Legislature(2017 - 2018)HOUSE FINANCE 519

04/26/2017 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
Moved HB 131 Out of Committee
Moved HB 128 Out of Committee
Heard & Held
Moved CSHB 76(FSH) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 26, 2017                                                                                            
                         1:33 p.m.                                                                                              
1:33:40 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 1:33 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Matt Gruening, Staff,  Representative Louise Stutes; Heather                                                                    
Fair, Chief  Right-of-Way, Department of  Transportation, In                                                                    
Room;  Representative Dan  Ortiz,  Sponsor; Forrest  Bowers,                                                                    
Deputy Director -  Commercial Fisheries Division, Department                                                                    
of  Fish  and  Game,  In  Room;  Representative  Dan  Ortiz,                                                                    
Sponsor;   Britteny    Cioni-Haywood,   Division   Director,                                                                    
Division  of Economic  Development, Department  of Commerce,                                                                    
Community  and  Economic   Development;  Elizabeth  Bolling,                                                                    
Staff,  Representative Dan  Ortiz; Representative  Sam Kito,                                                                    
Sponsor; Bianca Carpeneti, Staff, Representative Sam Kito.                                                                      
PRESENT VIA TELECONFERENCE                                                                                                    
Peter Pinnow, Senior Council, Wells Fargo, Minneapolis, MN.                                                                     
HB 76     MARICULTURE REVOLVING LOAN FUND                                                                                       
          CSHB 76  (FSH) was REPORTED OUT  of Committee with                                                                    
          a   "do   pass"   recommendation  and   with   two                                                                    
          previously published zero  fiscal notes: FN1 (CED)                                                                    
          and FN2 (DFG).                                                                                                        
HB 124    BENEFIT CORPORATIONS                                                                                                  
          HB  124  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
HB 128    SHELLFISH ENHANCE. PROJECTS; HATCHERIES                                                                               
          HB 128  was REPORTED OUT  of Committee with  a "do                                                                    
          pass"  recommendation  and   with  two  previously                                                                    
          published  fiscal  notes,  one  with  zero  fiscal                                                                    
          impact: FN1  (DFG); and one with  an indeterminate                                                                    
          fiscal impact: FN2 (DFG).                                                                                             
HB 131    RELOCATION ASSISTANCE FOR FED. PROJ/PROG                                                                              
          HB 131  was REPORTED OUT  of Committee with  a "do                                                                    
          pass"   recommendation  and   with  a   previously                                                                    
          published zero fiscal note: FN1 (DOT).                                                                                
Co-Chair Foster reviewed the agenda for the meeting. He                                                                         
indicated he intended to move all bills from committee.                                                                         
HOUSE BILL NO. 131                                                                                                            
     "An   Act  relating   to   relocation  assistance   for                                                                    
     federally assisted public  construction and improvement                                                                    
     projects and  programs; and providing for  an effective                                                                    
1:34:55 PM                                                                                                                    
MATT GRUENING, STAFF, REPRESENTATIVE LOUISE STUTES,                                                                             
introduced himself and read a prepared statement:                                                                               
     Good afternoon, Mister Chair and members of the House                                                                      
     Finance Committee, for the record, Matt Gruening,                                                                          
     staff to the House Transportation Committee.                                                                               
     It  has been  about  a month  since  the committee  has                                                                    
     heard this bill and my  intention is to provide a brief                                                                    
     I  would  be remiss,  if  did  not mention  that  Laura                                                                    
     Stidolph,  who previously  presented  this  bill has  a                                                                    
     very  good  reason  for  not being  here  today.  I  am                                                                    
     pleased to  announce that at  3:58 this  morning, Laura                                                                    
     gave birth  to an 8  lb. 15  oz. baby boy.  Both mother                                                                    
     and baby are in perfect health.                                                                                            
     In front of  you is House Bill  131 "Federal Relocation                                                                    
     Assistance Programs/Projects"  which will  bring Alaska                                                                    
     into   compliance    with   Federal    law   concerning                                                                    
     reimbursement  for  relocation   expenses  incurred  by                                                                    
     individuals or businesses that were  displaced due to a                                                                    
     federally   funded  highway,   bridge,  or   facilities                                                                    
     project. Alaskans  deserve to be fairly  compensated in                                                                    
     these circumstances. HB 131  will also protect Alaska's                                                                    
     approximately   $700  million   annual  allocation   of                                                                    
     Federal  Highway  Administration   (FHWA)  and  Federal                                                                    
     Aviation Administration  (FAA) funding by  bringing the                                                                    
     state  into  compliance.   $500  million  is  allocated                                                                    
     annually from the  FHWA and on average  $200 million is                                                                    
     allocated  from the  FAA.  Having  an equivalent  state                                                                    
     statute  is one  of  the requirements  for  a state  to                                                                    
     receive   a   delegated  authority   to   independently                                                                    
     administer  the  federal program.  Additionally,  being                                                                    
     out of  compliance, even  for a  short period  of time,                                                                    
     jeopardizes   our   relationship   with   our   funding                                                                    
     partners,  putting our  entire program  at risk.  These                                                                    
     projects   currently  amount   to  approximately   $700                                                                    
     million annually  in federal participation, as  well as                                                                    
     countless jobs.                                                                                                            
     In 2012, Congress relaxed  the eligibility criteria and                                                                    
     increased the maximum  reimbursement limits for State's                                                                    
     relocation  assistance   payment  programs   when  they                                                                    
     passed their  transportation authorization  and funding                                                                    
     bill,  the  Moving  Ahead  for  Progress  in  the  21st                                                                    
     Century Act,  aka MAP-21. Prior to  MAP-21, the payment                                                                    
     rates had not been changed for 30 years.                                                                                   
     These  changes  went  into   effect  October  1,  2014.                                                                    
     Unfortunately, Alaska Statute  continues to reflect the                                                                    
     more  stringent eligibility  criteria  and the  smaller                                                                    
     maximum reimbursement limits.                                                                                              
     During the second half of  the 29th Alaska Legislature,                                                                    
     this inconsistency  between state  and federal  law was                                                                    
