03/06/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB445 | |
| HB392 | |
| HB51 | |
| HB424 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 445 | TELECONFERENCED | |
| + | HB 392 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 51 | TELECONFERENCED | |
| += | HB 424 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 6, 2006
3:44 p.m.
MEMBERS PRESENT
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
Representative Tom Anderson, Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 445
"An Act relating to the alternative energy grant fund and to
alternative energy grants."
- MOVED CSHB 445(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 392
"An Act authorizing the establishment of regional solid waste
management authorities."
- MOVED CSHB 392(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 51
"An Act relating to permitting employers in the same trade to
form joint insurance arrangements for self-insured workers'
compensation coverage."
- HEARD AND HELD
HOUSE BILL NO. 424
"An Act relating to mortgage lenders and persons who engage in
activities relating to mortgage lending; and providing for an
effective date."
- MOVED CSHB 424(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 445
SHORT TITLE: ALTERNATIVE ENERGY GRANT FUND
SPONSOR(s): REPRESENTATIVE(s) THOMAS
02/13/06 (H) READ THE FIRST TIME - REFERRALS
02/13/06 (H) L&C, FIN
03/06/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 392
SHORT TITLE: SOLID WASTE MANAGEMENT AUTHORITIES
SPONSOR(s): REPRESENTATIVE(s) WILSON
01/25/06 (H) READ THE FIRST TIME - REFERRALS
01/25/06 (H) CRA, L&C
02/09/06 (H) CRA AT 8:00 AM CAPITOL 124
02/09/06 (H) Heard & Held
02/09/06 (H) MINUTE(CRA)
02/14/06 (H) CRA AT 8:00 AM CAPITOL 124
02/14/06 (H) Moved CSHB 392(CRA) Out of Committee
02/14/06 (H) MINUTE(CRA)
02/17/06 (H) CRA RPT CS(CRA) NT 4DP 2NR
02/17/06 (H) DP: CISSNA, KOTT, THOMAS, OLSON;
02/17/06 (H) NR: SALMON, NEUMAN
03/06/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 51
SHORT TITLE: EMPLOYER ASSN FOR WORKERS' COMP INS
SPONSOR(s): REPRESENTATIVE(s) MEYER
01/10/05 (H) PREFILE RELEASED 1/7/05
01/10/05 (H) READ THE FIRST TIME - REFERRALS
01/10/05 (H) L&C, FIN
01/18/06 (H) SPONSOR SUBSTITUTE INTRODUCED
01/18/06 (H) READ THE FIRST TIME - REFERRALS
01/18/06 (H) L&C, FIN
02/10/06 (H) L&C AT 3:15 PM CAPITOL 17
02/10/06 (H) Heard & Held
02/10/06 (H) MINUTE(L&C)
03/06/06 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 424
SHORT TITLE: MORTGAGE LENDING
SPONSOR(s): LABOR & COMMERCE
02/03/06 (H) READ THE FIRST TIME - REFERRALS
02/03/06 (H) L&C, JUD
03/01/06 (H) L&C AT 3:15 PM CAPITOL 17
03/01/06 (H) Heard & Held
03/01/06 (H) MINUTE(L&C)
03/06/06 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE BILL THOMAS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HB 445.
KACI SCHROEDER-HOTCH, Staff
to Representative Thomas, Sponsor
Juneau, Alaska
POSITION STATEMENT: Answered questions during hearing on HB
445.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project
Anchorage, Alaska
POSITION STATEMENT: Characterized HB 445 as a good start and
suggested some changes.
CONNIE FREDENBERG, Natural Resources Coordinator
Aleutian Pribilof Islands Association
Anchorage, Alaska
POSITION STATEMENT: Characterized HB 445 as a good start and
suggested some changes.
GREG KINGSLEY, Planning Commission
Lake and Peninsula Borough
Pilot Point, Alaska
POSITION STATEMENT: During hearing of HB 445, discussed the
Lake and Peninsula Borough's situation.
RON MILLER, Executive Director
Alaska Industrial Export & Development Authority and
Alaska Energy Authority
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Explained the grant program established
under HB 445.
SARAH FISHER-GOADE, Alaska Energy Authority
Department of Commerce, Community, & Economic Development
POSITION STATEMENT: During hearing of HB 445, answered
questions.
PETER CRIMP, Program Manager
Alternative Energy and Energy Efficiency
Alaska Energy Authority (AEA)
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 445, answered
questions.
REPRESENTATIVE PEGGY WILSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HB 392.
BECKY ROONEY, Staff
to Representative Wilson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified during hearing on HB 392.
ROLLO POOL, Executive Director
Southeast Conference
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 392.
CINDY ROBERTS, Denali Commission
Division of Community Advocacy
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 392.
JOHN BOLLING, City Administrator
City of Craig;
Member, Southeast Conference
Craig, Alaska
POSITION STATEMENT: Testified in support of HB 392.
DAN EASTON, Deputy Commissioner
Office of the Commissioner
Department of Environmental Conservation
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 392.
RUTH HAMILTON HEESE, Assistant Attorney General
Environmental Section
Civil Division - Juneau
Department of Law
Juneau, Alaska
POSITION STATEMENT: During hearing of HB 392, answered
questions.
MICHAEL PAWLOWSKI, Staff
to Representative Kevin Meyer
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the sponsor of HB
51, Representative Meyer.
ROBERT VOGEL
Pro Group Management
Carson City, Nevada
POSITION STATEMENT: Testified in support of HB 51.
RAY HICKEL, President
Anchorage Home Builders Association (AHBA)
Anchorage, Alaska
POSITION STATEMENT: Related that the AHBA, the Alaska State
Home Builders Association (ASHBA), and the Associated General
Contractors - Board of Realtors support HB 51.
LARRY PARTUSCH
Anchorage Home Builders Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 51.
KENNETH GAIN, Secretary/Treasurer
Independent Lenders of Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 424 [Version F].
JOHN MARTIN, Executive Manager
Alaska Mortgage Solutions
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
JOHN CARMAN, President
Home State Mortgage;
Legislative Committee Chair, Alaska Mortgage Bankers Association
Anchorage, Alaska
POSITION STATEMENT: Characterized [CSHB 424, Version F] as good
legislation.
JOE BRAMMER, Manager
1st Metropolitan Mortgage;
Legislative Board
Alaska Association of Mortgage Brokers
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 424.
CRIS SKINNER, President/Broker
Kelstar Financial of Alaska Mortgage Company;
Legislative Committee, Alaska Association of Mortgage Brokers
Wasilla, Alaska
POSITION STATEMENT: Expressed concerns with HB 424.
TIM KELLY, Lobbyist
Independent Lenders of Alaska
Anchorage, Alaska
POSITION STATEMENT: Related the Independent Lenders of Alaska's
support for [Version F].
ACTION NARRATIVE
REPRESENTATIVE NORMAN ROKEBERG, ACTING CHAIR, called the House
Labor and Commerce Standing Committee meeting to order at
3:44:47 PM. Representatives Lynn, LeDoux, Guttenberg, Crawford,
and Rokeberg were present at the call to order. Representative
Kott arrived as the meeting was in progress.
REPRESENTATIVE ROKEBERG announced that he would temporarily
chair the meeting.
HB 445-ALTERNATIVE ENERGY GRANT FUND
ACTING CHAIR ROKEBERG announced that the first order of business
would be HOUSE BILL NO. 445, "An Act relating to the alternative
energy grant fund and to alternative energy grants."
REPRESENTATIVE GUTTENBERG made a motion to adopt CSHB 445,
Version 24-LS1311\L, Cook, 2/24/06, as the working document.
There being no objection, Version L was before the committee.
