Legislature(1995 - 1996)
04/10/1996 08:20 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
APRIL 10, 1996
8:20 A.M.
TAPE HFC 96 - 107, Side 1, #000 - end.
TAPE HFC 96 - 107, Side 2, #000 - end.
TAPE HFC 96 - 108, Side 1, #000 - #205.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 8:20 A.M.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Kohring
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Navarre was not present for the meeting.
ALSO PRESENT
Representative Gary Davis; Representative Ivan Ivan;
Representative John Davies; Representative Norman Rokeberg;
Elmer Lindstrom, Special Assistant, Office of the
Commissioner, Department of Health and Social Services;
Donald Dapcevich, Executive Director, Governor's Advisory
Board on Alcoholism & Drug Abuse, Office of the
Commissioner, Department of Health and Social Services;
Julie Krafft, Alaska Municipal League, Juneau; Kurt Parkan,
Deputy Commissioner, Department of Transportation and Public
Facilities; Jack Burmingham, (Testified via teleconference),
Alaska Air Carriers Association, Anchorage; Elisabeth
Hickerson, (Testified via teleconference), Assistant
Attorney General, Department of Law, Anchorage.
SUMMARY
HB 529 An Act giving notice of and approving the entry
into, and the issuance of certificates of
participation in, a lease-purchase agreement for a
centralized public health laboratory.
HB 529 was HELD in Committee for further
discussion.
HB 543 An Act establishing a preference when entering
into state airport land leases.
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HB 543 was HELD in Committee for further
discussion.
HCR 26 Relating to creation of the Public Inebriate Task
Force.
CS HCR 26 (FIN) was reported out of Committee with
a "no recommendation" and with a zero fiscal note
by the Department of Public Safety dated 3/20/96
and a fiscal impact note by the House HESS
Committee dated 3/20/96.
HOUSE CONCURRENT RESOLUTION 26
Relating to creation of the Public Inebriate Task
Force.
REPRESENTATIVE IVAN IVAN stated that he had introduced the
resolution because of a growing alcohol problem in Alaska
that would need to be addressed by future legislatures. The
resolution establishes a task force to develop and recommend
a plan for treatment and services for intoxicated persons
who are affected by Title 47.
Under AS 47.37.170, local police can take into protective
custody a person who appears to be intoxicated and
incapacitated in a public place and then place that person
in an approved public treatment or detention facility. A
licensed physician or other qualified health practitioner
must then examine the inebriate as soon as possible. If the
person is found to be incapacitated by alcohol, they are
then detained for no more than 48 hours in the facility or
for no more than twelve hours in a detention facility.
Tremendous costs have been accruing to municipalities and
public health facilities due to the program.
He continued, costs of affected programs and other aspects
of the Title 47 equation are unknown. He considered the
legislation essential in forming a task force to investigate
the problem.
Representative Martin pointed out that this concern has been
"unsuccessfully" studied many times before. Representative
Ivan advised that the problem continues to exist and a
solution needs to be achieved. Co-Chair Hanley pointed out
to Representative Martin that the fiscal note adopted by the
HESS Committee only provides travel money for the task force
members who are not working for the Legislature or the
Executive Branch of government.
ELMER LINDSTROM, SPECIAL ASSISTANT, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES,
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spoke in support of HCR 26. He pointed out that the cost of
the public inebriate problem statewide is unknown and that
HCR 26 could provide information which could help in
determining potential solutions.
DONALD DAPCEVICH, EXECUTIVE DIRECTOR, GOVERNOR'S ADVISORY
BOARD ON ALCOHOLISM & DRUG ABUSE, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES,
stated that the Advisory Board on Alcoholism and Drug Abuse
endorses the effort put forth in HCR 26. The creation of a
Public Inebriate Task Force has the potential of drawing all
concerned parties together to solve this perplexing problem.
He stressed that HCR 26 would be a prevention issue.
Representative Martin reiterated that all the work done in
previous years has not been productive.
JULIE KRAFFT, ALASKA MUNICIPAL LEAGUE, JUNEAU, noted that
the Alaska Municipal League supports passage of HCR 26.
Many communities lack the financial resources to deal with
the problem of public inebriates. Communities are required
to detain these people with extremely limited financial
assistance, and are then faced with ever increasing costs.
The public inebriate problem is a public safety problem, a
medical care problem, and a drug alcohol treatment problem.
The issue can not be resolved from any one entity; the State
must help take responsibility to develop a solution.
Representative Mulder MOVED to adopt Amendment #1 which
would change the number of voting members on the board from
11 to 12, adding one substance abuse treatment provider.
There being NO OBJECTION, it was adopted.
Representative Mulder MOVED to report CS HCR 26 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS HCR 26 (FIN) was reported out of Committee with a "no
recommendation" and with a fiscal impact note by the House
HESS Committee dated 3/20/96 and a zero fiscal note by the
Department of Public Safety dated 3/20/96.
HOUSE BILL 529
"An Act giving notice of and approving the entry into,
and the issuance of certificates of participation in, a
lease-purchase agreement for a centralized public
health laboratory."
