Legislature(1997 - 1998)

02/25/1998 01:40 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
             HOUSE FINANCE COMMITTEE                                           
                February 25, 1998                                              
                   1:40 P.M.                                                   
                                                                               
TAPE HFC 98 - 41, Side 1.                                                      
TAPE HFC 98 - 41, Side 2.                                                      
TAPE HFC 98 - 42, Side 1.                                                      
TAPE HFC 98 - 42, Side 2.                                                      
                                                                               
CALL TO ORDER                                                                  
                                                                               
Co-Chair Therriault called the House Finance Committee                         
meeting to order at 1:40 P.M.                                                  
                                                                               
PRESENT                                                                        
                                                                               
Co-Chair Therriault   Representative Kelly                                     
Representative Grussendorf Representative Mulder                               
Representative J. Davies  Representative Martin                                
Representative G. Davis  Representative Moses                                  
Representative Foster                                                          
                                                                               
Representatives Hanley and Kohring were not present for the                    
meeting.                                                                       
                                                                               
ALSO PRESENT                                                                   
                                                                               
Mike Tibbles, Staff, Representative Gene Therriault;                           
Barbara Cotting, Staff, Representative Jeannette James;                        
Janice Adair, (Testified via Teleconference), Director,                        
Division of Environmental Health, Department of                                
Environmental Conservation, Anchorage; Steve Borell,                           
(Testified via Teleconference), Executive Director, Alaska                     
Miners Association, Anchorage; Jerry Reinwand,                                 
Representative for the Chemical Specialty Manufacturers                        
Association, Juneau; Mike Conway, Director, Air/Water                          
Quality Division, Department of Environmental Conservation;                    
Bob Bartholomew, Deputy Director, Income and Excise Tax                        
Division, Department of Revenue; Mark Hickey, Representing                     
the Petro Marine Services, Juneau; Paul Fuhs, Court                            
Consultant, City of Nome; Keith Laufer, Manager, Financial                     
and Legal Affairs, Alaska Industrial Development and Export                    
Authority (AIDEA), Anchorage; Randy Simmons, Executive                         
Director, Alaska Industrial Development and Export                             
Authority (AIDEA), Anchorage.                                                  
                                                                               
SUMMARY                                                                        
                                                                               
HB 144 An Act authorizing the Department of                                    
Environmental Conservation to charge certain fees                              
relating to registration of pesticides and                                     
broadcast chemicals; and providing for an                                      
effective date.                                                                
                                                                               
HB  144  was held in Committee for further                                     
consideration.                                                                 
                                                                               
HB 239 An Act relating to the liability of motor fuel                          
dealers for payment of tax imposed on certain                                  
credit transactions involving motor fuel sales or                              
transfers that become worthless debts or on sales                              
or transfers to persons who declare bankruptcy;                                
and providing for an effective date.                                           
                                                                               
 HB 239 was HELD in Committee for further                                      
consideration.                                                                 
                                                                               
HB 386 An Act relating to the financing authority,                             
programs, operations, and projects of the Alaska                               
Industrial Development and Export Authority; and                               
providing for an effective date.                                               
                                                                               
 HB 386 was HELD in Committee for further                                      
consideration.                                                                 
HOUSE BILL NO. 144                                                             
                                                                               
"An Act authorizing the Department of Environmental                            
Conservation to charge certain fees relating to                                
registration of pesticides and broadcast chemicals;                            
and providing for an effective date."                                          
                                                                               
BARBARA COTTING, STAFF, REPRESENTATIVE JEANNETTE JAMES,                        
explained that HB 144 had been submitted at the request of                     
the Alaska Department of Environmental Conservation (DEC),                     
Division of Environmental Health.                                              
                                                                               