REPRESENTATIVE BILL THOMAS, Alaska State Legislature, Sponsor of
HB 445, informed the committee that HB 445 would take [$0.10]
per barrel of oil and place it into an alternative energy fund,
which is estimated to generate around $30 million per year. He
said that the funds would be taken out only when oil prices are
at $35 per barrel or higher. He explained that the Alaska
Energy Authority (AEA) would manage the fund and administer
grants of up to $20 million to power utilities who have shown a
need. In addition, he said, the [utilities] would be required
to secure matching funds equal to 25 percent of the grant. He
stated that the priority would be given to those areas which
experience higher costs of fossil fuels. He said that
"alternative energy" means a system which produces energy and is
not dependant on fossil fuel; however, natural gas is
acceptable, as some rural communities have small gas fields they
may be able to "tap into" in order to generate electricity. He
explained that an "electric utility" is an entity which provides
power for public consumption.
REPRESENTATIVE THOMAS went on to explain that Yakutat uses
around 1 million gallons of diesel per year. He pointed out
that ConocoPhillips Alaska, Inc. has gas wells nine miles from
Yakutat. Therefore, if the funding were available, [the
community of Yakutat] would be able to run a gas line into town
to run the generators. He said that in addition to Yakutat,
there are many other areas needing assistance. He stated that
if an area has additional projects, it would be able to submit
additional grant applications. He added that this would help to
create jobs throughout Alaska. He mentioned that he represents
many fishing communities in the state. He then opined that the
high cost of electricity negatively affects the amount of money
that comes back to the state. In regard to the alternative
energy grant fund, he said that this would free up [power cost
equalization] funds which can then be used for areas that are
still reliant on fossil fuel. In conclusion, Representative
Thomas said that the alternative energy grant fund would help
stimulate the economy in rural communities, in addition to
ending the dependence on fossil fuels.
3:50:43 PM
REPRESENTATIVE GUTTENBERG noted that in Version L, page 2, the
definition of "alternative energy project" removes the reference
to "nuclear fuel". He asked if this is the only change.
REPRESENTATIVE THOMAS replied yes, and noted that "nuclear fuel
for the supply of energy" was replaced with "other than natural
gas for the supply of energy."
REPRESENTATIVE LEDOUX asked if the legislature is required to
appropriate money for the alternative energy grant fund.
REPRESENTATIVE THOMAS said that although the legislature may
appropriate the amount calculated by the Department of Revenue,
the bill does not create a dedicated fund.
REPRESENTATIVE LEDOUX asked why there is a fiscal note if there
is not a dedicated fund.
3:52:04 PM
KACI SCHROEDER-HOTCH, Staff to Representative Thomas, Sponsor,
explained that the fiscal note estimates the amount of funds
that would be available for grants, if the legislature decided
to appropriate the funds.
ACTING CHAIR ROKEBERG asked if there is a fiscal note from the
Department of Natural Resources or the Department of Revenue
regarding the $0.10.
REPRESENTATIVE THOMAS replied no, and added that the AEA has
stated that, at this time, it would not cost AEA any additional
funds to run the grant system.
ACTING CHAIR ROKEBERG remarked that this bill would lower [the
states] revenue by $30 million a year, yet does not have a
fiscal note.
REPRESENTATIVE THOMAS agreed that there is a cost to the
program.
3:54:09 PM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), explained that the REAP is a statewide coalition of
large and small utility companies, conservation groups, and
Native organizations which share the same goal of increasing the
production of renewable energy in the state. He said that the
REAP believes that HB 445 is a "great start" toward more energy
production in the state, adding that Alaska is one of 15 states
in the country that does not have a renewable energy policy. He
opined that [establishing an alternative energy grant fund]
would be policy statement that the state can make in order to
begin providing incentives to increase the production of
renewable energy. He said that Alaska has some of the best
sources of renewable energy resources in the country.
MR. ROSE said that by providing an incentive for renewable
energy production, the state will be attracting technology and
knowledge-based workers to the state. In addition, he said,
there are over 200 villages in the state that are reliant on
diesel, and as the price of oil continues to rise, these
villages will continue to have a problem meeting the basic
needs. He stated that there are many projects throughout the
state which would be helped by this legislation.
MR. ROSE went on to say that Alaska has the opportunity to
become a world leader in renewable energy. He stated that
several villages are experimenting with wind-diesel technology,
adding that it is "working very well." He opined that this
technology could be exported to the world. In regard to
including natural gas, he said that the REAP is focused on wind,
geothermal, biomass, ocean power, and hydro-electric. He opined
that the language regarding project eligibility could be
strengthened. He said that the REAP would also like to suggest
amending the bill to include loans and production credits, which
it believes would be a good vehicle to get these projects up and
running.
[Representative Rokeberg passed the gavel to Representative
Kott.]
3:58:21 PM
CONNIE FREDENBERG, Natural Resources Coordinator, Aleutian
Pribilof Islands Association, informed the committee that she
would be speaking on her own behalf. She said that she would
like to echo the previous testimony. She stated that while this
legislation is a good start, she would like to see more included
in the bill, such as a renewable portfolio standard, which
currently exist in 22 other states. In regard to PCE, she
surmised that there may be a way to "tweak" it so that it
provides more incentive to develop renewable energy. Ms.
Fredenberg went on to say that she believes that AEA should have
more guidance during the selection process, adding that it may
be helpful to include members from rural Alaska on the selection
committee.
4:00:28 PM
GREG KINGSLEY, Planning Commission, Lake and Peninsula Borough,
explained that the borough has been working on setting up
generators in two villages, along with anemometer studies.
Furthermore, the borough has been working for the last three
years to receive state and federal funding, which has been
difficult to acquire. He expressed agreement with the previous
testimony. He stated that addressing the high cost of energy is
the borough's top priority. He said that the borough is paying
$4.10 per gallon for heating oil. He stated that the borough is
at risk of losing valuable infrastructure. He explained that
[Pilot Point] school enrollment is down to 10 [students].
Moreover, there are four or five villages in the borough that
are "about ready to go under" due to the high price of fossil
fuel. He added that when schools shut down, the entire village
shuts down, which affects the entire region.
4:02:25 PM
REPRESENTATIVE THOMAS, in response to an earlier question,
stated that he would look into the renewable portfolio standard
provided by other states, and added that he has been working
with AEA and REAP. He stated that in the past, the Denali
Commission has funded these projects with federal monies, and
opined that the Congressional Delegation is hopeful that the
state will "step up to the plate." He reiterated that this bill
would use AEA, which is already in place, and would not cost
additional funds.
REPRESENTATIVE GUTTENBERG asked why the grants are limited to
electric utilities. He surmised that there may be situations
when [the city] may have a viable project in which the utility
is not interested.
REPRESENTATIVE THOMAS replied that the bill is intended to
assist those municipalities which are in need of assistance with
the price of fuel.
REPRESENTATIVE GUTTENBERG expressed concern with the definition
of "electric utility," as follows:
(2) "electric utility" means a corporation, whether
public, cooperative, or otherwise, company,
individual, or association of individuals, their
lessees, trustees, or receivers appointed by a court,
that owns, operates, manages, or controls a plant or
system for furnishing, by generation, transmission, or
distribution, electrical services to the public for
compensation.
REPRESENTATIVE LEDOUX asked if the bill would require an
appropriation in the operating budget.
REPRESENTATIVE THOMAS replied that it would require an
appropriation each year, although it may not be the same amount
each year.
REPRESENTATIVE LEDOUX asked if the appropriation is required.
REPRESENTATIVE THOMAS replied no.
REPRESENTATIVE LEDOUX asked if the bill would require a fiscal
note once the money is appropriated.
REPRESENTATIVE THOMAS said yes.
4:07:01 PM
RON MILLER, Executive Director, Alaska Industrial Export &
Development Authority (AIDEA) and Alaska Energy Authority (AEA),
Department of Commerce, Community, & Economic Development, said
that the bill takes a "straight-forward" approach in
establishing a grant program within the AEA. He said that as
funds are appropriated, the AEA would incorporate the
alternative energy program and funds into the alternative energy
and energy efficiency assistance plan, as required under the
current regulations. He stated that, if HB 445 were to pass,
the AEA would solicit a request for proposals based on the
criteria established in the bill. He stated that this criteria
is similar to the AEA's Energy Cost Reduction Program, which is
funded by the Denali Commission. He stated that this program
selects projects based on life cycle savings.