     nearly fixed.  Language similar to HB  131 was proposed                                                                    
     and  passed the  House unanimously.  It passed  through                                                                    
     the Senate  State Affairs and Senate  Finance. However,                                                                    
     the bill was held in  Senate Rules and never calendared                                                                    
     for a Senate floor vote.                                                                                                   
     HB 131  assures Alaskans  that their  Legislature wants                                                                    
     them to  be compensated the  same as a resident  of any                                                                    
     other state.                                                                                                               
     Thank you for  the opportunity to present  this bill on                                                                    
     behalf of  the House Transportation  Committee. Heather                                                                    
     Fair,  the   Department  of  Transportation   &  Public                                                                    
     Facilities'  Statewide Right-of-Way  Chief, is  here to                                                                    
     answer any questions you may have.                                                                                         
Representative Wilson conveyed that  last time the committee                                                                    
heard the bill there would  be approximately $12 thousand or                                                                    
9 percent  in state  funding, although  the fiscal  note was                                                                    
zero. She wanted to make  sure the fiscal note was accurate.                                                                    
Mr.  Gruening  responded  that  the  zero  fiscal  note  was                                                                    
correct. He added that federal  funding was approximately 91                                                                    
percent with a 9 percent state match.                                                                                           
Representative  Wilson asked  why the  fiscal note  would be                                                                    
zero if there was a 9  percent state note. She was fine with                                                                    
the bill.                                                                                                                       
1:39:19 PM                                                                                                                    
HEATHER    FAIR,   CHIEF    RIGHT-OF-WAY,   DEPARTMENT    OF                                                                    
TRANSPORTATION,  answered   that  the  state   would  design                                                                    
projects  based on  available state  funding and  absorb the                                                                    
additional costs when the department allocated projects.                                                                        
Representative  Wilson  noted  that   the  fiscal  note  was                                                                    
retroactive  to 2014.  She wondered  if  the department  was                                                                    
confirming  that even  though  there might  be funding,  the                                                                    
department had  enough in  its budget  to absorb  the costs.                                                                    
Ms.  Fair responded  affirmatively. She  indicated that  the                                                                    
department  estimated about  $12 thousand  liability to  the                                                                    
state,  a  small enough  amount  that  the department  could                                                                    
absorb the cost back to 2014.                                                                                                   
Representative  Wilson  suggested  that in  the  future  the                                                                    
committee  might  want   to  take  a  closer   look  at  the                                                                    
department's budget.                                                                                                            
1:40:24 PM                                                                                                                    
Representative Guttenberg spoke  about the railroad recently                                                                    
acquiring   a  significant   amount  of   right-of-way.  The                                                                    
railroad's  authority  to  make   that  acquisition  was  in                                                                    
question.  He  asked  if  the  bill  would  cover  what  the                                                                    
railroad was  doing. Right-of-way  was required but  not for                                                                    
capital projects.  The bill encompassed  compensating people                                                                    
for  property right  of  ways. He  asked  if the  railroad's                                                                    
actions were covered in the  legislation. Ms. Fair responded                                                                    
that the railroad was a separate corporation.                                                                                   
Vice-Chair Gara  understood the  explanation about  the zero                                                                    
fiscal note.  He thought  it was due  to the  projects being                                                                    
dependent on  there being  a federal  project in  the future                                                                    
and the legislature  having to pay to relocate  a family. He                                                                    
suggested that  the department  would not  know when  or how                                                                    
frequently  it would  happen and  when  it would  be in  the                                                                    
capital  budget. He  remarked  it was  an ongoing  operating                                                                    
budget expense  normally seen in  a fiscal note.  He queried                                                                    
the  reason for  the zero  fiscal note.  Ms. Fair  responded                                                                    
that it  was very difficult  to estimate how  the department                                                                    
would  impact businesses,  farms, and  families with  future                                                                    
projects. The department took it  into consideration when it                                                                    
had   the  Statewide   Transportation  Improvement   Program                                                                    
(STIP).  The   department  prioritized  projects   based  on                                                                    
available funding and need.                                                                                                     
Vice-Chair Gara  asked if there  would be a  capital expense                                                                    
request of  9 percent. Ms. Fair  responded, "That's correct,                                                                    
and again  we expect  it to  be a de  minimis impact  to the                                                                    
Representative   Wilson  suggested   that   in  the   future                                                                    
relocation  funds would  be part  of  federal funding  which                                                                    
would be matched with 10  percent state funding. She thought                                                                    
that what  had been  discussed applied to  retroactive funds                                                                    
and which  accounts they would  come out of.  She reiterated                                                                    
that going forward the relocation  of funds would be part of                                                                    
the  grants from  the transportation  program  and would  be                                                                    
seen in  the capital budget.  She asked if she  was correct.                                                                    
Ms.  Fair responded  affirmatively. She  added that  roughly                                                                    
$12 thousand of the  state liability was retroactive to-date                                                                    
as  well  as  what  the  department  could  foresee  in  the                                                                    
following 1 to 2 years on known projects.                                                                                       
Representative  Guttenberg  commented   that  in  a  capital                                                                    
appropriation for  a project  it included  engineering costs                                                                    
and  costs associated  with property  acquisitions including                                                                    
right-of-way  properties. He  thought the  legislation would                                                                    
authorize  DOT  to  add  10  percent  or  absorb  the  cost.                                                                    
However,  it  was  enclosed inside  a  capital  project  bid                                                                    
document going  forward. He did not  believe the legislature                                                                    
would  see the  amount in  a budget  item. He  asked if  his                                                                    
assessment  was  accurate.  Ms.   Fair  responded  that  the                                                                    
legislature would  not see  the detailed  line items  in the                                                                    