She advised that DEC oversees the use of pesticides in                         
Alaska, a service which consists of applicator training and                    
certifications, issuing permits for public use projects,                       
and ensuring pesticides are used correctly, which includes                     
that manufacturers register their products with the State.                     
Ms. Cotting noted that the program would be partially                          
funded by the federal government with a State match.                           
Each state pays for its share of the pesticide program                         
through a registration fee levied ON chemical                                  
manufacturers.  DEC would like to implement this in Alaska,                    
but statutory authority would be required.  At this time,                      
no Alaskan would be required to pay the fee since there are                    
no chemical manufacturers in the State.  DEC initially                         
proposed to charge $100 fee per label. Ms. Adair thought                       
that rate would not impact the large manufacturers' bottom                     
line, but would instead have a positive impact on the                          
general fund providing a projected annual savings of                           
$56,600 dollars to be replaced by program receipts.                            
                                                                               
MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT,                           
provided a sectional analysis of the proposed legislation,                     
work draft #0-LS0573\B, Lauterbach, 2/24/98.  He pointed                       
out that Section #1 would provide language from the                            
original bill indicating that the Department would have the                    
authority to collect fees for the registration of                              
pesticides and broadcast chemicals.  It would also                             
eliminate the Department's authority to charge fees for                        
"other services provided by the Department".                                   
                                                                               
Section #2 would establish a new subsection (e), which                         
would permit the Department to collect fees relating to                        
water and wastewater operator training.  That item would be                    
singled out into its own subsection because it no longer                       
would appropriately fit under the direct costs of                              
permitting.                                                                    
                                                                               
Mr. Tibbles continued, Section #2 would also establish a                       
new subsection (f) which would divide pesticides and                           
broadcast chemicals into two classifications; one being                        
restricted use chemicals under federal regulation, and the                     
second, all other pesticides (targeting household chemicals                    
such as bleach, disinfectants and insect repellents).  The                     
fee for restricted use chemicals has been established at a                     
higher rate to account for the greater administrative costs                    
associated with those chemicals.                                               
                                                                               
Additionally, Section #2 would establish a new subsection                      
(g) which would prohibit the Department from charging an                       
hourly fee under (a) of that section.                                          
                                                                               
Co-Chair Therriault spoke to the fiscal impact relating to                     
the committee substitute.  If some of the program receipt                      
authority was removed for something that already had a fee,                    
the Department would no longer then have that authority.                       
The Department would need to be backed by general funds                        
which should be reflected in the fiscal note.                                  
                                                                               
JANICE ADAIR, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,                        
DIVISION OF ENVIRONMENTAL HEALTH, DEPARTMENT OF                                
ENVIRONMENTAL CONSERVATION, commented to the concerns                          
presented by the proposed committee substitute.  Currently,                    
there is an hourly fee charged for solid waste, requested                      
by municipalities that did not want to subsidize other                         
communities.  She agreed that it would be easier for the                       
Department not to have an hourly fee, but that it had been                     
initiated at the communities request.                                          
                                                                               
Last year, industrial solid waste was reflected in a                           
separate component.  The Department was given authority to                     
cover all costs and travel through the fees.  Ms. Adair                        
continued, the Department recently completed a public                          
notice regarding the hourly fee rates.  She advised that                       
the Department does not know how to implement such a                           
procedure without an hourly fee assessment unless the                          
client pays more.                                                              
                                                                               
Ms. Adair spoke to an additional concern for the Department                    
to provide site-specific determination for wastewater                          
permits.  She recommended that Mike Conway address that                        
concern for Committee members.                                                 
                                                                               
Ms. Adair spoke to the deletion of "other surfaces                             
provided" and how that would affect communities need for                       
compliance with the certification process.  The Department                     
is also responsible for providing sanitary surveys for                         
public water systems and a variety of functions, which are                     
not associated with the permit or plan aspect and in which                     
a fee is associated.                                                           
                                                                               
Co-Chair Therriault asked if the service would be                              
discontinued without the specific fee.  Ms. Adair replied                      
that it would depend on the amount of general funds                            
allocated.  She pointed out that the benefit about                             
implementing the fee is that those that use the service are                    
the ones who pay.  General funds would not have that same                      
correlation.                                                                   
                                                                               