Representative Martin MOVED to report HB 529 out of
Committee with individual recommendations and with the
accompanying fiscal note. Representative Kelly OBJECTED.
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A roll call was taken on the MOTION.
IN FAVOR: Martin, Mulder, Parnell, Hanley.
OPPOSED: Kohring, Therriault, Grussendorf, Kelly,
Foster.
Representatives Brown and Navarre were not present for the
vote.
The MOTION FAILED (4-5).
HB 529 was HELD in Committee for further consideration.
HOUSE BILL 543
"An Act establishing a preference when entering into
state airport land leases."
REPRESENTATIVE GARY DAVIS testified in support of HB 543.
He stated that the Alaskan aviation industry has made
significant progress and investment in developing a system
which better meets the transportation needs of the State.
That system is different than the one used by other states.
Regulations have recently been proposed that could have a
negative impact on the industry. The changes suggested may
threaten the aviation infrastructure in Alaska by
discouraging investment and development. Private aviators
stand to lose any physical improvements added to airport
structures at the conclusion of their lease. In some cases,
the lessees have developed their leasehold. The potential
loss could foster reluctance by the private sector to
continue providing the infrastructure at aviation sites
across the State.
He added that the purpose for State involvement in airport
management should be to promote, encourage and develop
aviation in Alaska. It is important that airport leasing
policy and practice in Alaska remain on a first come first
served basis.
HB 543 would give the current lessee preference if they are
in compliance with the terms of the existing lease and have
made substantial financial investments in developing that
land.
Representative Davis provided a sectional analysis of the
bill. Representative Martin asked if a requirement exists
in which "fair market value" must be considered for the
leased space. Representative Davis advised that each five
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years, a reevaluation will occur of the lease. The market
value and rate of the lease would be indicated in
regulation.
JACK BURMINGHAM, (TESTIFIED VIA TELECONFERENCE), ALASKA AIR
CARRIERS ASSOCIATION, ANCHORAGE, stated that the schedule
implemented in 1991 by the Department of Transportation and
Public Facilities (DOTPF) received strong opposition by the
current lease holders. There have been instances where the
rates were challenged because the scheduled rates exceeded
the fair market value of the land. No one has been getting
airport land at a "cheap" rate.
Co-Chair Foster thanked the sponsor for proposing the
legislation. He recalled that ten years ago the State
decided to put all leases to bid. Co-Chair Foster
emphasized that a company with a sizeable investment stands
to loose a tremendous amount through the leasing process.
The proposed legislation addresses the availability of land
and gives preference to those companies already holding
leases. He hoped that the legislation would force DOTPF to
open more land for zoning of aircraft.
Co-Chair Foster asked what would happen to the hangar,
concrete floor and fuel tank when a company was forced to
relinquish their lease. He pointed out that market rates
have been met. Mr. Burmingham added that the committee
substitute as passed by the House Transportation Committee
had good intent but would not address the current concerns.
The primary area of concern was with the Findings Section in
Section #1, and Subsection (c), Section #3. The ownership of
the lease-hold improvements is integral in a state renewal
right. He stipulated that the company who makes the
improvements must own those improvements.
Mr. Burmingham reiterated that air carriers are requesting
that language exist which clearly defines a renewal right
and a clear understanding that the lease holders who have
made improvements, own those improvements.
ELISABETH HICKERSON, (TESTIFIED VIA TELECONFERENCE),
ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE,
noted that language which exists would clarify the procedure
to be used. She noted that change was to Section #3,
deleting "shall" and inserting "may", clarifying that the
holding lessee could receive the right to the lease without
competition. Other wording has also been considered. She
added that an additional concern was to the time limit.
Currently, in statute, the limit is fifty-five years. The
Department of Law's position is that the lease should amount
to fifty-five years, affecting concerns the court might
have. She added, inclusion of the Findings Section is
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extremely important to expand judicial scrutiny and
constitutional challenge.
Representative Brown distributed a handout titled "DOT&PF
Comments to Suggested Changes". [Copy on file]. She asked
for further discussion of disposition and improvements to
the site and how that would be addressed. Ms. Hickerson
replied that the issue of disposition and improvements was a
policy issue. She added that all leases contain an existing
provision that discuss the issue of improvements at the end
of those leases. Most are written in such a way that there
exists an option to sell, remove or vest in the State.
Representative Brown questioned where that clause was
located in the version before the Committee. Co-Chair
Hanley pointed out that was delineated in Section (e), Page
3.
KURT PARKAN, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, remarked that
currently, every lease has reference to the disposition of
the investments made.
(Tape Change, HFC 96-107, Side 2).
Mr. Parkan stated that each lease has three options written
into it including a removal and purchase.
Co-Chair Foster stated that in the 1970's and 1980's,
companies had the right to renew their contract each year at
the adjusted inflation rate. He pointed out that the
current options are not fair for the company currently
holding the lease. Co-Chair Hanley agreed, indicating that
concern had been suggested by many people.
Mr. Parkan acknowledged that it was a problem. He thought
that it would be fair to the purchaser of the improvements
to purchase it at the appraised value. Co-Chair Hanley
asked if that was written into the lease. Mr. Parkan stated
that the language written into the leases was not specific.