4:09:02 PM
SARAH FISHER-GOADE, Alaska Energy Authority (AEA), Department of
Commerce, Community, & Economic Development, in response to a
question, explained that the fiscal note reflects the amount
that would be available for appropriation through the mechanism
provided in HB 445. She opined that there would be an annual
appropriation requested to provide the fund transfer to the
alternative energy grant fund.
4:09:41 PM
ACTING CHAIR KOTT closed public testimony.
4:09:58 PM
REPRESENTATIVE CRAWFORD expressed that he has an active interest
in finding jobs and "new hope" for Alaskans. He opined that
there is much potential in renewable energy, especially in rural
Alaska. He stated that this bill is making an effort to work
for the future of the state, more jobs for Alaskans, and
additional opportunity. He said, "I support this
wholeheartedly."
REPRESENTATIVE GUTTENBERG said that while he is supportive of
the bill, he remains concerned regarding local utilities putting
effort into coming up with a grant proposal only to have the
legislature not appropriate the money. He said "I hope that if
we do pass this ... we follow through with it [by] funding
projects that come before us."
ACTING CHAIR KOTT referring to page 2, line 3, asked for more
information regarding the determination of whether a project is
"economically viable."
PETER CRIMP, Program Manager, Alternative Energy and Energy
Efficiency, Alaska Energy Authority (AEA), Department of
Commerce, Community, & Economic Development, said:
We perform a life-cycle analysis of the status quo,
which is ... generally ... diesel usage. Then [we]
compare the cost of [diesel usage] to the cost of the
proposed projects, including the initial capital
costs, the [operation, maintenance, and fuel] costs.
We ... bring that back to a net present value of
savings. In the Energy Cost Reduction program that
[Mr. Miller] mentioned, we rank the projects based on
their benefit to cost ratio and select the projects
that way.
ACTING CHAIR KOTT, referring to page 2, lines 6-8, asked if
Anchorage would be used as the base for comparison of fossil
fuel costs.
MR. CRIMP opined that if this portion of the bill is removed,
this would still favor the selection of projects in rural areas,
as the cost of diesel is higher. He said that the AEA has found
the savings to be greater in rural areas due to the cost of
diesel. He stated that if the use of diesel can be avoided by
using hydroelectric, this is "way ahead," and added that this
could be detailed in regulations.
ACTING CHAIR KOTT asked if the sponsor would be amenable to
removing the aforementioned language.
4:14:54 PM
REPRESENTATIVE THOMAS replied that this would be fine.
ACTING CHAIR KOTT opined that the AEA would use Anchorage area
costs, as no other area has lower fossil fuel costs.
REPRESENTATIVE GUTTENBERG opined that if, in a given year, there
were no other grant requests other than in Anchorage, the money
could be used in Anchorage.
REPRESENTATIVE THOMAS stated that rural projects are typically
$6-$8 million versus the higher costs for larger projects. He
stated that the intent was not to use Anchorage as the base for
costs.
ACTING CHAIR KOTT said that he understands the intent and noted
that the bill would not be amended.
4:16:36 PM
REPRESENTATIVE CRAWFORD moved to report CSHB 445, Version 24-
LS1311\L, Cook, 2/24/06, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 445(L&C) was reported from the House Labor
and Commerce Standing Committee.
HB 392-SOLID WASTE MANAGEMENT AUTHORITIES
ACTING CHAIR KOTT announced that the next order of business
would be HOUSE BILL NO. 392, "An Act authorizing the
establishment of regional solid waste management authorities."
4:17:36 PM
REPRESENTATIVE PEGGY WILSON, Alaska State Legislature, sponsor,
informed the members that a new committee substitute (CS) had
been drafted for the members' consideration.
REPRESENTATIVE LYNN moved to adopt CSHB 392, Version 24-
LS1227\X, Bullock, 3/2/06, as the working document. There being
no objection, Version X was before the committee.
ACTING CHAIR KOTT asked Representative Wilson to explain the
changes made in the CS.
REPRESENTATIVE WILSON explained that during the House Community
and Regional Affairs Standing Committee (CRA) hearing on the
bill, a CS was drafted to change the authority language to allow
a municipality to opt out of an authority without causing that
authority to dissolve. She said that in addition to changing
the Solid Waste Management Authority statutes, the CS
inadvertently modified the Port Authority statutes. She stated
that the new CS removes all language that would modify the Port
Authority statutes, as this was not the intent of the bill.
ACTING CHAIR KOTT remarked that he would have offered an
amendment to make this change if the CS had not been drafted.
REPRESENTATIVE WILSON, in response to questions from
Representative LeDoux, said that the new CS removes Sections 2
and 3, which dealt with the Port Authority.
REPRESENTATIVE WILSON said that she would like to have a member
of her staff explain the details of the legislation.
4:21:02 PM
BECKY ROONEY, Staff to Representative Wilson, Alaska State
Legislature, said that the Southeast Conference has spent [two]
years researching the legislation and has received grants to
identify the problems, suggest solutions, and generate language
for the bill. She stated that the bill provides a mechanism
that can be useful all over the state; however, the sponsor is
mainly interested in the affect the bill will have on Southeast
Alaska. She said that each Alaskan produces 6 1/2-7 pounds of
solid waste per day, which is a total of 2,125 tons per day. In
Southeast Alaska, 250 tons of solid waste a day is generated,
which is over 90,000 tons per year. She stated that over the
past 10 years, Southeast Alaska has seen many landfills, waste-
to-energy plants, and incinerators close, which has caused
several communities to ship solid waste to super landfills in
the Lower 48. She explained that due to the high cost of
developing regional solid waste management facilities,
individual communities have been unable to take on this task.
MS. ROONEY went on to say that recycling and solid waste
disposal is expensive, and Southeast Alaska communities are
paying anywhere from $77-$220 per ton to ship recyclables to
markets, and to ship solid waste to landfills, while in
Anchorage, it only costs $40 per ton to deal with solid waste.
She said that the communities that ship solid waste to the Lower
48 ship a combined average of 23,000 tons of municipal waste
each year. This does not include the 32,000 tons processed in
Juneau. She stated that some Southeast Alaska communities have
landfills nearing the [maximum] capacity, while others have
improper or un-permitted dumping sights. She said that the bill
would allow several communities to form an authority, which
would allow them to produce a regional solution to deal with
municipal solid waste. She stated that the authority would keep
the money spent on municipal waste disposal in Alaska, thus
helping the regional economy. She explained that the bill would
not affect how a municipality handles garbage pickup or any
ordinances that govern mandatory participation in a program.
MS. ROONEY said that HB 392 is modeled after the Port Authority
and requires that voters in each municipality approve the
authority. She said that the authority would have an
independent legal existence and would be able to issue bonds,
borrow funds or enter into contracts. She stated that a board
would be responsible for creating the by-laws and regulations
which would govern the authority, adding that the board would
have representation from each municipality that is a member of
the authority. She explained that a municipality would be able
to withdraw without dissolving the authority; however, the
municipality would still be responsible for any existing
obligations to the authority. Ms. Rooney stated that once
formed, the authority would decide where a regional facility
would be located, along with the technologies that would be used
to deal with solid waste management. This could include
facilities for recycling, state of the art landfills, thermal-
reduction or waste-to-energy plants, composting, and areas to
treat oily soils.
4:25:27 PM
REPRESENTATIVE GUTTENBERG, referring to a letter in committee
packets, asked if the concerns of the Attorney General have been
addressed.