STEVE BORELL, (TESTIFIED VIA TELECONFERENCE), EXECUTIVE                        
DIRECTOR, ALASKA MINERS ASSOCIATION, INC., ANCHORAGE,                          
pointed out that concern regarding user fees has surfaced                      
as State revenues have decreased.  He questioned how much                      
of the DEC budget should be generated from user fees versus                    
how much should come from the general fund.                                    
                                                                               
Mr. Borell stated that the Alaska Miners Association has                       
been working in collaboration with DEC, discussing changes                     
to user fee collection. He thought that HB 144 had                             
originally been written to address fees associated with                        
pesticides.                                                                    
                                                                               
Mr. Borell spoke to the work draft.  In Section #1, the                        
first item clarifies that the intent of existing statute AS                    
44.46.025(a) is to allow user fees for "the applicable                         
direct costs" for items listed, including certification of                     
federal water discharge permits and processing water                           
discharge permits.  By the change proposed in removing the                     
language "and other services provided by the Department"                       
would clarify the intent and limit user fees applicable to                     
direct costs.  He believed that DEC would then still be                        
able to charge user fees but that they would be limited to                     
direct costs.                                                                  
                                                                               
Mr. Borell continued, Section #2, Line 26, the change would                    
prohibit DEC from charging hourly fees for the items                           
listed.  He stated that this action would benefit DEC, as                      
well as private industry.  He stressed that the difficulty                     
and cost to administer an hourly fees program is                               
significant.                                                                   
                                                                               
Mr. Borell added that Alaska Miners Association has not had                    
the opportunity to determine if the changes in the "B"                         
version would affect DEC's ability to enter into                               
reimbursement agreements.  He believed that it is important                    
for DEC to be able to enter into such agreements for large                     
projects.  The agreements are negotiated between the                           
company and the State and would define work objectives, the                    
work to be done, the final products, and the time schedule                     
for completion.  Major companies are generally not opposed                     
to such agreements if they provide increased certainty and                     
predictability of the total cost.                                              
                                                                               
Co-Chair Therriault noted that the Committee could provide                     
the Alaska Miners Association clarification for the                            
reimbursable agreements.  He asked if DEC was planning to                      
provide a fee packet of regulations for the storm water run                    
off.                                                                           
                                                                               
MIKE CONWAY, DIRECTOR, AIR/WATER QUALITY DIVISION,                             
DEPARTMENT OF ENVIRONMENTAL CONSERVATION, replied to date,                     
there is not a package for those services and there is no                      
plan to create such a package.  Currently, the Division has                    
the authority to charge a fee for that service.                                
                                                                               
Co-Chair Therriault asked if the language were changed to                      
"other direct services" as suggested by Representative J.                      
Davies, would that address the concern of the Alaska Miners                    
Association.  Ms. Adair replied that the problem continues                     
to be solid waste.  The Department would need to address                       
the decision made last year by the Legislature to have                         
industrial solid waste fully supported by fees.                                
                                                                               
Co-Chair Therriault questioned concerns regarding                              
pesticides contained in the legislation.  Ms. Adair                            
responded that the Department is trying to cover $55,500                       
dollars, the federal grant match received for pesticide                        
management in Alaska.  She discussed the distinction                           
between restricted use pesticides which are more regulated                     
and those that cause problems because of their high toxic                      
levels.                                                                        
                                                                               
Representative J. Davies asked the amount, which could be                      
considered problematic.  Ms. Adair responded that it would                     
be important to determine how many pesticides would be                         
considered restricted use.  The registration program is                        
only a few months old.  Originally, the Division requested                     
that a temporary registration fee of $100 dollars be in                        
place until a regulatory limit had been established.  After                    
the market survey had been completed, the Division realized                    
that $100 dollars was too high and decided that $50 dollars                    
should be the cap.                                                             
                                                                               
Representative J. Davies asked if a general fee would be in                    
place until regulations had been adopted.  Ms. Adair noted                     
that it would.  She had envisioned doing it in a regulatory                    
process, which would provide an opportunity to work with                       
those affected by the change.                                                  
                                                                               
