Legislature(2005 - 2006)HOUSE FINANCE 519

04/29/2005 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed to 2 pm--
+= HB 217 FULL & TRUE VALUE OF TAXABLE MUNI PROP. TELECONFERENCED
Moved Out of Committee
+= HCR 6 EXTEND INFRASTRUCTURE POLICY TASK FORCE TELECONFERENCED
Moved Out of Committee
+= HB 148 TRAFFICKING OF PERSONS TELECONFERENCED
Moved CSHB 148(JUD) Out of Committee
+ HB 157 ELEC/PHONE COOP & OTHER ENTITIES TELECONFERENCED
Heard & Held
+ SB 147 SPORT FISH FACILITY BONDS/SURCHARGES TELECONFERENCED
Scheduled But Not Heard
+ SB 139 OCCUPATIONAL BDS/AGENCIES TELECONFERENCED
Scheduled But Not Heard
+ SJR 11 REPEAL TELECOMMUNICATIONS TAX TELECONFERENCED
Scheduled But Not Heard
+ SB 16 POWERS/DUTIES DOTPF/TRANSPORTATION PLAN TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 29, 2005                                                                                           
                         2:18 p.m.                                                                                              
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer called the House  Finance Committee meeting to                                                                   
order at 2:18:16 PM.                                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Carl Moses                                                                                                       
Representative Bruce Weyhrauch                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bill Stoltze, Vice-Chair                                                                                         
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Michael O'Hare, Staff, Representative  Pete Kott; Tom Wright,                                                                   
Staff, Speaker  John Harris;  Chuck Harlamert, Revenue  Audit                                                                   
Supervisor, Tax Division, Department  of Revenue; Eric Yould,                                                                   
Alaska Power Association; Representative  Beth Kertulla; Brad                                                                   
Reeves,  CEO,  Kotzebue  Electric;   Frank  Corbin,  Nushagak                                                                   
Cooperative,  Dillingham;   Vern  Rauscher,   Inside  Passage                                                                   
Electric Cooperative; Jon Bittner,  Staff, Representative Tom                                                                   
Anderson;   Pat  Carter,  Lobbyist,   Delta  Western;   Karla                                                                   
Schofield, Legislative Affairs Agency                                                                                           
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Pete Hallgren,  Delta Junction; Pete Fellman,  Staff, Speaker                                                                   
John Harris;  Steve Van Sant,  State Assessor,  Department of                                                                   
Commerce, Community and Economic Development                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 217    "An Act  relating to the determination  of full and                                                                   
          true value of taxable municipal property for                                                                          
          purposes of calculating funding for education and                                                                     
          certain other programs."                                                                                              
                                                                                                                                
          HB 217 was REPORTED out of Committee with a "no                                                                       
          recommendation" recommendation and with zero                                                                          
          fiscal  impact   note  #1  by  the   Department  of                                                                   
          Commerce, Community and Economic Development.                                                                         
                                                                                                                                
HB 148    "An Act relating to trafficking of persons."                                                                          
                                                                                                                                
          CSHB 148  (JUD) was REPORTED out of  Committee with                                                                   
          a  "do  pass"  recommendation  and with  five  zero                                                                   
          fiscal  impact notes:  #1 ADM, #2  COR, #3  CRT, #4                                                                   
          LAW, and #5 DPS.                                                                                                      
                                                                                                                                
HCR 6     Relating to the continuation of the Alaska                                                                            
          Information Infrastructure  Policy Task Force until                                                                   
          the first  day of the First Regular  Session of the                                                                   
          Twenty-Fifth  Alaska State  Legislature in  January                                                                   
          2007.                                                                                                                 
                                                                                                                                
          HCR 6 was REPORTED out of Committee with a "do                                                                        
          pass" recommendation  and with a revised LEG fiscal                                                                   
          impact note.                                                                                                          
                                                                                                                                
SSHB 157 "An Act clarifying the powers of electric or                                                                           
          telephone cooperatives  to become members of or own                                                                   
          stock in other entities."                                                                                             
                                                                                                                                
          SSHB 157 was heard and HELD in Committee for                                                                          
          further consideration.                                                                                                
                                                                                                                                