MS. ROONEY replied that these concerns have been addressed. She
said that she would provide a copy of the letter from
Legislative Council, which includes answers to these concerns.
4:26:10 PM
REPRESENTATIVE CRAWFORD commented that in Europe, each home has
a compost pile and both homes and stores are charged for
disposal of any garbage produced. He stated that during the
time when he was in Europe, the cost was $2.25 for a sticker to
place one bag of garbage in the landfill. He said that this
reduced the amount of garbage produced, as all biodegradable
materials were placed in a compost pile. He expressed his wish
to see the emphasis placed on individuals and businesses to do
what they can to reduce the amount of garbage produced. He
remarked that the root of the problem needs to be addressed and
said "we throw too much stuff away."
4:28:39 PM
REPRESENTATIVE ROKEBERG asked if the Municipality of Anchorage
is in favor of or against the bill.
Municipality of Anchorage had not been contacted; however, the
waste management group that processes the garbage at the
Anchorage landfill was supportive of the legislation.
REPRESENTATIVE ROKEBERG expressed concern with regard to the
impact on the Municipality of Anchorage. He recalled that there
have been "garbage wars" in the past and expressed concern that
this may allow the municipality to create a port authority to
operate the landfill as a subterfuge to avoid the municipal tax
cap that is currently in place. He asked if Representative
Wilson has spoken with the Regulatory Commission of Alaska
regarding who would be regulating the proposed Solid Waste
Management Authority.
REPRESENTATIVE WILSON replied that the Department of Law has
looked over several revisions to ensure that it would not affect
other areas. She stated that Rollo Pool would be able to give
more detail regarding this issue.
4:31:31 PM
ROLLO POOL, Executive Director, Southeast Conference, related
that Southeast Conference is supportive of HB 392. He informed
the committee that over the last 15-20 years, practically every
community in Southeast Alaska has created a solid waste plan, a
recycling plan, and household hazardous waste. Furthermore,
nearly every report and study relates that communities should
work together to solve the problems as a group. However,
nothing has ever been done to [encourage] communities to work
together on the issue. This legislation allows communities to
collaborate and cooperate on the collection, sorting, and
disposal of solid waste. This legislation provides an important
step for communities to address solid waste in a regional
fashion. Regarding the earlier question as to whether this
would be regulated by the Regulatory Commission of Alaska (RCA),
he opined that Southeast Conference would prefer it not to be
regulated by the RCA because the communities will operate the
process and will do so in full view of the community. He noted
that he has had no correspondence from the RCA that it should
regulate the proposed authority.
4:33:54 PM
REPRESENTATIVE ROKEBERG asked if Mr. Pool had talked with the
RCA regarding its current regulatory authority. He indicated
his understanding that the RCA is trying to leave the garbage
business.
MR. POOL said that he didn't speak with the RCA. However,
discussions with the Department of Law revealed that the
regulation could [be performed by the communities or the RCA]
depending upon Southeast Conference's preference. He reiterated
that the Southeast Conference doesn't want [the proposed
authorities] to be regulated by the RCA because they will be in
the public domain. In further response to Representative
Rokeberg, Mr. Pool highlighted that every community in Southeast
Alaska is different. For example, Juneau has a private hauler
and a landfill; Sitka has a private carrier for its garbage; and
Haines has a privately owned landfill. The remainder of the
region has publicly owned [waste facilities]. He noted that
most of the publicly owned landfills do not accept raw garbage
and thus construction and demolition debris and items that
aren't inert aren't allowed.
REPRESENTATIVE ROKEBERG inquired as to how an authority would
deal with the private services.
MR. POOL said that the currently operating landfills could
become a player in a regional solution. He informed the
committee that a plan reviewed those communities that are
currently shipping waste, which amounts to about one-third of
the garbage in Southeast Alaska. Mr. Pool opined that it would
be cheaper to ship waste [within the region versus out of the
state]. He mentioned the possibility of capturing energy from
the waste. This is a long-term project, and he said that
whatever it considered would have a life expectancy of 25-50
years.
4:37:23 PM
REPRESENTATIVE ROKEBERG expressed concerned that under HB 392,
the authority can be established and collect waste, which could
result in a potential conflict between private enterprise and
the state authority.
4:37:49 PM
REPRESENTATIVE WILSON replied that the intent is [for the
authority] to deal with the waste once it is delivered to the
harbor/port. This legislation, through the authority, allows
the communities to save money while not interfering with how the
communities handle their waste.
REPRESENTATIVE ROKEBERG pointed out that page 1 specifies that
the purpose of the solid waste authority includes storage,
collection, transportation, separation, processing, recycling,
and disposal.
MS. ROONEY said that HB 392 doesn't hamper any municipality's
collection services. The reference to "collection" refers to
the time after it has been collected. She clarified that it
speaks to waste leaving the [community].
4:39:50 PM
CINDY ROBERTS, Denali Commission, Division of Community
Advocacy, Department of Commerce, Community, & Economic
Development (DCCED), informed the committee that she manages the
solid waste grant program. She related that in fiscal year (FY)
04 the Denali Commission was pleased to work with the Southeast
Conference to create the language in HB 392 for which she
related support. Ms. Roberts highlighted that while HB 392 is
important for Southeast Alaska specifically, the legislation
presents opportunities for communities [in other regions]. For
instance, last summer over 1 million pounds of hazardous waste
and steel was brought out of the Yukon drainage by a nonprofit
organization. If some of the communities along the Yukon River
could utilize HB 392 to form an authority and thereby have
funds, it could help them do a better job. Ms. Roberts
concluded by strongly encouraging the committee to support HB
392.
4:43:15 PM
JOHN BOLLING, City Administrator, City of Craig; Member,
Southeast Conference, echoed earlier testimony regarding the
mechanism HB 392 provides for communities to work together to
address solid waste issues. He opined that this will allow
communities in Southeast Alaska to take advantage of an economy
of scale for the disposal of solid waste. Ideally, it should
reduce the cost of handling municipal solid waste over time. He
informed the committee that the City Craig pays $200/ton for
solid waste to be shipped to the Lower 48. This proposed
authority provides the City of Craig the ability to partner with
other communities in the region to develop a long-term cost-
effective solution. Furthermore, the funding to dispose of the
solid waste in Southeast can stay in the region and create jobs
in the region. Mr. Bolling concluded by noting that the City of
Craig supports HB 392.
4:45:21 PM
ACTING CHAIR KOTT inquired as to how the shipping costs for the
City of Craig have increased over the last decade.
MR. BOLLING responded that about five years ago, the City of
Craig was paying $.04/ton to dispose of the solid waste that the
city collects from its residents. Currently, it costs $.10/ton
to do so, which he characterized as a substantial increase. In
further response to Acting Chair Kott, Mr. Bolling clarified
that there is a chance of decreasing the aforementioned costs.
However, he said that he is really looking for stability. One
of the advantages the authority might bring, he opined, are more
predictable costs for the City of Craig. In even further
response to Acting Chair Kott, Mr. Bolling said that he didn't
envision that the city's costs would increase during the initial
inception of the legislation.
4:47:05 PM
DAN EASTON, Deputy Commissioner, Office of the Commissioner,
Department of Environmental Conservation (DEC), stated that DEC
certainly supports HB 392, which it views as creating
opportunity for additional regional solid waste management
systems in Alaska. He pointed out that for solid waste
management, larger is better in terms of funding and operating.
He noted that larger solid waste operations are less apt to
create environmental or human health problems. Therefore, he
urged the committee's support for HB 392.
REPRESENTATIVE GUTTENBERG asked if anything in HB 392 eliminates
DEC's regulation of this industry.
MR. EASTON replied no, and clarified that DEC's statutes and
regulations typically apply to a person who is defined very
broadly as a government, authority, person, and group.
4:48:25 PM
REPRESENTATIVE ROKEBERG asked if DEC regulates landfills
throughout the state.