Representative J. Davies asked if there would be any impact                    
on the reimbursement agreements.  Ms. Adair stated that                        
there would not, although, she asked if a prohibition on                       
hourly fees would be placed in statute for DEC regulations.                    
She questioned if that would be interpreted as a                               
prohibition on the hourly fees and reimbursable services                       
agreement.                                                                     
                                                                               
JERRY REINWAND, REPRESENTING THE CHEMICAL SPECIALITY                           
MANUFACTURERS ASSOCIATION, JUNEAU, noted that the groups                       
which he represents had provided a survey of the average                       
number of products per state, which amounted to                                
approximately 8800.  A $100 dollar fee could create a                          
hardship.  He noted that the Association would be more                         
comfortable with a statuary procedure in place and that a                      
system be established to create a reasonable number.  He                       
believed that if the Department was delegated the                              
authority, they would be receiving taxation authority,                         
which is a concern for the private industry. Mr. Reinwand                      
added that the Association is also concerned with the                          
differentiation used between household products and                            
products used for commercial and industrial purposes.                          
                                                                               
Co-Chair Therriault inquired if there was information                          
available from other states regarding the more restrictive                     
amount.  Mr. Reinwand replied that the consumer household                      
breakdown amounted to approximately 65% of the national                        
registration.  Mr. Reinwand reiterated that by providing                       
the agency with the discretion could create a tax situation                    
and he felt that authority should be more appropriately                        
decided by the Legislature.  He urged that a cap be                            
established.                                                                   
                                                                               
Representative J. Davies pointed out that there is not a                       
good way to measure the number.  He believed that Alaska                       
would have a lower amount than the national average.                           
                                                                               
Representative G. Davis voiced his concern with the section                    
of the bill which establishes the fees.  He acknowledged                       
that many of the complaints received by the Department are                     
in regard to high fees.                                                        
                                                                               
Co-Chair Therriault noted that HB 144 would be HELD in                         
Committee for further discussion.                                              
HOUSE BILL NO. 239                                                             
                                                                               
"An Act relating to the liability of motor fuel                                
dealers for payment of tax imposed on certain credit                           
transactions involving motor fuel sales or transfers                           
that become worthless debts or on sales or transfers                           
to persons who declare bankruptcy; and providing for                           
an effective date."                                                            
                                                                               
REPREESNTATIVE GARY DAVIS explained that the Alaska motor                      
fuel tax is an excise tax designed to be paid by the                           
consumer or user of the fuel.  For administrative reasons,                     
state law requires the tax to be collected and paid by the                     
motor fuel wholesaler at the time the fuel is sold or                          
transferred.  As a practical matter, the transaction often                     
occurs at the wholesale level with businesses that                             
subsequently resell the fuel to the consumer or user of the                    
fuel.                                                                          
                                                                               
Representative G. Davis continued, in commercial                               
transactions of this nature, it is customary to extend                         
reasonable credit terms that may result in a deferral or                       
delay in the collection of both the debt and the motor fuel                    
tax by the dealer.  In some cases, the debt may become                         
wholly or partially worthless because of a bankruptcy                          
filing.                                                                        
                                                                               
HB 239 would allow motor fuel dealers in these cases to                        
receive a nonrefundable credit in an amount equal to the                       
tax previously remitted to the State.  The credit would                        
only be applied against subsequent tax liabilities, and                        
could only be taken for sales with a total tax liability of                    
$500 or more.                                                                  
                                                                               
The language specifies that dealers may only apply for a                       
bad debt credit by filing written proof of the bankruptcy                      
petition, or after reporting the debt as worthless on the                      
dealer's federal income tax return.                                            
                                                                               
Representative Gary Davis summarized that HB 239 would                         
include a provision requiring repayment of the tax if the                      
account or debt was subsequently repaid, with partial                          
payments to be handled on a proportional or pro rata basis.                    
                                                                               
Co-Chair Therriault questioned the need for the "findings"                     
section.  Representative G. Davis replied that section                         
indicates the process that the State must go through to put                    
the situation in place.  He agreed that section could be                       
deleted.                                                                       
                                                                               