request. She  added that the  legislature was  currently not                                                                    
seeing  a  line  item,  as  it  was  already  something  the                                                                    
department paid. There would be new limits.                                                                                     
1:45:44 PM                                                                                                                    
Vice-Chair Gara reviewed one zero fiscal note:                                                                                  
Department:   Department   of  Transportation   and   Public                                                                    
Appropriation: Design, Engineering, and Construction                                                                            
OMB Component: 2357                                                                                                             
Vice-Chair  Gara MOVED  to report  HB 131  out of  Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
There being NO OBJECTION, it was so ordered.                                                                                    
HB  131 was  REPORTED  OUT  of Committee  with  a "do  pass"                                                                    
recommendation and  with a previously published  zero fiscal                                                                    
note: FN1 (DOT).                                                                                                                
1:46:46 PM                                                                                                                    
AT EASE                                                                                                                         
1:50:01 PM                                                                                                                    
HOUSE BILL NO. 128                                                                                                            
     "An Act  relating to management  of enhanced  stocks of                                                                    
     shellfish; authorizing  certain nonprofit organizations                                                                    
     to engage  in shellfish enhancement  projects; relating                                                                    
     to application  fees for  salmon hatchery  permits; and                                                                    
     providing for an effective date."                                                                                          
1:50:10 PM                                                                                                                    
Co-Chair  Seaton relayed  that the  last time  the committee                                                                    
heard the  bill on April 14,  2018 at which time  there were                                                                    
no  amendments  offered.  He invited  the  bill  sponsor  to                                                                    
refresh the committee about the bill.                                                                                           
REPRESENTATIVE DAN ORTIZ,  SPONSOR, reviewed the legislation                                                                    
dealing  with shellfish  enhancement projects.  He explained                                                                    
that  the purpose  of the  bill was  to advance  mariculture                                                                    
opportunities  in   Alaska  through   shellfish  enhancement                                                                    
projects.  It allowed  non-profits to  apply for  and pursue                                                                    
enhancement  or  restoration projects  involving  shellfish.                                                                    
They might  include red  and blue  king crab,  sea cucumber,                                                                    
abalone, geoduck, razor clams,  plus other shellfish species                                                                    
not yet on the radar.                                                                                                           
Representative  Ortiz continued  to explain  the purpose  of                                                                    
the bill.  He reported  that HB 128  held the  Department of                                                                    
Fish and  Game (DFG) to  a high  standard in the  process of                                                                    
issuing permits  specifically requiring the  commissioner to                                                                    
make  a   finding  of  substantial  public   benefit  and  a                                                                    
determination that the project  would not jeopardize natural                                                                    
stocks. It  was important to  note that when  shellfish were                                                                    
released  back  into  the  wild  by  a  permit  holder,  the                                                                    
shellfish became  a common  property resource  available for                                                                    
common use.                                                                                                                     
Representative Ortiz  summarized that  the project  held the                                                                    
promise of  diversifying and strengthening  Alaska's fishery                                                                    
portfolio by  establishing a sound, sustainable  approach to                                                                    
growing  the  state's  fledgling mariculture  industry.  The                                                                    
bill had 2 zero fiscal notes.                                                                                                   
Representative  Wilson appreciated  the  bill. She  quarried                                                                    
about enhancement for hatcheries.  She referred to the title                                                                    
on   page   1,  line   3   and   salmon  hatchery   permits.                                                                    
Representative   Ortiz   responded   that   the   bill   was                                                                    
specifically  designed   to  enhance   Alaska's  mariculture                                                                    
industry.  There were  several salmon  hatcheries in  Alaska                                                                    
that came into  existence many years ago.  There was nothing                                                                    
preventing the  state from putting other  hatcheries forward                                                                    
in the future. The bill  being discussed addressed the issue                                                                    
of the mariculture industry.                                                                                                    
Representative  Wilson   asked  if  someone  from   DFG  was                                                                    
1:53:54 PM                                                                                                                    
FORREST  BOWERS,   DEPUTY  DIRECTOR,   COMMERCIAL  FISHERIES                                                                    
DIVISION, DEPARTMENT  OF FISH  AND GAME,  introduced himself                                                                    
and asked Representative Wilson to restate her question.                                                                        
Representative Wilson  suggested that in the  bill the state                                                                    
was enhancing  shellfish, which she favored.  She brought up                                                                    
the Interior  hatchery. It  had a  plentiful stock,  but the                                                                    
fish  could not  be placed  into the  river. Since  the bill                                                                    
provided  a  vehicle,  she  thought   there  might  be  some                                                                    
enhancement  the  state  could provide  for  its  hatcheries                                                                    
creating more opportunities. She asked for his feedback.                                                                        
Mr.  Bowers  responded that  currently  there  were laws  in                                                                    
place  that allowed  for enhancement  or rehabilitation  for                                                                    
fish including salmon, trout, and  char. Those laws had been                                                                    
in place  for many years.  Currently, there was no  law that                                                                    
allowed for  shellfish enhancement, the intent  of the bill.                                                                    
Currently, a  person could not  apply for  a permit to  do a                                                                    
shellfish fishery enhancement project.  The bill would allow                                                                    
enabling  regulations and  a permitting  process  to be  put                                                                    
into  place where  a person  could apply  for and  receive a                                                                    
permit  to enhance  a shellfish  fishery. As  Representative                                                                    
Wilson  pointed out,  there was  already a  fish enhancement                                                                    
hatchery program  in place for  fish. The  legislation would                                                                    
establish a parallel program for shellfish.                                                                                     
Representative Wilson asked if  there was a non-profit means                                                                    
of  doing  salmon enhancing  products  similar  to what  was                                                                    
being  proposed  for  shellfish.   She  wondered  if  salmon                                                                    