MR. EASTON replied yes. In further response to Representative
Rokeberg, Mr. Easton explained that DEC permits landfills
throughout the state and regulates their operation in terms of
human health and environmental impact. In terms of the
financial regulation that the RCA does, he said he didn't know
what the RCA's role is for solid waste facilities.
REPRESENTATIVE ROKEBERG asked whether a private corporation or
person that applied with DEC and met its requirements as well as
local requirements, would be granted the permit to operate a
private landfill.
MR. EASTON replied yes.
4:49:29 PM
REPRESENTATIVE GUTTENBERG directed the committee's attention to
page 2, line 22, of Version X, which is the enabling ordinance
that allows an authority to be established and leaves it to
establish its powers and boundaries. He asked if the language
allows the authority to establish its boundaries beyond the
lines of the municipality.
4:50:29 PM
RUTH HAMILTON HEESE, Assistant Attorney General, Environmental
Section, Civil Division - Juneau, Department of Law, related her
understanding that the intent of HB 392 is to make the
legislation operate in similar fashion to the port authority
legislation.
REPRESENTATIVE GUTTENBERG, referring again to page 2,
subsections (e) and (f), pointed out that if the authority
establishes boundaries outside of the municipality, then there
are no voters. He then pointed out that subsection (g) on page
2 refers to the authority organizing in a manner "not prohibited
by law already."
[Due to technical difficulties, the recording fades from 4:51:48
p.m. to 4:52:18 p.m.]
MS. HAMILTON HEESE indicated that the solid waste facility would
be operated within the region of the municipalities that band
together.
REPRESENTATIVE GUTTENBERG pointed out that on page 4, paragraph
(14) gives the authority the power to exercise eminent domain
under AS 29.35.030. He inquired as to what falls under AS
29.35.030.
MS. HAMILTON HEESE said she couldn't answer that today.
4:52:57 PM
REPRESENTATIVE ROKEBERG, referring to page 12, Section 3,
related his understanding that the authority would be regulated
by the RCA if there was a competing utility.
MS. HAMILTON HEESE noted her agreement.
REPRESENTATIVE ROKEBERG related his further understanding that
nothing in the legislation would prohibit the establishment of
this authority when a regulated certificate of convenience was
already issued in a jurisdiction.
MS. HAMILTON HEESE said that she didn't know the answer.
REPRESENTATIVE ROKEBERG surmised that there is regulatory
authority over a collection service, not a landfill, that
operates privately in a municipal jurisdiction. Therefore, he
stressed the importance of determining whether this legislation
would authorize the establishment of a regional authority
notwithstanding an existing certificate of public convenience
and necessity.
MS. HAMILTON-HESSE offered her understanding that this
legislation would freely allow municipalities to come together
and operate, even in the presence of an existing facility.
REPRESENTATIVE ROKEBERG inquired as to what would happen if the
municipality had already agreed to exclusivity or a franchise.
MS. HAMILTON HEESE opined that contract law would come into play
and perhaps prevent the municipality from becoming wayward of a
preexisting obligation. She further opined that it would depend
on the facts.
REPRESENTATIVE ROKEBERG expressed concern that if the
legislation doesn't recognize that there is a regulated utility
operating that could be private. He related his belief that a
municipality could use an authority to run a company out of
business. He pointed out that the legislation indicates that if
there is competition, it would be regulated. However, the
legislation doesn't prohibit the authority from entering the
territory [of an existing operator], which seems to mean that
the authority wouldn't need a certificate to operate.
REPRESENTATIVE WILSON reiterated that the legislation allows
municipalities to join together to start an authority to provide
for unmet needs. She highlighted that each municipality that
enters the agreement would have to conduct a vote of its
residents regarding whether they want to enter the authority.
4:57:58 PM
REPRESENTATIVE ROKEBERG opined that the aforementioned doesn't
address his question. He inquired as to whether sideboards need
to be included such that other businesses are protected.
REPRESENTATIVE WILSON said that she didn't object to such an
amendment.
REPRESENTATIVE ROKEBERG pointed out that Anchorage is a regional
authority already, and related his understanding that it would
have to go through the process outlined in HB 392.
REPRESENTATIVE WILSON reiterated that this legislation allows
several municipalities to come together rather than just one.
She said this legislation wouldn't pertain a municipality that
was going to deal with its solid waste on its own.
REPRESENTATIVE ROKEBERG discussed the garbage wars in Anchorage
and the cherry picking that occurs.
REPRESENTATIVE WILSON specified that this legislation doesn't
deal with companies at all.
REPRESENTATIVE ROKEBERG commented that sometimes municipalities
don't like companies.
REPRESENTATIVE GUTTENBERG asked if any companies in the
[Southeast] area are perceived to be a regional authority and
operate under a certificate of convenience.
MR. POOL related that [Southeast Conference] has spoken with
both of the private landfill owners in Southeast Alaska, both of
which are interested in participating at some point.
Furthermore, the operator of the Juneau landfill could be the
operator of a regional landfill. Mr. Pool noted that the
Southeast Conference believes in commerce as well as obtaining
the best price for this service. He said that the Southeast
Conference really doesn't care who provides the service. In
fact, if a private company had come forward during the last 10
years and built a regional landfill, this legislation wouldn't
be before the committee. However, he said he understood the
concerns, and suggested that perhaps the legislation could be
redrafted to exclude areas of the state that so desired.
5:01:47 PM
REPRESENTATIVE GUTTENBERG asked if any solid waste company is
regulated in the area, including collection services.
REPRESENTATIVE ROKEBERG informed the committee that to be
regulated a company must have over $300,000 in gross receipts.
5:02:16 PM
REPRESENTATIVE WILSON referred to page 2, line 7, which
specifies: "the governing body of a municipality may, by
ordinance, create a regional solid waste management authority as
a public corporation of the municipality". She noted that she
is open to language that would prevent the concerns stated.
ACTING CHAIR KOTT, upon determining there were no further
questions or witnesses to testify, closed public testimony. He
then inquired as to whether Representative Rokeberg had an
amendment to address his concerns.
REPRESENTATIVE ROKEBERG said he wasn't interested in excluding
other parts of state. He restated his concern with regard to
regulation when there is already an existing regulated utility,
but said that he doesn't know that he has the answer. However,
he maintained that [the authority] could be utilized as a tool
to get rid of a bad operator by a municipality.
REPRESENTATIVE LEDOUX asked if the same statements and arguments
apply to any municipal landfills under the current system.
REPRESENTATIVE ROKEBERG pointed out that per today's testimony,
landfills aren't regulated, only collection services are. The
landfills merely obtain a permit from DEC.
REPRESENTATIVE LEDOUX asked if language could be inserted to
specify that this legislation doesn't apply to collection
services, if that's the intent of the sponsor.
REPRESENTATIVE WILSON emphasized that she didn't want to put
into place too many limits because [it might limit] the
authority's ability to organize and develop in a manner that's
best for the area, even if it includes an existing collection
company.
REPRESENTATIVE ROKEBERG noted his agreement, but maintained his
concern with regard to possible difficulties with competing
utilities.
ACTING CHAIR KOTT said that Representative Rokeberg could work
with the sponsor between now and when the legislation goes to
the House floor.
REPRESENTATIVE ROKEBERG asked if there is any common law or
defense that an existing regulated utility could put forward to
defend against a predatory practice, were it to occur.
MS. HAMILTON HEESE replied that she cannot answer that, but
offered to take the question back to the appropriate person in
the Department of Law.
REPRESENTATIVE GUTTENBERG commented that Southeast Alaska is an
appropriate place for a regional authority, and therefore he
supported the [legislation]. He further commented that
Southeast Alaska should establish a regional port authority as
well.
5:10:57 PM
REPRESENTATIVE LEDOUX moved to report CSHB 392, Version 24-
LS1227\X, Bullock, 3/2/06, out of committee with individual
recommendations and the accompanying three zero fiscal notes.