Representative J. Davies recommended that the effective                        
date of the legislation must be changed.  Representative G.                    
Davis agreed.  Co-Chair Therriault noted that would occur                      
in the new committee substitute.                                               
                                                                               
Representative Grussendorf emphasized the need of                              
establishing "other" revenue streams if the State continues                    
to give "breaks" to industry.  Representative G. Davis                         
believed that $500 dollars tax owed, at eight cents a                          
gallon would be an equitable threshold.  Co-Chair                              
Therriault pointed out that the tax would be written off                       
and that the refiner would take the "big hit".                                 
                                                                               
BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE TAX                        
DIVISION, DEPARTMENT OF REVENUE, spoke to the Department of                    
Revenues (DOR) considerations with the proposed                                
legislation.  Last year, when the Department went through                      
the process to change the motor fuel forms to increase the                     
compliance effort of the State, the forms were changed and                     
additional information was collected from the industry.  At                    
that time, the industry brought up issues that they had                        
with businesses not paying their debts.  DOR agreed to look                    
into it, and then discuss it internally as a policy issue.                     
At that time, other states were contacted regarding the                        
manner in which they addressed this concern.  The                              
Commissioner believed that this was a reasonable tax from                      
an equity standpoint.                                                          
                                                                               
Mr. Bartholomew advised that the Division had established                      
"guardrails" as to who would have the authority, which then                    
lead to focusing on several sections of the bill:                              
                                                                               
? 1st - Going into bankruptcy and meeting the court                            
test for not having the financial assets to meet                               
the debts;                                                                     
? 2nd - Meeting the IRS guidelines for writing off                             
a worthless debt.                                                              
                                                                               
He continued, one of those criteria must be met to be                          
eligible for the credit.  The Division also has asked for a                    
bottom threshold.  Other states recommended that there be                      
language to keep the small transactions out, consequently,                     
a limit was established.                                                       
                                                                               
Mr. Bartholomew continued, no cash refund would be given.                      
If a credit were claimed, it would come from a future tax                      
liability.  The fiscal note is based on 1/10th of 1% of the                    
total sales or revenue coming into the State.  The State                       
currently collects about $40 million dollars a year in                         
motor fuel revenues.                                                           
                                                                               
Representative Grussendorf asked if when the dealer buys                       
the gasoline in bulk, if he would have to pay the federal                      
tax on it.  Mr. Bartholomew understood that the federal tax                    
was collected "further upstream" and that the manufacturer                     
or the distributor would have paid it.                                         
                                                                               
Co-Chair Therriault questioned if motor fuel tax would                         
include marine fuel and highway fuel.  Mr. Bartholomew                         
stated it would and applied to all motor fuel taxes under                      
Title 43, aviation, marine and highway.                                        
                                                                               
Representative G. Davis pointed out that other states have                     
this in place, although, it is not used often.  He reminded                    
members that other states do not have the seasonal industry                    
that Alaska does, which would make this legislation more                       
advantageous here.                                                             
                                                                               
Co-Chair Therriault referenced language proposed in the                        
amendment, which considers the total transaction.  Mr.                         
Bartholomew understood that a typical tanker load would be                     
limited to one transaction and subject to the $500 dollar                      
limit.  He acknowledged that it would be a rare occasion                       
when a customer with one shipment payment late would be cut                    
off.  Usually the second or third shipment is where the                        
line would be drawn.  Limiting it to single transaction                        
would not help.  He believed that the transaction could                        
work given the other stipulations contained in the bill.                       
Co-Chair Therriault reiterated that no transaction would be                    
allowed once it was known that the business was bankrupt or                    
unwilling to pay the debt.                                                     
                                                                               
Co-Chair Therriault suggested that if a company was going                      
bankrupt, it would be prudent for the distributor to get a                     
letter of credit, rather than continue building that                           
potential debt.  Mr. Bartholomew commented, some business                      
would attempt to get some type of security.  If there was a                    
recovery by the company, they would then have to reimburse                     
the State for a portion of the credit, and that would be                       
prorated.                                                                      
                                                                               