CSSB 141(FIN)                                                                                                                   
          "An  Act  relating  to  the  teachers'  and  public                                                                   
          employees' retirement  systems and creating defined                                                                   
          contribution  and  health reimbursement  plans  for                                                                   
          members of the teachers'  retirement system and the                                                                   
          public employees'  retirement system who  are first                                                                   
          hired  after July 1,  2005; relating to  university                                                                   
          retirement   programs;   establishing  the   Alaska                                                                   
          Retirement  Management Board to replace  the Alaska                                                                   
          State   Pension   Investment  Board,   the   Alaska                                                                   
          Teachers'   Retirement   Board,   and  the   Public                                                                   
          Employees' Retirement  Board; adding appeals of the                                                                   
          decisions  of the  administrator  of the  teachers'                                                                   
          and  public employees'  retirement  systems to  the                                                                   
          jurisdiction   of  the  office  of   administrative                                                                   
          hearings;  providing for non-vested members  of the                                                                   
          teachers'  retirement system defined  benefit plans                                                                   
          to  transfer into the  teachers' retirement  system                                                                   
          defined   contribution  plan  and   for  non-vested                                                                   
          members of the public  employees' retirement system                                                                   
          defined benefit  plans to transfer into  the public                                                                   
          employees'  retirement system defined  contribution                                                                   
          plan;  providing  for  political  subdivisions  and                                                                   
          public organizations  to request to  participate in                                                                   
          the   public   employees'    defined   contribution                                                                   
          retirement  plan; and  providing  for an  effective                                                                   
          date."                                                                                                                
                                                                                                                                
          CSSB 141 was scheduled but not heard.                                                                                 
                                                                                                                                
CSSB 147(FIN)                                                                                                                   
          "An  Act providing  for  a sport  fishing  facility                                                                   
          surcharge on sport fishing  licenses; providing for                                                                   
          the  construction  and  renovation of  state  sport                                                                   
          fishing   facilities   and   for   other   projects                                                                   
          beneficial  to  the  sport fish  resources  of  the                                                                   
          state as  a public enterprise; and  authorizing the                                                                   
          issuance   of  revenue   bonds  to  finance   those                                                                   
          projects."                                                                                                            
                                                                                                                                
          CSSB 147 was scheduled but not heard.                                                                                 
                                                                                                                                
CSSB 139(L&C)                                                                                                                   
          "An  Act relating to  termination and  oversight of                                                                   
          boards,    commissions,   and   agency    programs;                                                                   
          extending  the  termination date  of  the Board  of                                                                   
          Marital  and Family Therapy;  and providing  for an                                                                   
          effective date."                                                                                                      
                                                                                                                                
          CSSB 139 was scheduled but not heard.                                                                                 
                                                                                                                                
SJR 11    Urging the United States Congress to amend the tax                                                                    
          code   to  repeal   the  federal   excise  tax   on                                                                   
          communications.                                                                                                       
                                                                                                                                
          SJR 11 was scheduled but not heard.                                                                                   
                                                                                                                                
CSSSSB 16(TRA)                                                                                                                  
          "An Act  relating to the  powers and duties  of the                                                                   
          Department    of    Transportation    and    Public                                                                   
          Facilities;  repealing the requirement for  a long-                                                                   
          range   program   for  highway   construction   and                                                                   
          maintenance;  and  repealing   a  requirement  that                                                                   
          public  facilities  comply  with  energy  standards                                                                   
          adopted  by the  Department  of Transportation  and                                                                   
          Public Facilities;  and providing for  an effective                                                                   
          date."                                                                                                                
                                                                                                                                
          CSSSSB 16(TRA) was scheduled but not heard.                                                                           
                                                                                                                                
2:19:14 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 217                                                                                                            
                                                                                                                                
     "An Act relating  to the determination of  full and true                                                                   
     value  of taxable  municipal  property  for purposes  of                                                                   
     calculating  funding  for  education and  certain  other                                                                   
     programs."                                                                                                                 
                                                                                                                                
TOM  WRIGHT,  STAFF,  SPEAKER  JOHN  HARRIS,  introduced  Mr.                                                                   
Fellman.                                                                                                                        
                                                                                                                                
2:20:25 PM                                                                                                                    
                                                                                                                                
PETE   FELLMAN,    STAFF,   SPEAKER    JOHN   HARRIS,    (via                                                                   
teleconference)  explained  that  under  HB  217  communities                                                                   
forming boroughs  that have gas  and oil properties  in their                                                                   
borough boundaries  could exclude the value  of that property                                                                   
as a means to raise new revenue.                                                                                                
                                                                                                                                