hatcheries could release  stock into the Chena  River or the                                                                    
Yukon  River,  or  wherever the  need  existed.  Mr.  Bowers                                                                    
responded  affirmatively.   There  were  examples   in  many                                                                    
coastal areas  of Alaska. Representative Wilson  was pleased                                                                    
with Mr.  Bowers answer.  She had been  told that  the state                                                                    
could not. She thanked him.                                                                                                     
Co-Chair  Seaton added  that releasing  fish  into the  wild                                                                    
could be different then raising  fish. Permits were required                                                                    
to allow  an entity to  release fish without  competing with                                                                    
natural stocks.  Enhancement was done by  hatcheries or non-                                                                    
profit  entities all  along the  Gulf. He  noted there  were                                                                    
several  letters of  opposition  to the  massive amounts  of                                                                    
pink salmon  going through  non-profit hatcheries  and being                                                                    
released. There was some contention.                                                                                            
Representative  Thompson was  aware of  the hatchery  on the                                                                    
Gulkana  River  between  Summit Lake  and  Paxon  Lake.  The                                                                    
hatchery was funded  by the fishing industry.  The fish were                                                                    
fertilized  and  taken  to  a  lake  in  the  Interior,  and                                                                    
subsequently were put  back into the river. He  asked if Mr.                                                                    
Bowers was speaking of such a type of set up.                                                                                   
Mr. Bowers affirmed  that Representative Thompson's comments                                                                    
reflected an  example of  a fish  enhancement project  for a                                                                    
private non-profit.  He added that a  permitting process was                                                                    
in  place. However,  it did  not mean  the department  would                                                                    
necessarily  grant or  approve every  application. He  noted                                                                    
folks   in  Representative   Thompson's  district   who  had                                                                    
discussed a  potential project with  the department  and who                                                                    
might  have  received  some  negative  feedback.  There  was                                                                    
statutory  and regulatory  language  in  place that  allowed                                                                    
them to apply for a permit.                                                                                                     
Representative  Wilson  was told  by  the  fish hatchery  in                                                                    
Fairbanks  that  they could  not  install  the fish  in  the                                                                    
Yukon. The  co-chair had  stated that  the reason  they were                                                                    
not allowed  was because of  the mixture of raised  and wild                                                                    
fish. She  wanted additional clarification. She  mentioned a                                                                    
large amount of money going  into the project and that there                                                                    
were issues  about fish population.  She was  concerned with                                                                    
having built  the hatcheries and  them not working.  She had                                                                    
heard from the hatchery that it could not insert stock.                                                                         
1:59:15 PM                                                                                                                    
Vice-Chair  Gara did  not  want to  haphazardly  add a  fish                                                                    
hatchery provision in the bill.  For example, recently there                                                                    
had been  a significant  amount of controversy  about adding                                                                    
hatchery  king  salmon to  a  wild  king salmon  stream.  He                                                                    
opined that  considerations would  have to be  studied prior                                                                    
to going  forward. Mr. Bowers  agreed. The only part  of the                                                                    
bill that  did not relate  to shellfish was  the application                                                                    
fee. The  legislation raised the  application fee for  a new                                                                    
salmon hatchery  permit from $100 to  $1000. Everything else                                                                    
related to shellfish fishery  enhancement. The piece related                                                                    
to the  salmon hatchery  permit application  fee was  in the                                                                    
bill  and  where the  word  "hatchery"  was drawn  into  the                                                                    
Vice-Chair  Gara  was  comfortable  with the  bill  being  a                                                                    
"shellfish bill." He would be uncomfortable expanding it.                                                                       
Co-Chair  Foster directed  Vice-Chair Gara  to walk  through                                                                    
the fiscal notes.                                                                                                               
Vice-Chair Gara reviewed two zero fiscal notes:                                                                                 
[Fiscal Note Number: 2]                                                                                                         
Department: Department of Fish and Game                                                                                         
Appropriation: Commercial Fisheries                                                                                             
Allocation: Statewide Fisheries Management                                                                                      
OMB Component Number: 2171                                                                                                      
[Fiscal Note Number: 1]                                                                                                         
Department: Department of Fish and Game                                                                                         
Appropriation: Commercial Fisheries                                                                                             
Allocation: Commercial Fisheries Entry Commission                                                                               
OMB Component Number: 471                                                                                                       
Vice-Chair  Gara MOVED  to report  HB 128  out of  Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
There being NO OBJECTION, it was so ordered.                                                                                    
HB  128 was  REPORTED  OUT  of Committee  with  a "do  pass"                                                                    
recommendation  and  with  two previously  published  fiscal                                                                    
notes, one with zero fiscal  impact: FN1 (DFG); and one with                                                                    
an indeterminate fiscal impact: FN2 (DFG).                                                                                      
HOUSE BILL NO. 76                                                                                                             
     "An Act relating to the mariculture revolving loan                                                                         
     fund and loans from the fund; and providing for an                                                                         
     effective date."                                                                                                           
2:02:05 PM                                                                                                                    
Co-Chair  Foster  indicated  there had  been  no  amendments                                                                    
submitted to  his office since  the bill's last  hearing. He                                                                    
invited  the bill  sponsor,  Representative  Ortiz, and  his                                                                    
staff to the table.                                                                                                             
REPRESENTATIVE  DAN ORTIZ,  SPONSOR,  thanked the  committee                                                                    
for  considering  the  legislation.   He  read  the  sponsor                                                                    
     This  bill  amends   the  existing  Alaska  Mariculture                                                                    
     Revolving Loan  Fund to  allow up  to forty  percent of                                                                    
     the fund  to be used  for loans to  permitted shellfish                                                                    
     hatcheries for planning, construction and operation.                                                                       
     Alaska shellfish  farms currently do not  have a stable                                                                    
     supply of seed  for the propagation of  oysters, and no                                                                    
