Legislature(1997 - 1998)
04/27/1998 01:08 PM House TRA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE
April 27, 1998
1:08 p.m.
MEMBERS PRESENT
Representative William K. (Bill) Williams, Chairman
Representative Beverly Masek, Vice Chair
Representative Bill Hudson
Representative Jerry Sanders
Representative Kim Elton
Representative Albert Kookesh
MEMBERS ABSENT
Representative John Cowdery
COMMITTEE CALENDAR
* HOUSE BILL 476
"An Act relating to leases of state-owned or state-controlled
airport or air navigational facility land."
- MOVED CSHB 476(STA) OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 476
SHORT TITLE: LEASE OF AIRPORT LAND
SPONSOR(S): LABOR & COMMERCE
Jrn-Date Jrn-Page Action
3/31/98 2813 (H) READ THE FIRST TIME - REFERRAL(S)
3/31/98 2814 (H) TRANSPORTATION
4/27/98 (H) TRA AT 1:00 PM CAPITOL 17
4/29/98 (H) TRA RPT CS(TRA) 2DP 4NR
4/29/98 (H) DP: MASEK, WILLIAMS;
NR: HUDSON, ELTON,
4/29/98 (H) KOOKESH, SANDERS
4/29/98 (H) ZERO FISCAL NOTE (DOT)
4/29/98 (H) REFERRED TO RULES
WITNESS REGISTER
REPRESENTATIVE NORMAN ROKEBERG
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801
Telephone: (907) 465-4968
POSITION STATEMENT: Presented HB 476.
JOHN STEINER, Assistant Attorney General
Civil Division
Department of Law
1031 West Fourth Avenue, Suite 200
Anchorage, Alaska 99501
Telephone: (907) 269-5100
POSITION STATEMENT: Provided information on HB 476.
ACTION NARRATIVE
TAPE 98-20, SIDE A
Number 0001
CHAIRMAN WILLIAM K. (BILL) WILLIAMS called the House Transportation
Standing Committee meeting to order at 1:08 p.m. Members present
at the call to order were Representatives Williams, Masek, Hudson,
Sanders, and Elton. Representative Kookesh arrived at
approximately 1:12 p.m.
HB 476 - LEASE OF AIRPORT LAND
Number 0005
CHAIRMAN WILLIAMS announced HB 476, "An Act relating to leases of
state-owned or state-controlled airport or air navigational
facility land," is before the committee.
Number 0007
REPRESENTATIVE NORMAN ROKEBERG, Alaska State Legislature, came
before the committee. He stated he is interested in this subject
because he is from the airport district in Anchorage, and the fact
that he spent some 25 years, in his career, for being known as the
"dean of leasing" in the state of Alaska and specialized in real
property of lease activities. So this is an area of a speciality
in the law that he is quite familiar.
Number 0011
REPRESENTATIVE ROKEBERG said, "In the Nineteenth Legislature, ...
HB 543 was an endeavor to clarify the state leasing polices as
related to the airports in the state, particularly the
international airports in Anchorage and Fairbanks. In the course
of that particular bill, there was some discussion about how this
would be implemented and so forth as it relates to the existing 55-
year statutory requirement in statute. Our consensus was that we
did not want to restrict a current leaseholder, nor from extending
their lease, nor do we want to exclude him from having a right
without having to put the property out for bid to even enter into
a new lease."
REPRESENTATIVE ROKEBERG stated, "The concern that's been expressed
was because of that particular language - the clarity of what was
intended by the legislature has been interpreted two different
ways. And as evidence to that, I included it in the package
although it wasn't earmarked so it's easy to find, in the back of
it is the existing draft regulations that the airport's putting
forward. I included those as part of your package to show the
problems, if one examines them, of the direction the state has gone
in these new regulations. We passed about a two-page bill and then
came in with 185 pages of regulations. The aviation interest in
the state are just livid, there's been a two-year battle to get
these regulations implemented so the intent of the legislation -
passed two years ago could be put into place because it's having a
dilatory effect on the development of the airports in the state and
the aviation community."