Representative Grussendorf asked if the company applying                       
for the credit would have to submit their IRS statements to                    
the State.  Mr. Bartholomew replied that the Division would                    
require documentation of the bankruptcy files as a part of                     
the credit support.                                                            
                                                                               
MARK HICKEY, REPRESENTING - PETRO MARINE SERVICES, JUNEAU,                     
spoke in support of HB 239.  He stated that the bill would                     
allow fuel dealers to receive a nonrefundable credit for                       
fuel taxes paid to the State for fuel sold on credit, but                      
not paid by purchasers, who had declared bankruptcy or                         
rendered their debt worthless.  The bill would allow motor                     
fuel dealers to receive a nonrefundable credit in an amount                    
equal to the tax previously remitted to the State.  The                        
credit would be applied against subsequent tax liabilities                     
only, and could be taken for sales with a total tax                            
liability of $500 dollars or more.                                             
                                                                               
The legislation specified that dealers may only apply for a                    
bad debt credit by filing written proof of the bankruptcy                      
petition or reporting on the dealer's federal income tax                       
return that debts are worthless.  Mr. Hickey commented that                    
Alaska Petro Marine Services believes that HB 239 would                        
provide a more fair and equitable adjustment to current                        
law.                                                                           
                                                                               
The company supports the amendment.  Mr. Hickey pointed out                    
the technical problem on Page 3, Section (f), regarding                        
protection. Current language could be interpreted that this                    
not apply to the transaction.  He recommended that Line 22                     
be worded:  "This section does not apply to a credit                           
transaction by" and keeping the remaining language.    He                      
suggested, on Line 27 to insert "a" and delete "the".                          
                                                                               
Co-Chair Therriault spoke to Section (e), Page 3, Line 19,                     
in reference to the three-year period.  Mr. Hickey                             
understood that language clarified that once a company has                     
a credit with an individual customer, they would not be                        
able to again apply when they ceased to pay the debt.                          
                                                                               
HB 239 was HELD in Committee for further consideration.                        
                                                                               
(Tape Change HFC 98- 42, Side 1).                                              
HOUSE BILL NO. 386                                                             
                                                                               
"An Act relating to the financing authority, programs,                         
operations, and projects of the Alaska Industrial                              
Development and Export Authority; and providing for an                         
effective date."                                                               
                                                                               
RANDY SIMMONS, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL                           
DEVELOPMENT AND EXPORT AUTHORITY (AIDEA), ANCHORAGE, spoke                     
in support of HB 386 which would continue AIDEA's bonding                      
authority powers and which would provide new tools to meet                     
the mission purpose to facilitate job creation, retention,                     
and helping diversify the economy.                                             
                                                                               
Mr. Simmons noted that a sectional analysis had been                           
distributed identifying four major areas of change.  He                        
spoke to bonding authorization, export guarantees, business                    
assistance changes, confidentiality provisions and loan                        
participation changes.                                                         
                                                                               
Mr. Simmons commented that any bonds over $10 million                          
dollars would come to the Legislature for authorization.                       
HB 386 would reauthorize general bonding authority for                         
AIDEA for certain types of bonds.  The legislation would                       
also allow for the Authority to bond for projects such as                      
Ft. Knox at $71 million conduit dollars, Goat Lake at $23                      
million dollars and Craig Port (False Island Marine                            
Facility).                                                                     
                                                                               
Representative J. Davies asked what a conduit bond was.                        
Mr. Simmons explained that a conduit bond was a bond issued                    
in AIDEA's name but which does not put the credit of the                       
Authority or the State at risk.  The credit risk would                         
instead go with the owner of the facility or the person                        
actually financially responsible.  Co-Chair Therriault                         
interjected that it would act as a conduit to enhance our                      
tax-free status.                                                               
                                                                               
Mr. Simmons continued, the State of Alaska is eligible to                      
receive only $150 million dollars a year in volume, which                      
is the ability to issue private activity bonds tax-exempt.                     
In the last four or five years, that was not important for                     
the State, as volume caps were not used much.  He pointed                      
out that in the next three or four years, that will not be                     
the case.  AIDEA now will be working with the State's                          
bonding committee in order to decide which projects should                     
be brought forward to use the volume cap for private                           
activity bonds.                                                                
                                                                               