Currently, the Department is looking into language which
would address the determination of the "fair market value"
of the improvements made.
Co-Chair Hanley mentioned that the concerns are the
disposition and the value needed to be paid for the initial
investment. Co-Chair Foster maintained that the regulations
were created to fix something that was not "broken". Mr.
Parkan agreed that Section (e), Page 3, would not need to be
included in statute. The section which needs to be
addressed in statute is the option to allow someone to
continue lease renewal. The first right of refusal is
language provided by DOT&PF, although, the Department of Law
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should provide an opinion regarding the constitutionality of
that language.
In response to Representative Kelly's question, Mr. Parkan
advised that the Department has not been challenged in court
regarding the existing statute. He added, the Department of
Law has expressed concerns with the current language.
Representative Brown asked if consideration had been given
to make the disposition a simple surface right, questioning
the constitutional issue. Ms. Hickerson replied that the
federal patent requires that the land be held for public
purposes and used for aviation. There are existing
restrictions on federal money used to support airports.
She spoke to the constitutional issue that arose. Under
Article 8, Section #10 requires public notice of any lease.
Existing regulations of the Department have been in effect
since the 1970's. They require that there be competing
applications offered at a public auction. What occurred was
that long term leases were beginning to expire, and
consequently, they were public noticed. The tenants were
very concerned with the possibility of being in a
competitive situation, at which point the issue became of
major concern. A resolution has not yet been found.
REPRESENTATIVE NORMAN ROKEBERG commented that the
disposition of the improvements is important and should be
addressed in the proposed statute. Currently, existing
leases leave to the Department, the determination of the
disposition of the improvements. He pointed out that a
"truly" market competitive situation does not exist. He
thought the State had created a "semi-monopoly" in their
interest of land surrounding the airport.
Representative Rokeberg noted that the concern has become of
legislative interest because of the leases and the way that
they have been drafted. He recommended that the language
proposed by the Air Carriers Association be included in the
proposed legislation.
Representative Parnell questioned why fair market value
would not work with the proposed legislation.
Representative Rokeberg stated that the free market does not
work because there is no alternative land to select. A lack
of clarity exists in the current leases. The intention of
the House Transportation Committee was to provide for
direction to DOT&PF regarding when the current leases would
expire.
Co-Chair Hanley remarked that this is a transition period
and that provisions now need to be created. He suggested
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that Section (e) be more clearly defined and that the
negotiations should be made at the front-end of the lease.
The legislation should be "fair" to those people that have
made the initial investments. He thought that Section (e)
would not guarantee fairness.
Representative Davis agreed, lessee have had problems and
concerns in dealing with the State. He noted that the
Department recommended that the Findings Section provide the
fair language. Representative Davis stated that the bill
has focused on the findings in order to provide fairness to
the lessee regarding the policy. Co-Chair Hanley pointed
out that the findings does not address the disposition of
assets.
Co-Chair Foster noted that no bank would loan to a business
about to expand if the disposition of assets had not been
resolved in regulations. He added, expansion possibilities
are checked by the physical confinements established by
DOTPF, and requested that they open up additional land.
Representative Foster predicted that a crisis will soon
exist, as new people come forward and over-bid current
lessee holders. He suggested that scenario would not happen
if undeveloped land was made available.
Mr. Parkan agreed that more land should be opened at the
rural airports, and that airports would make more revenue
with more lessee holders. He added that the Alaska
Industrial Development & Export Authority (AIDEA) bank would
be willing to lend on airport leasing conditions.
In response to Representative Parnell, Co-Chair Hanley
recommended that Section (e) should remain in the bill as it
clarifies that deposition should be addressed. Mr. Parkan
advised that the Department supports the current language of
the legislation.
Representative Rokeberg pointed out that Section (e) was a
clause moved from another draft. Language presented by the
Air Carriers Association had been removed before the bill
reached the House Finance Committee. He recommended that
additional language be added to address the deposition
problem.
Representative Rokeberg continued, the original bill, as it
moved from the Department, contained a section addressing
the First Right of Refusal. In common law, this concept is
based on the idea that the modified third party offer would
help generate what is considered a fair market value price
at that point in time. He suggested that the first right of
refusal no longer works in our society. Representative
Rokeberg noted that what has been utilized over the past
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years is a "renewal option" for an extension of a lease. He
recommended changing that language to the first right of
offer, thus allowing the Department to create the
regulations for implementation.
(Tape Change, HFC 96-108, Side 1).
Representative Brown asked how the price would be determined
in the right of the first offer. Mr. Parkan replied that
the intent was to have the lease approach fair market value.
Representative Brown asked if something other than price
could be used in the negotiations. Mr. Parkan stated that
an option exists in regulation to give a break on the rate
for public purposes. Representative Brown asked how fair
market value was determined. Mr. Parkan replied that it was
difficult to do. A survey is being implemented of all rural
airports leases to identify the values.
Representative Brown asked what a "hold-over" lease was.
Mr. Parkan stated that a "hold-over" lease was one in which
the term had expired, but the State continues those leases
on a temporary basis.
HB 543 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 10:05 A.M.
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