority's exemption from taxation. He pointed out
that line 30, on page 9 states that "the bonds or interest
on them shall at all times be exempt from taxation." He
asked if this would create a tax advantage over competing
interests.
Representative Therriault stressed that state statute would
not necessarily shield the State from potential liability.
He pointed out the existence of federal laws which deal with
responsibility.
CHRIS GATES, ATTORNEY, ALEUT CORPORATION urged the Committee
to amend the bill to require that the public members come
from the region. He expressed concern that assets from the
base could be stripped. He maintained that there is an
incentive to strip equipment from the base. He requested
that a three year moratorium be placed on stripping assets
with provision for exception by a super majority vote of the
Adak Reuse Authority. He reiterated that the Aleut Regional
Corporation is committed to making Adak work in a couple of
years. He stressed that there are other options available
to allow transference of the base without cost to the State.
Mr. Gates noted other concerns with the legislation. He
observed that the issue of conduit financing was not
improved by the proposed committee substitute. He suggested
that the legislation contain a performance audit provision.
He requested that "small" be deleted on page 16, line 18.
He pointed out that a company servicing Adak may not be a
small company. He asked for further clarification of the
succession process. He stressed that an alternative exists
to a state authority.
AGATHAN KRUKOFF, ALEUT REGIONAL CORPORATION testified via
the teleconference network. He restated concerns expressed
by Mr. Gates and Mr. Gromoff during the 3/12/96 House
Finance Committee meeting.
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Mr. Gates emphasized that the Aleut Regional Corporation is
willing to cooperate. He reiterated that there is an
alternative for a non-state authority that would fill the
same function as the Adak Reuse Authority.
Representative Martin expressed concern that the transition
period needs to protect the State's interest. Mr. Gates
restated concerns regarding the stripping of assets. He
maintained that there are incentives to take assets out of
Adak for use in other areas. He emphasized the need for
local representation.
Mr. Benintendi observed that the Navy will probably withdraw
from the base by late summer or early fall of 1997. He
maintained that the Adak Reuse Authority will need
flexibility to deal with the assets that it has.
Representative Mulder MOVED to delete on page 6, lines 4 and
5, "for which the authority's share of the financing would
be more than $10,000,000." He explained that this would
ensure legislative approval would be needed for bonds issued
by the Adak Reuse Authority. Representative Brown OBJECTED
for purposes of discussion. She asked what form approval
would be given.
Representative Martin noted that project approval would need
to be included in two pieces of legislation. Each project
would need to be included in authorizing legislation. The
appropriation would be included in the general appropriation
bill. He observed that projects could not be approved
through the Legislative Budget and Audit Committee.
Representative Mulder agreed with Representative Martin's
assessment.
Representative Brown WITHDREW her objection. There being NO
OBJECTION, "for which the authority's share of the financing
would be more than $10,000,000" was delete on page 6, lines
4 and 5.
Representative Mulder MOVED to delete on page 13, lines 13
and 14 (g): "The total principal sum of bonds issued under
this chapter may not exceed $100,000,000, exclusive of
refunding bonds." He stated that the language would no
longer be necessary. There being NO OBJECTION, it was so
ordered.
Representative Mulder noted that some technical amendments
may need to be adopted to clarify succession provisions.
In response to a question by Representative Martin, Mr.
Gates noted that two members will be appointed from the
region.
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Representative Martin reiterated concerns regarding
exemption from taxation. He pointed out that line 30, on
page 9 states that "the bonds or interest on them shall at
all times be exempt from taxation." He asked if this would
create a tax advantage over competing interests. Mr. Gates
clarified that this provision applies to the ability to sell
tax exempt bonds to finance improvements on Adak. He
suggested that the language may be required to sell tax
exempt bonds.
Representative Brown MOVED on page 9, lines 24 and 25, after
"and" to delete ", together with a project financed under
this chapter,". Representative Mulder OBJECTED for purposes
of discussion. She stated that this provision would prevent
a private project financed through the Adak Reuse Authority
from being exempted from taxation. There being NO
OBJECTION, it was so ordered.
Representative Mulder MOVED to report CSHB 466 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes.
Representative Brown OBJECTED for purposes of discussion.
She stated that she supports the concept of the legislation
but expressed concerns that the legislation needs further
amendments in regards to the succession provision. She
noted conflicting opinions were expressed in regards to
whether a number of major provisions would apply after
integration with a municipality.
A roll call vote was taken on the MOTION to move CSHB 466
(FIN) from Committee.
IN FAVOR: Kelly, Kohring, Martin, Mulder, Navarre,
Therriault, Foster
OPPOSED: Brown
Co-Chair Hanley and Representatives Grussendorf and Parnell
were absent from the vote.
The MOTION PASSED (7-1).
CSHB 466 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal impact note by the
Department of Community and Regional Affairs and with a zero
fiscal note by the Department of Military and Veterans
Affairs.
ADJOURNMENT
The meeting adjourned at 3:15 p.m.
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