The one change the Authority is requesting would be to                         
eliminate the sunset.  The sunset was important when                           
development finance bonding was new, but now the Authority                     
has a very good track record.  AIDEA will still come before                    
the Legislature for authorization of anything over $10                         
million dollars.  Under the Loan Participation Program, the                    
Authority can obligate $10 million dollars cash.                               
                                                                               
Representative J. Davies asked if the annual business plan                     
had been subject to the Executive Budget Act.  Mr. Simmons                     
replied that the operating budget was included in that                         
consideration.                                                                 
                                                                               
Mr. Simmons pointed out that in the sectional analysis, the                    
Export Guarantee Program was the most confusing to                             
understand.  The intent is to modify the program and merge                     
it into the already existing Business Assistance Program.                      
That program allows the Authority to guarantee 80% of a                        
loan up to $1 million dollars.                                                 
                                                                               
The program has not been used in the ten years it has been                     
available.  Following a study provided by an outside                           
consultant, it was determined that the program was not                         
applicable for the State's needs.  It had been designed                        
from other state programs appealing to a strong                                
manufacturing base, which Alaska does not have.  The                           
program was also transactional based and required 25% value                    
added, which eliminated opportunities for Alaskan                              
distributors and transshipments. It also required that                         
there was export credit insurance on every transaction.                        
The proposed change incorporates the data recommended in                       
the study.                                                                     
                                                                               
The program will be modified so that it will reflect the                       
cost of goods and services, the 25% value added will be                        
removed and it will be established that the business must                      
be Alaskan.  Insurance will be left at the discretion of                       
the Authority in each transaction.  The two programs would                     
be merged and called the Export Guarantee and Business                         
Assistance Program.                                                            
                                                                               
Representative J. Davies believed that State policy should                     
be to keep documents open to the public and that they be                       
kept confidential only upon request of the applicant.  Mr.                     
Simmons assured Representative Davies that confidentiality                     
is requested every time there is an application.  He                           
stressed that the Authority is a part of the public records                    
balancing act.  The banks are required to keep the                             
information confidential.  He noted that he would support                      
language proposed in Amendment #D.                                             
                                                                               
KEITH LAUFER, MANAGER OF FINANCIAL AND LEGAL AFFAIRS,                          
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA),                    
ANCHORAGE, commented on Amendment #D.  He noted that                           
deleting "or complied by" as recommended by Representative                     
Davies would be detrimental as the Authority receives many                     
documents which need to be compiled into some form before                      
they are taken to the internal credit committee.                               
                                                                               
Representative J. Davies asked if a credit-reporting agency                    
would require that the information be kept confidential.                       
Mr. Laufer agreed that there would be a need to insure that                    
the information came from a source and was confidential                        
when received.  "Compiled" versus "submitted" would be of                      
maximum concern to the Authority.  The identity of the                         
applicant is a public item.  That information should be                        
kept confidential.  The information becomes public when                        
there is a formal application before the Authority.                            
                                                                               
Mr. Simmons spoke to the technical changes to the loan                         
participation program.  The release of interest rates would                    
be in reference to the interest rates charged by the                           
Authority and not those charged by the bank.                                   
                                                                               
Representative Martin voiced concern that the State could                      
become a loosing partner when making these types of                            
arrangements.  Co-Chair Therriault distributed the current                     
confidentiality statute proposed for deletion.  [Copy on                       
file].  Mr. Simmons explained that language was used                           
specifically in addressing the export program only.  The                       
new confidentiality provision applies to all of AIDEA's                        
programs.                                                                      
                                                                               