     regular, in-state  source of seed for  resident aquatic                                                                    
     plants and other shellfish. A  stable supply of seed is                                                                    
     one of many hurdles the  industry must overcome to grow                                                                    
     and become a viable Alaskan industry.                                                                                      
     This bill  will amend  the program  to shift  its focus                                                                    
     and eligibility from  individual mariculture farmers to                                                                    
     include  shellfish hatcheries  that would  market stock                                                                    
     to local Alaskan mariculture farmers.                                                                                      
     The  mariculture industry  in Alaska  is not  yet fully                                                                    
     developed,  and   is  extremely   high  risk,   from  a                                                                    
     financial  standpoint.  These  obstacles  make  private                                                                    
     financing  difficult  to  obtain, but  this  bill  will                                                                    
     enable Alaskans  to maintain their businesses  and grow                                                                    
     mariculture industry.                                                                                                      
Representative  Ortiz  reported that  the  bill  had 2  zero                                                                    
fiscal notes. He was happy to answer any questions.                                                                             
Co-Chair Foster  reviewed the list of  available testifiers.                                                                    
Co-Chair  Foster  directed  Vice-Chair Gara  to  review  the                                                                    
fiscal notes.                                                                                                                   
Vice-Chair Gara reviewed two zero fiscal notes:                                                                                 
[Fiscal Note Number: 2]                                                                                                         
Department: Department of Fish and Game                                                                                         
Appropriation: Statewide Support Services                                                                                       
Allocation: Commissioner's Office                                                                                               
OMB Component Number: 2175                                                                                                      
[Fiscal Note Number: 1]                                                                                                         
Department: Department  of Commerce, Community  and Economic                                                                    
Appropriation: Investments                                                                                                      
Allocation: Investments                                                                                                         
OMB Component Number: 383                                                                                                       
Representative Wilson referred to  the last paragraph on the                                                                    
fiscal note  with OMB  component number  383. She  read from                                                                    
the fiscal note (copy on file).                                                                                                 
She asked  if the department  would be absorbing  the costs.                                                                    
She asked for the amount being absorbed.                                                                                        
2:05:32 PM                                                                                                                    
BRITTENY  CIONI-HAYWOOD,  DIVISION   DIRECTOR,  DIVISION  OF                                                                    
ECONOMIC DEVELOPMENT, DEPARTMENT  OF COMMERCE, COMMUNITY AND                                                                    
ECONOMIC DEVELOPMENT,  relayed that  the funding  would come                                                                    
out  of  the fund.  She  noted  that there  was  potentially                                                                    
another regulation package that would be coming out.                                                                            
Representative Wilson  asked what  fund the monies  would be                                                                    
drawn from.  She thought the  amount should be  reflected in                                                                    
the fiscal note and asked Ms. Cioni-Hawood to comment.                                                                          
Co-Chair  Seaton  read  from   the  remainder  of  the  last                                                                    
paragraph on  page 2 of the  fiscal note (copy on  file). He                                                                    
remarked that the regulations  were already being rewritten.                                                                    
He asked for further clarification.                                                                                             
Ms.  Cioni-Haywood understood  that the  department was  not                                                                    
asking for additional money  or an additional appropriation,                                                                    
therefore, the fiscal note was zero.                                                                                            
Representative  Guttenberg pointed  out  that  the note  was                                                                    
from DCCED.  It was  part of the  loan programs,  which they                                                                    
had a significant amount. He pointed  to the top line of the                                                                    
analysis  which  indicated  that the  Mariculture  Revolving                                                                    
Loan Fund program was already  authorized to issue loans. It                                                                    
appeared  the   program  was  expanding  to   include  other                                                                    
Representative Wilson  asked about other  planned regulation                                                                    
projects that would include  this project. Ms. Cioni-Haywood                                                                    
explained  that  the  department   was  also  considering  a                                                                    
regulation project on HB 56  [Legislation introduced in 2017                                                                    
- Short Title: COMMERCIAL  FISHING LOANS] that would include                                                                    
changes for the commercial fishing loan limits.                                                                                 
Representative  Wilson assumed  that HB  56 did  not have  a                                                                    
zero  fiscal note.  Ms. Cioni-Haywood  relayed  there was  a                                                                    
zero fiscal note for HB 56.  She was informed that since the                                                                    
department was  not asking for an  additional appropriation,                                                                    
the fiscal note would be zero.                                                                                                  
Representative Wilson  was asking because the  committee had                                                                    
heard about  the budget  and how much  it had  been reduced.                                                                    
She appreciated that the department  was absorbing the cost.                                                                    
However,  it  would  be  nice   to  know  the  amount  being                                                                    
absorbed.  She  specified  that the  loan  people  would  be                                                                    
paying  for  the  costs.  She   suggested  that  there  were                                                                    
inconsistencies in the absorption  of costs. She asked about                                                                    
the other  fiscal note and  the potential of more  money for                                                                    
the hatchery portion.  She read from the second  page of the                                                                    
fiscal  note from  DFG (copy  on file)  regarding additional                                                                    
operating funds  for operators  of hatcheries.  She realized                                                                    
that she was directing her  question to DCCED and she should                                                                    
be asking  DFG. She asked  if the money for  hatcheries went                                                                    
back into  the hatcheries  themselves. She wondered  if that                                                                    
was the reason  it stated there might be more  money for the                                                                    
hatcheries as opposed to the state.                                                                                             
Representative Ortiz asked what she was referring to.                                                                           
Representative Wilson  was speaking to the  fiscal note with                                                                    
the OMB  component number  2175. She  pointed to  the second                                                                    
page.  The language  mentioned  potential  revenue going  to                                                                    
hatcheries rather than to the state.                                                                                            