REPRESENTATIVE ROKEBERG said, "So then the issues I (indisc.) in my
sponsor statement is whether or not we need the clarification on
this - I have a legal opinion from our legal council indicating
that remedial legislation is necessary and to make sure it's
absolutely abundantly clear so they can write the regulations
accordingly and that was - as I (indisc.) was a tenant allowed to
extend an existing lease and enter into a new lease prior to
expiration of the existing lease if it was in the best interest of
the state? Or was the lease term not exceeding 55 years, including
extensions and periods of holdover which is now under regulation."
REPRESENTATIVE ROKEBERG continued. "It's clear that the intention
of the Nineteenth Legislature was to select the first alternative
there allowing for existing businesses to be able to extend their
leases and or enter into new leases. There is provisions in the
existing law that provide that - if there is - if one were to step
out of that lease into a new lease that that lease - the only way
this could work is unless he was in compliance with terms and
conditions of the existing hold (indisc.) over lease and the
continued use of that lease so by that particular tenant unless he
is consistent the written airport operation policies and their
long-range plans, and that it's in the best interest of the state.
These are major hurdles that have to be accomplished. So,
therefore, the state has the ability - if they have a best interest
finding - finding if it was not, that they would be able to stop
that alleged lease of perpetuity."
Number 0048
REPRESENTATIVE ROKEBERG concluded, "This bill is brought forward as
a technical correction to clarify that, what I believe to be the
legislature's intent in the Nineteenth Legislature and it should be
consistent with this legislature's intent that we want to see the
airports in the state be healthy, robust, and not have any
constraints by regulations which in hinder that particular
objective. For that reason, I would ask that you take out the
committee substitute, version H to the bill, which is different
than the original bill."
Number 0055
CHAIRMAN WILLIAMS stated for the record that Representative Kookesh
is present.
Number 0056
REPRESENTATIVE BEVERLY MASEK made a motion to adopt proposed
committee substitute 0-LS1725\H, Bannister, 4/22/98 as a work
draft. There being no objections, that version was before the
committee.
Number 0069
REPRESENTATIVE BILL HUDSON asked Representative Rokeberg to explain
the basis of 55 years. [Which reads]:
The duration of a new lease under this subsection, including
any extensions of that lease, may not exceed 55 years. The
duration of an extension under this subsection, when added to
the lese being extended and to any earlier extensions of the
lease being extended, may not exceed 55 years.
REPRESENTATIVE ROKEBERG replied, "I've been in the leasing business
for over 25 years now and studied the area. I think it's more or
less, I hate to use the term customary and traditional in a sense.
It's basically arbitrary."
Number 0072
REPRESENTATIVE HUDSON interjected the "subsistence" bill.
REPRESENTATIVE ROKEBERG replied "Yeah, right. I think it was used
in Anglo Saxton jurisprudence because it has to do with, I think
the perceived life-time of an individual. ... He pointed out the
recent expiration by the lease by the United Kingdom and Chinese
Empire on Hong Kong was like some 250 years, it's not uncommon to
see leases that are beyond 100 or 200 years in some instances,
particularly in Europe. It's pretty common to see 110 year leases
or leases beyond 55 years in the United States, normally long-term
ground leases is what they are."
REPRESENTATIVE HUDSON noted the bill tries to set up some sort of
a fixed total - cumulative time period. If it were in the state's
best interest, is there a procedure to where they can go beyond
that period of time.
Number 0088
REPRESENTATIVE ROKEBERG replied this bill provides that you can
extend your existing leasehold up to 55 years and then step-out and
request a new lease. He pointed out one of the distinctions he
made in the prior bill is, one of the advantages of just extending
your existing leasehold is that you could have the terms and
conditions to be the same as were in that particular document. He
indicated his expectation is that if you stepped out of that and
requested a new lease, which is provided under the bill - and was
provided in the last bill we passed, was that you may be subject to
the new terms and conditions and provisions of a new lease
document. That was particularly important in the Anchorage airport
where there were some new environmental standards that had come
into play and had been adopted for the new leases (indisc.). As a
result there may have been and advantage of people wanting to
extend their lease rather than enter into a new lease..."
Representative Rokeberg gave a history on some of the leaseholders
in Anchorage that are coming up on that 55-year period.
Number 0119
REPRESENTATIVE MASEK asked what is the standard lease term is in
other states.