2:22:09 PM                                                                                                                    
                                                                                                                                
Representative Holm  asked Mr. Van  Sant why a  borough would                                                                   
choose not to tax  a large piece of property at  20 mills, so                                                                   
that it could then tax people at 4 mills.                                                                                       
                                                                                                                                
2:23:16 PM                                                                                                                    
                                                                                                                                
STEVE  VAN  SANT, STATE  ASSESSOR,  DEPARTMENT  OF  COMMERCE,                                                                   
COMMUNITY  AND  ECONOMIC  DEVELOPMENT,  (via  teleconference)                                                                   
explained that  under current  law requirements,  the borough                                                                   
would  have  to come  up  with  additional money  for  school                                                                   
funding and  would need to levy  a property tax.   He related                                                                   
that the  proposed legislation  would lower the  property tax                                                                   
by $200  million.  The bill  would provide boroughs  with the                                                                   
option to levy a property tax or not.                                                                                           
                                                                                                                                
Representative  Holm asked why  that option  is not  given to                                                                   
any other  large municipalities such  as Fairbanks.   Mr. Van                                                                   
Sant replied that under this scenario  the borough would have                                                                   
that option.   The property mentioned in the  bill is singled                                                                   
out because it  is "centrally accessed property"  and crosses                                                                   
jurisdictional  lines.    HB  217 would  apply  to  all  such                                                                   
municipalities.    Representative  Holm  asked  if  there  is                                                                   
currently a  property tax.  Mr.  Van Sant replied  that there                                                                   
is  no local  tax being  levied,  but there  is  a state  tax                                                                   
leveled against the pipeline.                                                                                                   
                                                                                                                                
2:27:28 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault  inquired where  the cost  to the  state of                                                                   
$1.9 million  would come  from.  He  asked about  mill rates.                                                                   
Mr. Van  Sant clarified that he  was giving an example:  at 4                                                                   
mills, the proposed borough would  receive a little less than                                                                   
$800,000,  and at  10 mills,  they would  receive about  $1.9                                                                   
million.                                                                                                                        
                                                                                                                                
2:28:26 PM                                                                                                                    
                                                                                                                                
PETE  HALLGREN,  CITY  ADMINISTRATOR,  DELTA  JUNCTION,  (via                                                                   
teleconference)  related that his  city is currently  looking                                                                   
at developing a  borough proposal.  There are  currently four                                                                   
boroughs  in the  state, which  have  no property  tax.   The                                                                   
charter commission  of Delta Junction  has been looking  at a                                                                   
petition,  which  would  allow  for funding  for  a  proposed                                                                   
borough,  with  a  variety  of   taxes.    He  explained  the                                                                   
differences  in taxes and  how the  property tax would  work.                                                                   
There would  be no fiscal impact  from this bill, but  in the                                                                   
future there would  be issues.  He said that  Fairbanks could                                                                   
also choose  to do this.   The bill would make  the formation                                                                   
of new boroughs along the pipeline more feasible.                                                                               
                                                                                                                                
2:33:13 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault inquired about  the advantages of accepting                                                                   
this bill  in order to  assess a smaller  tax.  Mr.  Van Sant                                                                   
said that it  offers alternatives in taxation.   He clarified                                                                   
what the bill would allow.                                                                                                      
                                                                                                                                
2:35:35 PM                                                                                                                    
                                                                                                                                
Representative  Hawker   MOVED  to  report  HB   217  out  of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
HB   217  was   REPORTED  out   of  Committee   with  a   "no                                                                   
recommendation"  recommendation and  with zero fiscal  impact                                                                   
note  #1  by  the  Department   of  Commerce,  Community  and                                                                   
Economic Development.                                                                                                           
                                                                                                                                
2:36:40 PM                                                                                                                    
                                                                                                                                
HOUSE CONCURRENT RESOLUTION NO. 6                                                                                             
                                                                                                                                
     Relating to  the continuation of the  Alaska Information                                                                   
     Infrastructure Policy Task  Force until the first day of                                                                   
     the  First Regular  Session of  the Twenty-Fifth  Alaska                                                                   
     State Legislature in January 2007.                                                                                         
                                                                                                                                