2:11:02 PM                                                                                                                    
AT EASE                                                                                                                         
2:11:27 PM                                                                                                                    
Representative Ortiz deferred to his staff, Ms. Bolling.                                                                        
ELIZABETH   BOLLING,   STAFF,  REPRESENTATIVE   DAN   ORTIZ,                                                                    
explained that hatcheries would be  able to apply for grants                                                                    
through  the reshaped  loan fund.  Although the  grants were                                                                    
small, it would be possible  for operators to get some small                                                                    
grant money  through the program  that they  might otherwise                                                                    
receive  from DFG.  All that  the fiscal  note conveyed  was                                                                    
that  a  portion  of  the   amount  they  paid  out  to  the                                                                    
hatcheries to operate might be  offset slightly by the grant                                                                    
Representative Guttenberg highlighted  that the loan program                                                                    
was  sustainable as  a  revolving loan  fund  and was  self-                                                                    
sustained. The  legislation was expanding who  could use the                                                                    
funds and  how the  funds would  be used.  The loan  fund by                                                                    
itself was essentially a bank.                                                                                                  
Representative Wilson clarified that  her point was that the                                                                    
money would  be designated general  funds (DGF) and  DGF was                                                                    
shown  in state  fiscal  notes. She  wanted the  information                                                                    
provided on fiscal notes.                                                                                                       
Co-Chair  Seaton  MOVED  to  report CSHB  76  (FSH)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
There being NO OBJECTION, it was so ordered.                                                                                    
CSHB  76 (FSH)  was REPORTED  OUT  of Committee  with a  "do                                                                    
pass" recommendation and with  two previously published zero                                                                    
fiscal notes: FN1 (CED) and FN2 (DFG).                                                                                          
2:14:47 PM                                                                                                                    
AT EASE                                                                                                                         
2:15:49 PM                                                                                                                    
HOUSE BILL NO. 124                                                                                                            
     "An Act relating to corporations, including benefit                                                                        
     corporations, and other entities; and providing for an                                                                     
     effective date."                                                                                                           
2:15:57 PM                                                                                                                    
Co-Chair Foster  indicated there  was one amendment  that he                                                                    
would be offering. He asked  the bill sponsor to provide the                                                                    
committee with a recap of the bill.                                                                                             
REPRESENTATIVE  SAM KITO,  SPONSOR,  reviewed  the bill.  He                                                                    
explained  that  the  bill established  a  charter  type  of                                                                    
corporation that would  allow a company to  have, within its                                                                    
bi-laws, operations  plan, and  activities more than  just a                                                                    
fiduciary responsibility to its  shareholders. They would be                                                                    
allowed,  under the  "B" corporation  statute, to  provide a                                                                    
public benefit. The  public benefit would be  defined in the                                                                    
organizing  documents of  the  corporation.  He had  covered                                                                    
several questions.  He would defer  to his staff  to present                                                                    
his position on the amendment.                                                                                                  
Co-Chair Foster  reviewed the  list of  available testifiers                                                                    
Co-Chair Foster MOVED to ADOPT Amendment 1 (copy on file):                                                                      
Page 15, following line 2:                                                                                                      
     Insert a new section to read:                                                                                              
          "Sec. 10.60.725. Reliance by  third parties. (a) A                                                                    
          person  who,   in  good  faith,  centers   into  a                                                                    
          transaction with a benefit corporation may                                                                            
               (1)   assume   without   inquiry   that   the                                                                    
               transaction, and  each action or  inaction by                                                                    
               any  director  or   officer  of  the  benefit                                                                    
               corporation    giving     effect    to    the                                                                    
               transaction,   is  in   furtherance  of   the                                                                    
               benefit corporation's  general public benefit                                                                    
               purpose or  specific public  benefit purpose;                                                                    
               (2)  enforce  the   transaction  against  the                                                                    
               benefit corporation as  if the transaction is                                                                    
               in furtherance  of the  benefit corporation's                                                                    
               general  public benefit  purpose or  specific                                                                    
               public benefit purpose.                                                                                          
          (b)  Nothing in  this  section  exempts a  covered                                                                    
          financial   institution   from   identifying   and                                                                    
          verifying the  beneficial owner of a  legal entity                                                                    
          that is a customer as  required under a federal or                                                                    
          state  law  or  regulation.  In  this  subsection,                                                                    
          "covered  financial institution"  has the  meaning                                                                    
          given in 31 C.F.R. 1010.605."                                                                                         
Representative Wilson OBJECTED for discussion.                                                                                  
2:18:24 PM                                                                                                                    
BIANCA CARPENETI, STAFF,  REPRESENTATIVE SAM KITO, indicated                                                                    
that  the amendment  was a  friendly  safe harbor  amendment                                                                    
proposed  by the  Alaska Bankers  Association. The  proposed                                                                    
language  was  intended  to   function  much  like  Alaska's                                                                    
certificate of trust statute.  In particular, the subsection                                                                    
of the trust statute  was AS 13.36.079(f)(g). The provisions                                                                    
provided third  parties transacting  business with  a trust.                                                                    
They could  rely on a  trust statement that  the transaction                                                                    
was  permitted  by  the trust,  and,  as  such,  enforceable                                                                    
against  the  trust. The  intent  of  the amendment  was  to                                                                    
provide  the same  contractual  certainty  to third  parties                                                                    
that  contracted  businesses  with proposed  public  benefit                                                                    
Ms.  Carpeneti  turned to  Article  5,  Actions and  Claims,                                                                    
Sections 10,  60, 300, and  320 of the  proposed legislation                                                                    