There being no objection, CSHB 392(L&C) was reported out the
House Labor and Commerce Standing Committee.
5:11:21 PM
The committee took a brief at-ease.
HB 51-EMPLOYER ASSN FOR WORKERS' COMP INS
ACTING CHAIR KOTT announced that the next order of business
would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 51, "An Act
relating to modifying the qualifications required for workers'
compensation self-insurance and permitting employers in the same
trade or industry to form an employer association for self-
insured workers' compensation coverage; and providing for an
effective date."
ACTING CHAIR KOTT informed the committee that it was not his
intent to move the bill at this time.
MICHAEL PAWLOWSKI, Staff to Representative Kevin Meyer, Alaska
State Legislature, informed the committee that the proposed
committee substitute (CS) addresses the issues of regulatory
oversight of self-insured groups and whether or not workers'
claims would be paid in the event of an insolvency. In regard
to the regulatory oversight, he said that the CS shifts the
oversight of self-insured groups from the Department of Labor
and Workforce Development to the Division of Insurance. In
regard to the payment of claims, he explained that several
sections were added which deal with the rules the self-insured
groups would be required to follow to ensure payment.
MR. PAWLOWSKI explained that Section 21.77.200 of the CS
requires the association adopt a plan for payment, which must be
approved by the director of the Division of Insurance. The plan
would include an advance payment of at least 15 percent of the
total, with the remainder to be paid quarterly or monthly. This
will ensure, based on actuarial accounting, that the self-
insured group has appropriate reserves to cover costs and
liabilities. He stated that "appropriate reserves" are defined
on page 12, Section 21.77.210. These are: actual claims,
claims incurred but not reported, reserves for uncollected
debts, and are based on the experience of other associations.
He said that at least 65 percent of the money collected must be
placed in an account to pay claims, with the remaining 35
percent put towards operating costs.
MR. PAWLOWSKI explained that workers' compensation rates are
determined by the standard workers' compensation system, and the
CS does not change this. He said that the CS creates a benefit
for the self-insured groups by allowing the groups to plan
actuarially what the costs will be. He said that Section
21.77.230 of the CS requires the self-insured group to collect
an additional assessment to make up for any short-fall. If this
is not done, he said, the director can require an additional
assessment. He referred to page 11 and explained that if too
much money is collected, the self-insured group must receive
approval from the director before the money is returned, which
ensures that there is enough money to pay claims. He said that
the CS attempts to build in as much oversight as possible. He
stated that the director would determine the amount of re-
insurance or excess insurance the group is required to purchase.
He said:
So, ... not only do we ensure [that the group]
collects enough money, but they buy re-insurance and
excess insurance to limit the liability of loss on the
upside. So, you can't have a claim that will ever
cost you more than this, or, you cannot ever incur
costs in this aggregate. That's the insurance plan
that you require of the backup. Further, that's
determined by the director.
MR. PAWLOWSKI said that page 9 of the CS states that in the
event of a bankruptcy, the claims are still payable. He stated
that the joint and several liability provisions mean people are
pledging their companies that the claims will be paid. He
explained that this places the impetus on the members and the
director to ensure that there are enough reserve funds.
MR. PAWLOWSKI stated that the CS includes the requirement of a
surety bond that will go to the state. In the event that all
the "checks and balances" fail, there is a bond to pay the
claims. In conclusion, he said that the aforementioned
additions are to ensure that workers' compensation claims are
paid.
MR. PAWLOWSKI, in regard to reciprocal groups, stated that if a
reciprocal fails, the [debts] are referred to the guarantee
fund. He noted an instance when this occurred, and stated that
all the payees in the system were required to "pay in" to make
up the balance, which, in turn, caused workers' compensation
rates to increase. He stated that if a self-insured group were
to fail, the joint and several liability, reserves, and bonds
would all be available to pay the claims, and the costs do not
fall back to the state. He said:
The point of self-insurance is that these groups are
asking for the ability to take ownership of their
costs and obligations. To see a direct benefit for
the loss and safety programs they put in, and to
really control the cost and their destiny. And that's
what a self-insured group allows them to do. It won't
put the burden on the rest of the state. ... The
attempt of the committee substitute is to come back to
the committee's questions and see if we can't get as
far toward the regulatory oversight and financial
oversight as possible.
5:20:41 PM
REPRESENTATIVE CRAWFORD asked what happens to the self-insured
group and the remaining employees if a "dominant employer"
retires.
MR. PAWLOWSKI replied that five employers are required,
therefore removal of one employer would lead to the dissolution
of the self-insured group. However, he said, the bonds and
obligations would still exist to pay for the claims incurred
under the previous self-insured group. He noted that this is
beyond bankruptcy, selling or [any other issue that may arise].
REPRESENTATIVE LEDOUX made a motion to adopt CSSSHB 51, Version
24-LS0233\S, Bailey, 3/3/06, as the working document. There
being no objection, Version S was before the committee.
REPRESENTATIVE LEDOUX asked if a self-insured group would
receive a refund if it did not receive any workers' compensation
claims and dissolves.
MR. PAWLOWSKI replied that any refunded money would need to be
approved by the director. He surmised that the money would be
refunded in this scenario. He said that the director may hold
onto a potion of the money for a time, as not all workers'
compensation claims are immediately filed.
5:23:42 PM
ROBERT VOGEL, Pro Group Management, stated that he is in support
of HB 51, which provides the state and employers in the state a
broader opportunity to provide workers' compensation insurance.
He stated that this would give the employers the control to
provide a safe working environment and take care of injured
employees. He opined that this is to the benefit of the
employers and employees in the state, and added that this is not
a mechanism to save money, but is intended to provide long-term
stability and continuity.
REPRESENTATIVE ROKEBERG asked if, in Mr. Vogel's experience,
groups have voluntarily dissolved.
MR. VOGEL replied that no groups have dissolved voluntarily or
involuntarily.
REPRESENTATIVE ROKEBERG asked if any groups have become
insolvent.
MR. VOGEL replied that no groups have become insolvent. He
stated that the "key" issue is that the actuarial projections
are designed to collect enough money, based on payroll exposure.
He explained that losses are projected over the amount of
exposure, with the intent of paying all losses, claims and
expenses with this amount. He said that in the event of a
bankruptcy or dissolution, the money has already been collected
to cover the losses and expenses that were created. He stated
that the actuarial projections which are required yearly is to
collect enough money based on experience. He explained that it
can take time for all of the costs and expenses to be known, and
added that if the projection is less than was actually needed,
small adjustments can be made to collect the money over time.
MR. VOGEL, in response to an earlier question, said that the
self-insured group is pooling funds to cover expenses, rather
than paying on an individual basis. He stated that the
actuarial analysis considers all losses for all of the members
during the time that they were active in the group. He said
that if, when the group dissolves, the director approves the
return of funds, the division will retain a pool of money to pay
claims. He stated that the joint and several liability
agreement obligates each member for the liability during the
time they were in the group. If the amount retained for claims
is not enough, the division will approach the member(s) who are
no longer a part of the self-insured group to ensure payment.
5:30:41 PM
REPRESENTATIVE ROKEBERG asked what the premiums are for surety
bonds and "stop loss" insurance.
MR. VOGEL replied that typically, the excess insurance market
charges 12-15 percent for excess and aggregate reinsurance. He
noted that this is dependent upon the deductible layer the group
selects. Generally, he said, the deductible is $500,000-
$750,000 with an aggregate of 100-110 percent of premiums. He
noted that this is not charged to the members in addition to the
premiums, but is what the group pays to the excess insurance
company.
MR. VOGEL, in response to further questions, stated that a
surety bond is an amount to cover expected claims and is not
equal to the premiums. He said that the director would give the
amount and this would be negotiated based on the members'
experience level.
REPRESENTATIVE ROKEBERG asked if surety bonds are available in
the market.