MICHAEL O'HARE,  STAFF, REPRESENTATIVE  PETE KOTT,  explained                                                                   
what  the resolution  would do.    In 2003  the Alaska  State                                                                   
Legislature  passed   HCR  31  in  order  to   establish  the                                                                   
Information  Infrastructure  Policy  Task  Force.   The  task                                                                   
force   is  charged   with  analyzing   fiber  optic   cable,                                                                   
satellite, and  other communications  infrastructure.   It is                                                                   
also  charged  with analyzing  long-term  needs  of  distance                                                                   
learning,  telemedicine,  homeland   security,  and  economic                                                                   
development via  Internet connectivity.  The  task force will                                                                   
define  the state's  role, act  as advocates,  and develop  a                                                                   
long-term  strategic plan.   HCR  6  extends the  termination                                                                   
date of the task force until January 2007.                                                                                      
                                                                                                                                
Mr. O'Hare noted  that the fiscal note reflects  staffing and                                                                   
travel for task force members.                                                                                                  
                                                                                                                                
2:38:43 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  asked  for clarification  of  the  fiscal                                                                   
note.   Mr.  O'Hare reported  that the  fiscal note  reflects                                                                   
staff travel.   Co-Chair Chenault asked if this  bill is from                                                                   
last  session.     Mr.  O'Hare   referred  to   the  handout,                                                                   
"Preliminary Report  to the Alaska  State Legislature  on HCR                                                                   
32", (copy on file) slide 6, and  explained how the bill came                                                                   
about.  Co-Chair Chenault said  he was more interested in the                                                                   
amount  of money  that was  spent  last year.   He  suggested                                                                   
lowering the fiscal note.                                                                                                       
                                                                                                                                
2:41:17 PM                                                                                                                    
                                                                                                                                
Representative Kelly  questioned whether this bill  should be                                                                   
passed.                                                                                                                         
                                                                                                                                
2:41:46 PM                                                                                                                    
                                                                                                                                
Representative  Joule  said  he   does  not  know  about  the                                                                   
expenditures  from last  year, but maintained  that  the bill                                                                   
has value.                                                                                                                      
                                                                                                                                
Mr. O'Hare explained the fiscal note.                                                                                           
                                                                                                                                
2:47:28 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  MOVED to  amend  fiscal  note LEG  #2  to                                                                   
$74,000.  There being NO OBJECTION, it was so ordered.                                                                          
                                                                                                                                
2:48:45 PM                                                                                                                    
                                                                                                                                
Representative Kelly suggested  more outcome-based reports in                                                                   
the future.                                                                                                                     
                                                                                                                                
2:49:46 PM                                                                                                                    
                                                                                                                                
KARLA SCHOFIELD,  LEGISLATIVE  AFFAIRS AGENCY, addressed  the                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
2:50:21 PM                                                                                                                    
                                                                                                                                
Representative Foster MOVED to  report HCR 6 out of Committee                                                                   
with  individual recommendations  and  with the  accompanying                                                                   
amended fiscal  note.   There being NO  OBJECTION, it  was so                                                                   
ordered.                                                                                                                        
                                                                                                                                
HCR  6  was  REPORTED  out of  Committee  with  a  "do  pass"                                                                   
recommendation and with a revised LEG fiscal impact note.                                                                       
                                                                                                                                
2:51:15 PM                                                                                                                    
                                                                                                                                
#hb148                                                                                                                        
HOUSE BILL NO. 148                                                                                                            
                                                                                                                                
     "An Act relating to trafficking of persons."                                                                               
                                                                                                                                
REPRESENTATIVE  BETH KERTTULA,  sponsor, explained  that this                                                                   
bill is similar to HB 101 and  addresses human trafficking in                                                                   
Alaska.   It is estimated that  there are up to  20,000 cases                                                                   
of human  trafficking in the  United States.   Local shelters                                                                   
in  Juneau have  seen three  cases.   This  bill would  allow                                                                   
Alaskan  prosecutors to  prosecute  this crime.   She  opined                                                                   
that  HB 148  is easier  to understand  and more  enforceable                                                                   
than similar bills in four other states.                                                                                        
                                                                                                                                
Co-Chair Meyer noted that the  five fiscal notes are all zero                                                                   
notes.                                                                                                                          
                                                                                                                                
2:53:06 PM                                                                                                                    
                                                                                                                                
Representative  Hawker asked about  human trafficking  in the                                                                   
second degree, if the person obtains  a benefit with reckless                                                                   
disregard.     Representative  Kerttula  explained   reckless                                                                   
disregard is an intent requirement.                                                                                             
                                                                                                                                