found on pages  9 and 10. The section  provided that parties                                                                    
might bring action against a  public benefit corporation for                                                                    
failing  to  pursue  or  create   a  public  benefit.  Since                                                                    
monetary  damages  were  not permitted  under  the  proposed                                                                    
legislation,  the  likely  relief  would  be  injunctive  in                                                                    
nature.  The relief  could  theoretically  include a  court,                                                                    
setting aside  a contract under  the theory that it  did not                                                                    
satisfy  or further  a public  benefit. Absent  the proposed                                                                    
language,  third parties  might  feel compelled  to make  an                                                                    
independent assessment of  whether the transaction satisfied                                                                    
or furthered a  public benefit. She relayed  that there were                                                                    
some  concerns  that sort  of  analysis  might increase  the                                                                    
costs  of  completing  transactions   and  might  make  some                                                                    
transactions more difficult to complete.                                                                                        
Ms. Carpeneti  reported that the bill  sponsor's position on                                                                    
the amendment was neutral. He  consulted with William Clark,                                                                    
the lawyer that  testified in front of the  committee at the                                                                    
prior  bill  hearing,  who  understood  the  intent  of  the                                                                    
amendment but thought it might  go too far. Specifically, he                                                                    
had  concerns with  subsection 2  regarding the  non-benefit                                                                    
corporation  part of  the contract.  He  disagreed that  the                                                                    
non-benefit corporation  should not  have a duty  to inquire                                                                    
about the  purpose of the  contract, but it might  have said                                                                    
too much to  allow the other party to enforce  a contract in                                                                    
all cases.  If a court  declined to enforce a  contract, the                                                                    
other party  would still  be protected  because it  would be                                                                    
entitled  to any  damages it  could prove.  She relayed  Mr.                                                                    
Clark's suggestion  was to strike subsection  2. Although he                                                                    
noted  that   his  concerns  were  not   extremely  serious.                                                                    
Representative Kito's office also  contacted DCCED to see if                                                                    
there  were  any  concerns  about  the  proposed  amendment.                                                                    
Responses  were  received  from  Janey  Hovenden,  Director,                                                                    
Division   of   Corporations,  Business   and   Professional                                                                    
Licensing. She noted that the  division did not see an issue                                                                    
with  the  proposed  changes. Representative  Kito's  office                                                                    
also heard from  Kevin Anselm from the  Division of Banking.                                                                    
The  division requested  the addition  of  subsection 3,  as                                                                    
provided in the amendment before the committee.                                                                                 
PETER PINNOW, SENIOR COUNCIL,  WELLS FARGO, MINNEAPOLIS, MN,                                                                    
referred to section 2 and  indicated the intent was to track                                                                    
the same rights and the  same protections afforded under the                                                                    
trust certificate statute that was referenced.                                                                                  
2:22:33 PM                                                                                                                    
Co-Chair  Seaton commented  that either  the general  public                                                                    
benefit or  the specific  public benefit  were not  the sole                                                                    
reason  for  the  company's  existence.  He  read  from  the                                                                    
amendment (see above).  He understood that in  a trust there                                                                    
was   an  obligation   to  only   act  on   behalf  of   the                                                                    
beneficiaries  of the  trust. The  amendment encompassed  an                                                                    
additional  benefit that  was offered  by a  corporation but                                                                    
was  not its  sole benefit.  He thought  the language  would                                                                    
interfere with  a company's  right to make  a profit  by not                                                                    
furthering  the  specific  or  benefit  purpose.  He  wanted                                                                    
someone  to  address the  issue  of  mixing trusts  with  an                                                                    
auxiliary purpose, which could become problematic.                                                                              
Mr.  Pinnow  understood  the  representative's  comment.  He                                                                    
explained  that   whenever  there   was  a   public  benefit                                                                    
requirement imposed by a statute  Wells Fargo wanted to make                                                                    
sure it  had contractual certainty.  It did not want  to run                                                                    
the risk of  having its contracts set aside  with 20/20 hind                                                                    
sight.  The proposal  was intended  to  ensure that  parties                                                                    
transacting business with a  public benefit corporation felt                                                                    
safe and  secure that the  contract they entered  into would                                                                    
not be  set aside in  the future  under the theory  that the                                                                    
contract did  not further the public  benefit. He reiterated                                                                    
that  the intent  was  to make  sure  there was  contractual                                                                    
certainty. He explained that the  reason he analogized it to                                                                    
the trust  certificate was because,  much like  parties that                                                                    
transacted  business with  trusts,  they needed  contractual                                                                    
certainty  that  the  transaction   was  authorized  and  in                                                                    
furtherance  of the  trust  purpose. As  a  third party  who                                                                    
would  be  interacting  and  lending   money  to  a  benefit                                                                    
corporation,  Wells Fargo  would want  to make  sure it  had                                                                    
certainty  just  as  a  third   party  relying  on  a  trust                                                                    
certificate would.                                                                                                              
2:27:09 PM                                                                                                                    
Co-Chair Seaton remarked that  general benefits and specific                                                                    
benefits  were additional  values  to the  operation of  the                                                                    
corporation.   Neither  were   the  sole   purpose  of   the                                                                    
corporation.  He thought  that,  the way  the amendment  was                                                                    
written, the entirety of the  contract had to accomplish the                                                                    
accessory  benefit,  rather  than  the  sole  purpose  of  a                                                                    
corporation. A trust  had a sole purpose.  He suggested that                                                                    
the  amendment   was  converting  the  general   benefit  or                                                                    
specific benefit  into the sole  purpose of the  company and                                                                    
that everything  in the  contract would  have to  comply. He                                                                    
asked Mr. Pinnow to comment  on the potential interpretation                                                                    
of the language contained in the amendment.                                                                                     
Mr.  Pinnow did  not  believe the  purpose  of the  language                                                                    