REPRESENTATIVE ROKEBERG replied it's his understanding that there
are much shorter lease terms in some airports, particularly JFK and
LAX which are major airports - might even have five-year terms. He
suspects they will use a finance able term for construction of
improvements which would be a minimum of 30 or 35 years. If
there's existing improvement on land, he understands that some of
the policies are short as a five-year turnaround so they can have
the ability to raise their rent. He mentioned most of those
airports are not owned or operated by state governments.
Number 0132
REPRESENTATIVE ROKEBERG noted the Anchorage airport has additional
lands, and the capability, and the marketing opportunity right now.
For example, in air cargo which we need to be aggressive and
provide a long-term financial lease term so improvements can be
financed and constructed on those particular parcels.
Number 0136
REPRESENTATIVE MASEK referred to page 2, line 4, of the committee
substitute. She asked if the policy is the same for the airport in
Anchorage, as in Big Lake, or in Willow. Is it the same written
policy statewide?
(2) the continued use of the leasehold is consistent with
written airport operation policies and is in the state's best
interest.
REPRESENTATIVE ROKEBERG replied no, we have a separate rules and
policies for the international airports as opposed to local or
rural airports. He pointed out the leasehold applies to both
groups.
REPRESENTATIVE MASEK asked it does.
REPRESENTATIVE ROKEBERG replied, "Yes, it's a perk, there's no
reason that the flying service up in Nome, or another rural area -
it's on a state airport - shouldn't have this ability to enter
under the same lease terms because their conditions and
circumstances are the same."
Number 0145
REPRESENTATIVE MASEK read:
(1) the lessee is in compliance with the terms and conditions
of the existing or holdover lease; and
REPRESENTATIVE MASEK asked how many they have jeopardized the terms
or conditions in the past.
REPRESENTATIVE ROKEBERG replied that particular language is what we
basically call "border-plate" in the sense that, in order to enter
into a new lease or extension, you have to be in compliance and not
in breech of your existing lease. He didn't know how many have
been jeopardized. You can have a breech of a lease for a
relatively minor thing but then you need to be able to correct it
which is done pretty commonly. The biggest one is not paying your
rent.
Number 0156
JOHN STEINER, Assistant Attorney General, Civil Division,
Department of Law, provided information on HB 476 via
teleconference. He said he would like to explain for the benefit
of the committee and provide a little understanding of putting this
into the context of some constitutional provisions and some Federal
Aviation Administration(FAA) matters which may not lead to an
(indisc.) up or down as to whether the bill ought to be acceptable.
MR. STEINER stated the committee substitute would appear to provide
for a (indisc.) basically in perpetuity to lease and release the
airport land subject to the two findings that are listed which have
been mentioned already with regard to the state's best interest and
the compliance to an existing lease.
MR. STEINER noted there would be a 55-year maximum tenancy under
particular lease language but at the end of that 55 years, with new
lease language, there could be renewal. There was a mention a few
moments ago about the desire by some tenants to possibly extend a
term rather than getting a new lease because they would like to
take advantage of existing lease language. It is important to the
airport, and legally to the Department of Law having a concern that
there be some period of time that's not too far, at least certainly
longer than 55 years, in which a new lease language would be
required so that you don't wind up with a lease continuing to exist
in lease language which applied 60 years ago and is no longer
relevant to today's situations. There needs to be a turnover so
that, whether it be for environmental or other adjustments
according to changes in the law, otherwise - in conditions and new
kinds of aircraft, or new kinds of operations, whatever, that that
language can be updated.
Number 0178
MR. STEINER stated to put this in context with a true, perpetual or
preference right if it were absolute, would probably be
inconsistent with Article 9, Section 6 of the Alaska Constitution
which forbids the transfer of public property except for a public
purpose.
MR. STEINER said a true perpetual right of a preference would
possibly also violate Article 8, Section 2 of the Alaska
Constitution which requires that the legislature provide for use of
public lands in the maximum benefit of the people. And the state's
best interest finding may help to preserve that it is difficult to
determine how you can know whether particular uses at the maximum
benefit of the people if there's not competition to consider what
other uses might arise out of the public.
Number 0188
MR. STEINER mentioned there's also some concern in Article 8,
Section 10 of the Alaska Constitution. It forbids disposal of
leases without safeguards of the public interest and there's a
concern that if there were no safeguards, if this were truly a
perpetual preferential lease, then all three of these sections
might be violated.