Representative  Hawker and Kerttula  discussed legal  aspects                                                                   
of reckless  disregard.   She emphasized  that people  have a                                                                   
duty  to be  aware of  what is  happening  at their  business                                                                   
establishment.                                                                                                                  
                                                                                                                                
2:56:01 PM                                                                                                                    
                                                                                                                                
Representative  Kelly  referred   to  Representative  Croft's                                                                   
bill, HB  101, regarding  transportation and advertising  for                                                                   
overseas  trafficking.    Representative  Kerttula  explained                                                                   
that HB 148 does not refer to advertising, but trafficking.                                                                     
                                                                                                                                
2:57:20 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  asked what  the  punishment  for a  class  B                                                                   
felony  is.  Representative    Kerttula agreed  it is one  to                                                                   
three years for a first offense.                                                                                                
                                                                                                                                
Representative Croft explained  the difference between HB 101                                                                   
and HB  148, which were  originally one  bill.  HB  148 deals                                                                   
with  trafficking  in  Alaska,  whereas  HB  101  applies  to                                                                   
trafficking elsewhere.                                                                                                          
                                                                                                                                
2:58:06 PM                                                                                                                    
                                                                                                                                
Representative Croft MOVED to  report HB 148 out of Committee                                                                   
with individual  recommendations and the  accompanying fiscal                                                                   
notes.  There being NO OBJECTION, it was so ordered.                                                                            
                                                                                                                                
CSHB  148 (JUD)  was REPORTED  out  of Committee  with a  "do                                                                   
pass" recommendation and with  five zero fiscal impact notes:                                                                   
#1 ADM, #2 COR, #3 CRT, #4 LAW, and #5 DPS.                                                                                     
                                                                                                                                
3:00:12 PM                                                                                                                    
                                                                                                                                
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 157                                                                                     
                                                                                                                                
     "An Act clarifying the powers of electric or telephone                                                                     
     cooperatives to become members of or own stock in other                                                                    
     entities."                                                                                                                 
                                                                                                                                
Co-Chair  Meyer stated  his intent to  take public  testimony                                                                   
and hold HB 157 over.                                                                                                           
                                                                                                                                
JON BITTNER,  STAFF, REPRESENTATIVE  TOM ANDERSON,  explained                                                                   
the bill.   As it currently  exists, the Alaska  Electric and                                                                   
Telephone  Cooperative  Act  grants  electric  and  telephone                                                                   
cooperatives  broad  powers to  conduct  various  activities.                                                                   
Those powers include the ability  to become a member of other                                                                   
cooperatives  or corporations  or own stock  in them.   These                                                                   
powers  allow the  formation  of subsidiary  corporations  or                                                                   
cooperatives in which a cooperative  can own all or a portion                                                                   
of another  legal  entity that  conducts activities  separate                                                                   
from  the cooperative's  utility  operations.   For  example,                                                                   
some  cooperatives  provide  Internet   or  cable  television                                                                   
services.                                                                                                                       
                                                                                                                                
Mr. Bittner related  that recent court decisions  have called                                                                   
into  question  a cooperative's  ability  to  own  subsidiary                                                                   
corporations.   There is  concern that  those cases  could be                                                                   
used in the future  to help interpret Alaska's laws.   HB 157                                                                   
proposes  to  clarify  AS  10.25.020 to  make  clear  that  a                                                                   
cooperative  utility may  own an interest  in another  entity                                                                   
organized for  any lawful purpose.  This  amendment preserves                                                                   
and clarifies the current statute.                                                                                              
                                                                                                                                
Mr. Bittner  reported that the  second change made in  HB 157                                                                   
is the  addition of "limited  liability company" to  the list                                                                   
of  entities a  cooperative may  become  a member  of or  own                                                                   
stock in.  He urged support for this legislation.                                                                               
                                                                                                                                
3:02:09 PM                                                                                                                    
                                                                                                                                
Representative  Croft   asked  if  it  would   create  unfair                                                                   
competition  with  private  fuel   operators.    Mr.  Bittner                                                                   
replied that  it would  not create  unfair competition.   The                                                                   
subsidiary  corporations fall  under the  same tax codes  and                                                                   
regulations as private operators.                                                                                               
                                                                                                                                