MR. VOGEL said yes, and added that generally, these are through
the excess carriers.
5:33:10 PM
RAY HICKEL, President, Anchorage Home Builders Association
(AHBA), stated that the AHBA, the Alaska State Home Builders
Association (ASHBA), and the Associated General Contractors -
Board of Realtors support the legislation. He said that the
AHBA and the ASHBA would like to have "control over [its]
destiny." He said that this will enable the AHBA to keep and
reward capable employees.
REPRESENTATIVE ROKEBERG asked if the $1 million net worth would
be affordable.
MR. HICKEL replied that he does not believe the $5 million will
be a problem.
MR. HICKEL, in response to questions, said that the AHBA
initiated the bill in an effort to keep the ASHBA from being
burdened by the time and cost of working on it. He said that
the Fairbanks Home Builders Association is welcome to join the
[self-insured] group at any time. He stated that while the AHBA
asked for support from the ASHBA, it did not ask for money.
5:35:36 PM
LARRY PARTUSCH, Anchorage Home Builders Association (AHBA), said
that he is in support of the legislation. He said that the AHBA
has been working on the bill for two years and has worked with
the [Division of Insurance] to address its concerns. He stated
that being industry specific allows the self-insured groups to
police themselves better than other groups would be able to. He
said that the intention is to get injured employees back to work
as soon as possible.
5:37:37 PM
ACTING CHAIR KOTT, referring to page 1, line 9, of the CS, noted
that it reads "the director may issue a self-insurance
certificate;" however, on page 5, lines 4-5, it reads "the
director shall issue a certificate of self-insurance."
MR. PAWLOWSKI surmised that this is an incongruence that should
be fixed and added that if this is not the case, he will look
into the reasoning behind the difference.
ACTING CHAIR KOTT stated that any issues with the bill should be
discussed before the next committee hearing. Therefore, HB 51
was held over.
5:39:11 PM
HB 424-MORTGAGE LENDING
ACTING CHAIR KOTT announced that the final order of business
would be HOUSE BILL NO. 424, "An Act relating to mortgage
lenders and persons who engage in activities relating to
mortgage lending; and providing for an effective date."
ACTING CHAIR KOTT noted that the committee packet includes a
proposed committee substitute (CS). He recalled that one of the
main concerns expressed at the previous hearing was that the
legislation didn't protect the public in the appropriate manner.
He then pointed out that the committee packet should also
include a new fiscal note.
REPRESENTATIVE LEDOUX moved to adopt CSHB 424, Version 24-
LS1504\F, Bannister, 3/1/06, as the working document. There
being no objection, Version F was before the committee.
5:40:55 PM
KENNETH GAIN, Secretary/Treasurer, Independent Lenders of
Alaska, explained that the major change embodied in Version F is
to include mortgage brokers since the original legislation only
applied to mortgage lenders. The mortgage bankers are most of
the large mortgage lenders in Alaska and they often act as a
lender temporarily until a number of mortgages can be pooled to
be resold. If the original legislation had passed, the mortgage
bankers would've been required to be licensed as the independent
lenders, while the competitor, mortgage brokers, wouldn't have
been required to be licensed. Therefore, the request was to
include mortgage brokers in order to provide for a level playing
field. [With the aforementioned change] a number of technical
matters had to be addressed, such as the location at which they
could operate. Version F makes it clear that the only thing
that is regulated is identifying the location of the office in
order for state records. Mr. Gain related that his group, which
consists of small lenders lending their own money, isn't
"particularly crazy" about regulation. However, the group
recognizes that Alaska is one of the last states to adopt
regulations. Furthermore, the group recognizes that the
Division of Banking & Securities receives about 20 complaints
per week, which indicates that there are problems to which the
division is currently unable to respond. Mr. Gain mentioned
that there is pending federal legislation requiring that all
states have some form of licensing. As a result, the
organization recognized the need for the division to be able to
audit records and perform background checks, all of which costs
money and results in the need for fees. Therefore, all in all
HB 424 is a reasonable bill that provides a lot of consumer
protection by giving the division authority without placing
undue burden on businesses. "All in all I believe it's a good
bill that will help address a very significant problem," he
opined. With regard to the lack of a provision for competency
testing, Mr. Gain pointed out that HB 424 licenses companies.
Mr. Gain concluded by announcing support for HB 424 [Version F].
5:46:10 PM
MR. GAIN, in response to Representative Rokeberg, replied that
not everyone will be happy with this legislation. He pointed
out that [the mortgage lending industry] is one of the last
professions in Alaska to be licensed.
5:47:11 PM
JOHN MARTIN, Executive Manager, Alaska Mortgage Solutions, began
by informing the committee that [Alaska Mortgage Solutions] is a
net branch operation performing mortgage loans throughout the
state. He mentioned that he has e-mailed his comments to
committee members. He then highlighted that some of the
language is vague, specifically he suggested changing the term
"mortgage companies" to "mortgage entities" in order to include
corporations, limited liability corporations (LLCs), and sole
proprietorships. As written, Version F would exempt
approximately two-thirds of all loan originators in the state,
which doesn't provide residents any "good at all." Furthermore,
the legislation doesn't provide for much consumer protection as
there is no provision for originator licensing.
MR. MARTIN pointed out that in Alaska real estate agents are
licensed and must work for a broker. He opined that a similar,
two-step process should be utilized for [mortgage lenders].
Furthermore, there should be comprehensive legislation such that
all parties involved know where they stand. He then noted that
portions of language in the legislation is derived from the
division, which utilizes language that pertains primarily to
depository organizations. However, most lenders in the state
don't have a depository relationship with their clients and thus
he suggested that such language should be modified or removed.
He then turned to licensing, which he opined should be done
every two years rather than annually. With regard to the
expense of licensing, Mr. Martin opined that it will cause an
increase in financing for the consumer.
5:51:03 PM
REPRESENTATIVE LYNN inquired as to an estimate of the increase
in cost to consumers mentioned by Mr. Martin.
MR. MARTIN replied that it's difficult to estimate because the
legislation specifies that there will be an audit process, which
he opined would be quite expensive. Furthermore, one must take
into account the cost of licensing as well as the $10 fee for
each transaction, as specified in the legislation. Mr. Martin
said that it's a bit premature to specify how much it will cost
individual consumers.
REPRESENTATIVE LYNN opined that paying extra to ensure a
consumer purchasing a house is dealing with someone who is
properly licensed is a small price to pay.
5:52:58 PM
JOHN CARMAN, President, Home State Mortgage; Legislative
Committee Chair, Alaska Mortgage Bankers Association, recalled
when he began making mortgage loans back in 1972 with National
Bank of Alaska. At that time, most mortgage loans were made by
national banks and state chartered savings and loans, which are
regulated entities. However, today most loans are made by
mortgage brokers and mortgage bankers, which aren't currently
regulated entities. Similar changes in other states have been
addressed with licensing. Mr. Carman related that for the past
five years he has been working to get legislation passed, from
which he understands that it's impossible to draft legislation
that will make everyone happy. With regard to comments that
banks and credit unions should play by the same rules as
mortgage bankers, banks and credit unions have always been
regulated. However, the mortgage bankers and brokers haven't
been regulated. "That's not to say that they don't have laws
out there that they have to go by, it's just that there's no one
to enforce those laws, no one to complain to, and no one to look
at it," he pointed out. He recalled that the division received
about 600 complaints last year, although the division can't do
anything because there is no enforcement mechanism. Mr. Carman
related his belief that [Version F] is good legislation. He
added that Alaska should have originator licensing, although
there are many issues surrounding it that need to be addressed.
However, company licensing needs to be in place first. Many
provisions within company licensing protects consumers, and
furthermore instituting a mechanism for the division will help
with enforcement.
REPRESENTATIVE ROKEBERG asked whether Version F would license
the businesses for which the loan originators work.
MR. CARMAN replied yes.