MR. STEINER said, "I hasten to add that the two provisions at the
end of this statute, which were imposed by the previous HB 543,
which require state's best interest finding and require continued
compliance of the lease terms may be sufficient to satisfy these
constitutional questions, but I believe it's important for the
committee to know that we're kind of on a balancing-line
constitutionally, so you're just aware of that, there are some
issues there that put a limit, and that the legislature cannot rent
by continued preferences without making sure that at least there is
something to keep us within these limitations."
Number 0199
MR. STEINER addressed the concern about FAA grant assurances. He
stated the FAA imposes on the state branch assurance requirements.
These are agreements that the state must make in order to be
eligible for him to receive federal airport and improvement program
funds from the FAA which have been important in redeveloping
airports and doing airport projects - capital projects. Some of
these assurances include that the airport make available for public
use, on a fair and reasonable terms without unjust discrimination,
lands of all types, kinds and classes of aeronautical uses. This
is limited to differences among aeronautical users, but it would be
a violation if the airport were to allow it's land to be tied up if
certain users - which might exclude other aeronautical users. He
remarked that's "grant assurance number 22."
Number 0208
MR. STEINER pointed out "grant assurance number 23" requires that
the airport makes sure that there is no exclusive rights for use of
the airport by anyone providing aeronautical use to the public. In
most cases we're probably not going to run into this because there
would almost always be additional land available so that there
could be competitive services offered on separate lease lots. But
their concern would be that if one vendor - one lessor had the only
lots that were suitable for certain kinds of uses, and someone else
came along wanting to offer the same kind of uses, and there was
not land available because the land was tied up in a long-term
lease, it could (indisc.) airports ability to make sure that they
haven't allowed a defacto monopoly to occur in aeronautical uses.
Number 0216
MR. STEINER said there's also a requirement, in "grant assurance
number 24," that a rental structure be (indisc.) which will make
the airport as self-sustaining as possible under the circumstances
at the airport taking into account factors such as traffic volume
and economy of collection. Now our current leases at the
international airports, he believes most of all them have provision
for updating rental amounts every five years. there not
necessarily at a market rate right now but they are adjustable.
It's important that there not be a lease that would lock in rental
prices at an amount they would not be able to be shifted to
maximize revenue along the market rate unless we wind up violating
the FAA rent requirements.
Number 0226
MR. STEINER referred to "grant requirement number 5," it indicates
that an airport's sponsor, which is the State of Alaska for the
state airports, will not take or permit any action which would
operate to deprive it with any of the rights and powers necessary
to perform any of the other assurances under the grant agreement.
In other words, it's important that a sponsor to the state of
Alaska not tie its hands and be able to fulfill the other grant
assurances.
Number 0231
MR. STEINER informed the committee the effort to clarify that the
preference to (indisc.) statute does not have a limit. It's
somewhat troubling to the extent that it is at least conceptually,
not necessarily consistent with the general policies enshrined in
the Alaska Constitution and imposed by the FAA grant assurances and
reflected in other public land law. He suggested, for references
purposed, the committee members might be interested in looking at
Alaska Statue 38.05.073 and the other statute in that vicinity
which deal with renewal of natural resource lands under the
auspices of the director of the Division of Lands with the State of
Alaska, under the Department of Natural Resources. Which does also
allow a preference or allowed the possibility of a preference, but
not the requirement of a preference if it's in the state's best
interest and has numerous safeguards in terms of the manner in
which there's preferences for the possibility of those preferences
are to be noticed to the public and carried out only if they're in
the state's best interest.
Number 0243
MR. STEINER said the constitutional provisions, the conditions in
number one and number two as he mentioned may well satisfy the
actual constitutional requirements such as this, if it were
enacted, would withstand constitutional scrutiny. It's not
altogether clear whether those would be satisfactory to the FAA or
the Office of the Inspector General to do an audit of this state.
But it is my opinion that the Department of Transportation and
Public Facilities could work with those two conditions and make
sure that the FAA grant assurances are not violated on their face.
Number 0250
MR. STEINER said the final comment that we have is that we want to
make awfully sure that it is (indisc.) and perhaps either by a
specific comment or proprietary language in the bill or at least in
the intent in the legislative record that there is no attempt by
the legislature to create a property right of receiving a
preference that might be constitutionally compensable in the event
that the airport for redevelopment focuses on or whatever needed to
take the property in order to reorient a road or something like
that. That the property interest that any individual would have in
a lease would be limited to the actual lease and not the
possibility of future extensions or renewals unless we wind up
being required to compensate tenants for what is effectively a fee
interest in the property despite the fact that the state is the
owner of the (indisc.).