would require that a public  benefit corporation only engage                                                                    
in  transactions  that would  serve  a  public benefit.  The                                                                    
purpose of  the language was  intended to make it  clear and                                                                    
provide  third parties  with  the  protection against  their                                                                    
contract right being  set aside because of  the contract not                                                                    
furthering  a public  benefit objective.  He suggested  that                                                                    
the  language should  not  be  interpreted as  fundamentally                                                                    
changing the  requirements of a public  benefit corporation.                                                                    
It  was  intended  solely to  provide  protection  to  third                                                                    
parties transacting with a public benefit corporation.                                                                          
2:29:42 PM                                                                                                                    
Co-Chair Seaton highlighted  line 5 and asked  if Mr. Pinnow                                                                    
was  saying that  it was  assumed without  inquiry that  the                                                                    
transaction and each  action or inaction by  any director or                                                                    
officer was to further the public benefit.                                                                                      
Mr.  Pinnow responded  that he  could see  Co-Chair Seaton's                                                                    
point  that the  contract might  be for  the benefit  of the                                                                    
corporation  but that  the contract  might  not further  the                                                                    
public  benefit purpose.  He was  concerned that  a contract                                                                    
might be  set aside because  someone argued that  a contract                                                                    
did not serve a public benefit.                                                                                                 
Co-Chair Seaton  did not have  a problem with the  intent of                                                                    
the bill, but  argued that the amendment  did not accomplish                                                                    
that goal. He indicated he  objected to adopting the offered                                                                    
specific language. He proposed  having the Legislative Legal                                                                    
Services redraft  the amendment.  He recommended  taking out                                                                    
the trust language as well.                                                                                                     
Co-Chair  Foster asked  the bill  sponsor how  he wanted  to                                                                    
proceed.   Representative   Kito    was   comfortable   with                                                                    
revisiting  the  bill later  and  changing  the language  to                                                                    
better satisfy the chair.                                                                                                       
Representative  Guttenberg  thought  the amendment  was,  at                                                                    
best,  neutral and  potentially cloudy.  He referred  to the                                                                    
section  of  the  amendment   that  contained  the  language                                                                    
causing  confusion.  He  was concerned  that  someone  would                                                                    
enter  a contract  with a  benefit corporation  and have  it                                                                    
overridden. He asked Mr. Pinnow to comment.                                                                                     
Mr. Pinnow  replied that  the language  spoke to  the public                                                                    
benefit purpose or the specific  public benefit purpose. The                                                                    
language  was  intended  to  deal   solely  with  whether  a                                                                    
transaction  furthered   the  public  benefit   purpose.  He                                                                    
suggested that if there were  concerns about a contract that                                                                    
would  otherwise  apply  under general  corporate  law,  the                                                                    
language  should not  be interpreted  to  address that.  The                                                                    
language was intended  to deal with the  specific and unique                                                                    
characteristics of the public  benefit corporations and that                                                                    
they had a public benefit  purpose requirement that could be                                                                    
enforced by shareholders.                                                                                                       
2:35:58 PM                                                                                                                    
Co-Chair  Seaton  asked Mr.  Pinnow  about  the concern  the                                                                    
amendment was trying  to address. He wondered  if the intent                                                                    
was to ensure  that when a party entered  a transaction with                                                                    
a benefit corporation  that the transaction did  not have to                                                                    
further the  general public benefit or  the specific benefit                                                                    
purpose  to be  valid. Co-Chair  Seaton provided  an example                                                                    
regarding maintaining  trails around Juneau. He  asked if he                                                                    
was correct in his assumption about Mr. Pinnow's intent.                                                                        
Mr. Pinnow responded in the  affirmative. Wells Fargo wanted                                                                    
certainty. He  provided the example  of Wells  Fargo lending                                                                    
money  to a  public benefit  corporation to  do an  addition                                                                    
such  as   building  a  parking  ramp   that  someone  later                                                                    
questioned the  public benefit. Wells  Fargo would  not want                                                                    
to have a  transaction or contract set aside  or called into                                                                    
question as being outside of  the corporate authority simply                                                                    
because with hind  sight it did not  accomplish, achieve, or                                                                    
further a public benefit.                                                                                                       
Co-Chair  Seaton understood  what Mr.  Pinnow was  hoping to                                                                    
achieve. He  thought that the  intent could  be accomplished                                                                    
by having Legislative Legal  Services redraft the amendment.                                                                    
He  thought the  issue could  be  resolved with  the use  of                                                                    
different language.                                                                                                             
Representative  Wilson  asked  if  the  amendment  could  be                                                                    
provided in  time for her to  speak with bankers at  home to                                                                    
make sure it worked for them.                                                                                                   
Co-Chair Foster WITHDREW Amendment 1.                                                                                           
HB  124  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair Foster  reviewed the agenda for  the following day.                                                                    
He recessed  the meeting to a  call of the chair  [Note: the                                                                    
meeting never reconvened].                                                                                                      
2:40:00 PM                                                                                                                    
The meeting was adjourned at 2:40 p.m.                                                                                          

Document Name Date/Time Subjects
HB 177 Supporting Document-Letter Kenai Borough 4.15.17.pdf HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Document-Article News Miner 4.15.17.PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Sponsor Statement 4.15.17.pdf HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Document-Article NOAA 4.15.17.PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Document-Article Peninsula Clarion 4.15.17 (2).PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Document-Article Peninsula Clarion 4.15.17.PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Document-News KTUU 4.15.17.PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Documents - Example AIS and Pamphlets 4.15.17.PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Documents - Letter NIPM 4.15.17.PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB177 Supporting Document-Support Letter-CIAA 4.15.17.pdf HFIN 4/26/2017 1:30:00 PM
HB 177
HB177Supporting Document-Letter RCAC 4.15.17.PDF HFIN 4/26/2017 1:30:00 PM
HB 177
HB 124 Amendment 1 Foster v.D.1.pdf HFIN 4/26/2017 1:30:00 PM
HB 124