5:58:41 PM
JOE BRAMMER, Manager, 1st Metropolitan Mortgage; Legislative
Board, Alaska Association of Mortgage Brokers, related that over
last 25 years he has observed the need for regulations and
consumer protection legislation in the mortgage industry. He
said, "I agree that we need and I'm wholeheartedly a staunch
proponent for independent legislation in Alaska for all lenders,
all brokers, and all mortgage loan originators." However, he
pointed out that mortgage lenders and brokers are two very
separate and distinct sets. For instance, lenders accept
monthly payments from consumers and collect money from consumers
to pay property taxes and homeowner's insurance. Furthermore,
lenders are named on the deed of trust as the beneficiary and
own the note. Moreover, lenders have the ability to foreclose,
set interest rates for the consumer, and to issue locked
commitments. Lenders also have the authority to deny a
consumer's request for a home loan. Mr. Brammer opined that
lenders and brokers aren't adequately and fairly regulated under
Version F. Although the lender and the broker offer the same
product to the consumer, each uses different delivery vehicles
to get to the market. The aforementioned truly sets the lender
and the broker apart from each other. Version F attempts to
regulate both, but as proposed it doesn't work. This
legislation, he stressed, needs major modifications because in
its current form it derails any attempt at consumer protection.
Mr. Brammer related that Version F shouldn't be allowed to pass
from committee. Under Version F, bankers are exempt from the
guidelines and regulations that they penned while the brokers
had no input. In closing, Mr. Brammer suggested that a fair
representation of Alaska brokers, bankers, and lenders to
collectively work to modify this legislation to make it workable
and enforceable while protecting consumers. Additionally, Mr.
Brammer opined that consumers deserve to have all lenders,
brokers, and mortgage loan originators licensed. Currently,
Version F includes eight exemptions of which he opined will
allow about two-thirds of all originators in Alaska will be
exempted. "The people who need to be regulated are not going to
be regulated under this bill, and those are the mortgage loan
originators," he said. "If we do not mandate loan officer
licensing as part of this legislation, which would include
competency testing and continuing education requirements, this
committee substitute serves no purported purpose of consumer
protection," he opined.
6:03:43 PM
REPRESENTATIVE ROKEBERG asked if legislation has been introduced
to solve the concerns expressed by Mr. Brammer.
MR. BRAMMER replied that the Alaska Association of Mortgage
Brokers and the Alaska Association of Mortgage Bankers had a
joint meeting in December. Both groups agreed on what the
mortgage loan originator licensing should be, save the required
bonding for each mortgage originator. He recalled that earlier
testimony related that it's impossible to include the mortgage
originators in this licensing legislation because there are too
many issues. However, he opined that there are no more issues
involved in licensing mortgage loan originators than mortgage
brokers.
REPRESENTATIVE ROKEBERG related that the legislature isn't
interested in getting into a "turf war." He then reminded
everyone that one of the main goals of this committee is to
protect the consumer. He pointed out that he has been in the
real estate industry for 30 years and the legislature for 12
years during which time he said he hasn't seen any proposed
legislation from the mortgage brokers, which is of concern.
MR. BRAMMER informed the committee that members of the Alaska
Association of Mortgage Brokers have been working with Roger
Prince to develop three individual bills. Those three bills
would address mortgage originators, lenders, and brokers.
REPRESENTATIVE ROKEBERG questioned, "Where is the other bill?"
MR. BRAMMER replied, "That's our point." He opined that the
other legislation needs to be included in HB 424 in order to
truly protect the consumer.
REPRESENTATIVE ROKEBERG related that at times portions of
legislation have to move along when ready, even if other
portions aren't. This legislation is unique in that it falls
under the Division of Banking & Securities and regulates
businesses whereas Title 8 usually regulates individuals.
6:07:57 PM
MR. BRAMMER, in response to Representative LeDoux, clarified
that his concern is that the proposed legislation includes too
many exemptions that will have the effect of exempting many
mortgage brokers and bankers from complying with the conditions
of the legislation.
6:08:41 PM
REPRESENTATIVE LEDOUX surmised then that Mr. Brammer was saying
that the legislation doesn't go far enough.
MR. BRAMMER answered that this legislation places certain
restraints and constraints on businesses, such as collecting a
fee from each transaction that the broker closes. However,
there are 11 classes that are exempt from the licensing.
Moreover, the legislation provides for the audit process of
mortgage brokers, although there is nothing to audit. Since
many provisions of this legislation don't apply, Mr. Brammer
opined that the legislation should be modified so that it does
serve the consumer interest rather than exempting two-thirds of
the group.
REPRESENTATIVE CRAWFORD inquired as to Mr. Brammer's thoughts
with regard to regulating those in the mortgage industry
operating in Alaska who are out-of-state and outside of the
country.
MR. BRAMMER highlighted that this legislation doesn't regulate
Internet lenders, most of which are a subsidiary or affiliate of
a bank and are exempt under this legislation. Mr. Brammer
opined that this legislation should be more far-reaching in
order to protect unscrupulous lenders who are located outside
the state or the country. The aforementioned can best be
accomplished by requiring individual licensing of all mortgage
originators who are going to do business in the state.
6:12:27 PM
CRIS SKINNER, President/Broker, Kelstar Financial of Alaska
Mortgage Company; Legislative Committee, Alaska Association of
Mortgage Brokers, began by characterizing the legislation as
"hollow" due to the lack of regulating mortgage loan
originators. She opined that it's a known fact that the
majority of consumer complaints arise at the mortgage loan
originator level. She further opined that the legislation
illustrates a misunderstanding of the lending process. She
echoed earlier testimony that mortgage loan originator licensing
and continuing education must be incorporated in order to
provide true consumer protection. Additionally, this
legislation allows far too many exemptions, which again isn't in
the best interest of the consumer. These exemptions, she said,
target small independent brokers and is questionable with regard
to fair trade and small business protection. Therefore, Ms.
Skinner proposed the creation of a task force composed of
lenders, bankers, brokers, and mortgage loan originators to
prepare legislation encompassing all aspects of the lending
process and cover licensing and education for each level. The
aforementioned would ensure true consumer protection and fair
trade. Ms. Skinner informed the committee that members of the
real estate community in Wasilla have provided written testimony
on this legislation. In conclusion, she urged the committee to
take their comments as well as her own into consideration prior
to passing this legislation.
6:15:06 PM
TIM KELLY, Lobbyist, Independent Lenders of Alaska, began by
relating the Independent Lenders of Alaska's support for
[Version F]. He then informed the committee that the Division
of Banking & Securities has possession of legislation that would
license and regulate mortgage loan officers or originators.
Therefore, it's merely a matter of having that legislation
drafted by legislative drafting. The Independent Lenders of
Alaska, he related, take the position that the legislation
before the committee, which encompasses two of three bills,
should be forwarded out of committee.
6:16:48 PM
REPRESENTATIVE LYNN noted that he is a licensed real estate
broker, although he is currently in referral status. With
regard to Version F, Representative Lynn opined that it's better
to have some protection now rather than none at all.
REPRESENTATIVE ROKEBERG stated his agreement.
ACTING CHAIR KOTT, upon determining no one else wished to
testify, closed public testimony.
6:18:27 PM
REPRESENTATIVE ROKEBERG moved that the committee adopt Amendment
1, as follows:
Page 3, lines 2-4;
Delete "agent"
Insert "licensee"
There being no objection, Amendment 1 was adopted.
REPRESENTATIVE ROKEBERG offered to work with those interested on
legislation relating to [mortgage loan originators].
6:20:20 PM
REPRESENTATIVE LYNN moved to report CSHB 424, Version 24-
LS1504\F, Bannister, 3/1/06, as amended, out of committee with
individual recommendations and the accompanying fiscal note.
There being no objection, CSHB 424(L&C) was reported from the
House Labor and Commerce Standing Committee.
6:20:56 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
6:21 p.m.
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