3:03:48 PM                                                                                                                    
                                                                                                                                
Representative Kelly discussed  cooperatives and how they are                                                                   
organized related to lowering  of fuel costs in the bush.  He                                                                   
testified in support of the bill.                                                                                               
                                                                                                                                
3:05:46 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  asked  Mr.  Bittner  to  explain  the                                                                   
changes to the Labor and Commerce  version of the bill.   Mr.                                                                   
Bittner    replied   that   Subsection    9   was    removed.                                                                   
Representative  Hawker   asked  if  that  solved   a  lot  of                                                                   
problems.  Mr. Bittner said it  did not solve the problems of                                                                   
the  fuel providers,  but it  did solve  those involving  the                                                                   
Department of Revenue.  Without  the removal of Subsection 9,                                                                   
coops would have  directly been able to sell  fuel, which was                                                                   
never their intention.                                                                                                          
                                                                                                                                
3:08:10 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  asked if  the coops  are  tax-exempt.                                                                   
Mr. Bittner  said yes.   Representative Hawker asked  if they                                                                   
are being allowed  to capitalize a limited  liability company                                                                   
as  a  tax-exempt  entity.     He  suggested  directing  that                                                                   
question to Eric Yould of the Alaska Power Association.                                                                         
                                                                                                                                
3:09:21 PM                                                                                                                    
                                                                                                                                
FRANK  CORBIN, NUSHAGAK  COOPERATIVE,  DILLINGHAM,  encourage                                                                   
passage of HB 157 because it offers  cooperatives a chance to                                                                   
freely engage  in alternative,  legal business ventures.   He                                                                   
suggested that competition is  good.  He gave an example from                                                                   
Bristol Bay Fuels.   He clarified the tax-exempt  issue as it                                                                   
applies to his cooperative.                                                                                                     
                                                                                                                                
3:12:30 PM                                                                                                                    
                                                                                                                                
Representative  Holm  questioned  a  statement  made  by  Mr.                                                                   
Corbin  that profit  should not  restrain the  ability to  go                                                                   
forward.   He asked where Mr.  Corbin's fuel is bought.   Mr.                                                                   
Corbin replied  that the cooperative  is part of  the Western                                                                   
Alliance  Fuel  group  and  the  fuel  is  put  out  to  bid.                                                                   
Representative  Holm  restated  the  question.    Mr.  Corbin                                                                   
deferred to Mr. Reeves.                                                                                                         
                                                                                                                                
3:13:42 PM                                                                                                                    
                                                                                                                                
BRAD  REEVES, CEO,  KOTZEBUE  ELECTRIC,  related the  various                                                                   
recent increases  in fuel  price.  He  stated that  last year                                                                   
the fuel was  purchased through Yukon Fuel and  this year the                                                                   
contract will go  to Crawley Maritime.  He  described how the                                                                   
cooperative was  formed in response to the  changing economy.                                                                   
He gave  an example of a  limited liability corporation  that                                                                   
his company  is involved with.   He spoke of  his community's                                                                   
needs and how the bill would affect it.                                                                                         
                                                                                                                                
3:19:47 PM                                                                                                                    
                                                                                                                                
Representative  Holm asked  where  Mr. Reeves  would buy  his                                                                   
fuel  previous  to  developing  a cooperative.    Mr.  Reeves                                                                   
related the history of his cooperative  and how the community                                                                   
saved over $20 million dollars by investing in a tank.                                                                          
                                                                                                                                
3:20:48 PM                                                                                                                    
                                                                                                                                
Representative Holm made the point  that no fuel is available                                                                   
to buy  in the  State of Alaska.   Instead  it is barged  in.                                                                   
Mr. Reeves replied that they purchase  fuel from Nikiski, and                                                                   
it has been 12 years since they  have purchased out of state.                                                                   
He noted  he would be  willing to look  at purchasing  out of                                                                   
state if the price were lower.                                                                                                  
                                                                                                                                
3:21:46 PM                                                                                                                    
                                                                                                                                
Representative  Holm   asked  if  Mr.  Reeve's   facility  is                                                                   
subsidized.    Mr. Reeves  replied  that they  have  received                                                                   
grants from  the Department of  Energy for the  wind project,                                                                   
and  some  state  and federal  dollars.    Some  were  direct                                                                   
appropriations from Senator Stevens.                                                                                            
                                                                                                                                