Mr. Simmons spoke to Amendment #B.  [Copy on file]. The                        
proposed project would create a new entrance channel to the                    
inner port in Nome.  The project also would include                            
construction of a new 28-foot breakwater that would be                         
built parallel to the existing causeway.  The new entrance                     
channel would improve navigational safety and reliability,                     
and the breakwater would create a protected turning basin.                     
Part of the existing channel would be filled to provide a                      
new access road to the sand spit, which will be protected                      
by a rip rap seawall connecting to the existing wall in                        
front of town.  The cost would be $30 million dollars.                         
                                                                               
PAUL FUHS, COURT CONSULTANT, CITY OF NOME, noted that the                      
City of Nome has already paid $550 thousand dollars for                        
studies accompanying the proposal.  The Army Corps of                          
Engineers has indicated through the cost benefit analysis                      
justification of a $40 million dollar project.  Their                          
estimate for the project is $26 million dollars.  The City                     
of Nome has paid for all the bills associated with the                         
project to date.  Federal procurement takes a long time to                     
put projects out to bid.  If the State put it out to bid                       
and managed all concerns associated with that, the Corps                       
would then pay 80% of the project costs in the first year.                     
Of the $26 million dollars, AIDEA would be repaid $21                          
million.                                                                       
                                                                               
Mr. Simmons pointed out that AIDEA has not yet worked out                      
the feasibility of the proposed project.  Because of timing                    
concerns, the construction would be started late in the                        
fall, which would not give AIDEA the opportunity to come                       
back to the Legislature.  To date, a finding has not been                      
initiated.  As part of the enabling legislation, all the                       
approval must be accomplished before the project is                            
considered.  He noted that AIDEA does support the                              
authorization of this project.                                                 
                                                                               
Representative Martin pointed out that $25 million dollars                     
had already been invested into this project.  He understood                    
that there is a problem that the Corps had not dredged deep                    
enough to maximize for bigger ships entering the port.                         
Mr. Fuhs responded that the proposed port is the only port                     
available from Dutch Harbor upward.  It is a regional port                     
serving that entire region, with the potential to serve                        
Russian fishing vessels.                                                       
                                                                               
Representative Martin reiterated concern that the port was                     
not deep enough.  Mr. Fuhs replied that it could be dug                        
deeper.  Because of the currents, it has been maintained at                    
21' for the past eight years.                                                  
                                                                               
Mr. Simmons stated that Nome's port has the second largest                     
volume of incoming cargo in the State.  At present, it has                     
limited access, safety issues, and situation problems which                    
significantly burden the port.  If a conduit bond were                         
used, ownership would change.  If development finance                          
authority were used, AIDEA would have to own the facility.                     
If AIDEA determines that conduit revenue financing will                        
work, the Authority would not own it, but would give the                       
City of Nome the credit risk for the facility.  Mr. Simmons                    
guaranteed that the proposed wording would not cut off the                     
Authority's bonding ability.  If conduit bonding was                           
successful, the proposed language would not be used.                           
                                                                               
(Tape Change HFC 98- 42, Side 2).                                              
                                                                               
Mr. Simmons spoke to the proposed Red Dog project.  The                        
project would extend the existing dock by approximately                        
2,500 feet and a 50 foot shipping channel would be                             
excavated, allowing ships to directly load the                                 
concentrates.  The project would eliminate barge traffic                       
and expedite the loading process.                                              
                                                                               
Mr. Simmons informed Committee members of the benefits of                      
the proposed project.  It would allow shipping season to be                    
extended to December and would eliminate the twice handling                    
of concentrates by eliminating barge relay.  The proposal                      
would lower vessel loading time in half and would reduce                       
down time caused by poor weather conditions.                                   
                                                                               
Mr. Simmons concluded that in economic terms, the project                      
would extend most seasonal jobs at the port and would lower                    
the cost of shipping concentrates.  Additionally, the                          
regional port at Red Dog would no longer be used at 100%                       
capacity, opening up shipping opportunities for other                          
potential users.                                                               
                                                                               
HB 386 was HELD in Committee for further consideration.                        
ADJOURNMENT                                                                    
                                                                               
The meeting adjourned at 3:50 P.M.                                             
                                                                               
H.F.C. 16 2/25/98                                                              

Document Name Date/Time Subjects