3:22:45 PM                                                                                                                    
                                                                                                                                
VERN   RAUSCHER,   INSIDE   PASSAGE   ELECTRIC   COOPERATIVE,                                                                   
commented that  the cooperative  has an obligation  to listen                                                                   
to requests of  the customers.  He spoke about  fuel business                                                                   
concerns.    The Board  has  discussed  these concerns.    He                                                                   
mentioned  utility billing  requests.   He  stated that  they                                                                   
have the authority  to diversify into other areas.   He spoke                                                                   
in favor of HB 157.                                                                                                             
                                                                                                                                
3:24:55 PM                                                                                                                    
                                                                                                                                
Representative  Holm asked where  they buy  their fuel.   Mr.                                                                   
Rauscher replied  from Petro Marine out of  Seattle, and also                                                                   
from one local wholesaler.                                                                                                      
                                                                                                                                
Representative Holm  commented that the volume  is predicated                                                                   
by the  customers.  If a  wholesaler had volume  removed then                                                                   
it  would adversely  influence  the customer.   Mr.  Rauscher                                                                   
replied  that it  was not  the intent  to put  anyone out  of                                                                   
business, however,  there is room  for competition.   He gave                                                                   
an example of paying  40 to 50 cents more than  barge prices.                                                                   
With talk of competitors coming  in, wholesale prices dropped                                                                   
by 25 cents.  He stated he would  welcome a competitor in any                                                                   
of his communities.                                                                                                             
                                                                                                                                
3:27:29 PM                                                                                                                    
                                                                                                                                
Representative Holm pointed out,  from the capital investment                                                                   
side, that  he would be  disturbed by allowing  a non-taxable                                                                   
entity to enter into the market  place for profit.  He voiced                                                                   
concern with unintended consequences.                                                                                           
                                                                                                                                
Mr.  Rauscher  responded  that  they purchase  a  minimum  of                                                                   
25,000  gallons to  get  the first  price  break.   When  the                                                                   
wholesale  price  drops,  he  said he  believes  it  is  from                                                                   
competition.                                                                                                                    
                                                                                                                                
3:29:53 PM                                                                                                                    
                                                                                                                                
PAT CARTER, LOBBYIST, DELTA WESTERN, addressed competition.                                                                     
He spoke of a  concern about an unlevel playing  field with a                                                                   
heavily subsidized entity.  There  are certain markets, which                                                                   
are small and having trouble finding  a buyer.  Under certain                                                                   
circumstances,  there  are not  problems  going into  certain                                                                   
businesses.  He noted that there  is an attempt to work out a                                                                   
compromise.   He opined that  the legislation is  written too                                                                   
broadly.  It should be limited  to certain rural communities.                                                                   
                                                                                                                                
Mr.  Carter thought  that a  government entity  needed to  be                                                                   
involved.  An LLC  does not get to use any  of the subsidized                                                                   
assets of the coop.   He stated that it should  be limited to                                                                   
a specific geographical  area and be revenue  neutral for the                                                                   
state.                                                                                                                          
                                                                                                                                
Mr. Carter mentioned the competition  within the communities.                                                                   
Delta Western  is sensitive  to high  costs in rural  Alaska,                                                                   
however Delta Western's  margins are not changing  due to the                                                                   
high  costs of  crude  oil.   He presented  an  analogy.   He                                                                   
concluded  that  the  bill  will  drive  the  private  sector                                                                   
investor   out  of  business,   which   will  result   in  no                                                                   
competition.                                                                                                                    
                                                                                                                                
3:36:23 PM                                                                                                                    
                                                                                                                                
Mr.  Carter addressed  accumulated  tax-exempt  wealth.   The                                                                   
utilities  have a  limitation on  how much  revenue they  can                                                                   
receive; 15%  without loosing  tax-exempt status.   He opined                                                                   
that the current bill was written too broadly.                                                                                  
                                                                                                                                
Mr. Carter  asked for  consideration whether  it is  right to                                                                   
allow a subsidized entity to drive the private sector out.                                                                      
                                                                                                                                
Representative  Hawker asked that  the excise tax  section be                                                                   
present  to testify  the next  time  the bill  is before  the                                                                   
Committee.                                                                                                                      
                                                                                                                                
HB 157 was HELD in Committee for further consideration.                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 3:38 P.M.                                                                                          
                                                                                                                                
                                                                                                                                

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