Number 0259
MR. STEINER concluded that the important thing to remember in all
of this is that this state land is held by the state specifically
as an airport. That being said, we have to abide by certain
requirements imposed by federal law in the operation of the
airport. The basic fundamental principal of those requirements is
that the airport be self-sustaining, maximize revenues in order to
not be a burden on the aviation or the traveling public. He
reiterated airports that get sizeable economic returns in their
real estate properties in order to support the airports. And it's
relevant they should because it is basically a mandate of the FAA
that the airport lands be used to maximize benefit and support of
the airport rather than telling the traveling public or the
airlines to spend more than what otherwise would be necessary in
order to provide aviation services to the public. He added that
Mr. Paul Bowers, Director, Statewide Aviation, Leasing, DOT, was
also available to answer any questions.
Number 0274
REPRESENTATIVE ROKEBERG said, "I just point out for the record that
the minutes for HB (indisc.) of the Nineteenth Legislature, which
is an airport leasing bill indicated clearly that the intent of
that legislation is embodied in this bill and in '090(c) 1 and 2'
for the best interest findings in the words consistent with written
airport operation policies means that airport's long-range plan, so
the instant that Mr. Steiner mentioned about it if they needed it
for a road or other improvement is included in that particular
language, and that's on the record. So, there is nothing that an
existing leaseholder or business couldn't be terminated or at its
expiration not renewed because (indisc.) way of the long-range
plan."
REPRESENTATIVE ROKEBERG stated, "I just add further that I think
that the six cents a square foot, or whatever it is they're
charging for Anchorage are way below fair market value as a matter
of policy in the airport, and I would make a recommendation that
the Department of Law - that they have a provision in any future
leases in Anchorage, that this allows the profit-making on a
(indisc.) to another successor in interest on the lese and
therefore disallowing any profit between a lessee and a sublessee
on a lease. So that goes to say, if you have a lease now, and
sublet it to another party and charge them a market rent, which may
be a dollar a foot higher than what the airports charging, or
whatever it would be, that that profit can't flow to the original
tenant, it has to flow to the airport. That's a very common
technique used and it should be adopted by the airport that way
would overcome that problem. And with that Mr. Chairman, I would
like to ask the Department of Law whether they can support this
language or not, yes or no."
Number 0291
MR. STEINER replied in terms of supporting and...
UNIDENTIFIED SPEAKER interjected "live with it."
MR. STEINER remarked, "We're willing to live with it, yes, I guess
we're not going to recommend that it should not be adopted because
it would be intolerably illegal - or that it would be illegal. We
are prepared to live with it if the legislature deems to see fit to
adopt it."
Number 0295
REPRESENTATIVE ELTON stated he would like to hear from Mr. Bower on
what the implications may be on Rural airports.
CHAIRMAN WILLIAMS noted he is apparently not on line.
Number 0300
REPRESENTATIVE ROKEBERG replied, "In my study of this I believe it
does. This particular provision of the statute does affect Rural
airports. Now - as a practical matter, I'm not certain what the
differentiation is, I think that's what Representative was trying
to get at."
REPRESENTATIVE ELTON asked Chairman Williams what further referrals
does this bill have.
CHAIRMAN WILLIAMS replied this is it.
Number 0304
REPRESENTATIVE ELTON asked Mr. Steiner if he could have Mr. Bowers
get in touch with his office to let him know what the implications
are on Rural airports he would appreciate it.
MR. STEINER replied he would be glad to do that.
REPRESENTATIVE ROKEBERG asked Mr. Steiner if this bill will help
straighten out any difficulties in drafting the new airport
regulation.
Number 0306
MR. STEINER said, "I believe the airport regulations pretty much
assume the policy in this bill was going to be the policy of the
regulations as well. It would clarify that this is the
legislature's intent and eliminating any possibility, I guess, that
the regulations might interpret this statute otherwise. I don't
believe that the DOT was intending to interpret this statute any
differently on basically on what's in this bill. And I'm told that
Mr. Bowers called into this office indicating that he had been
knocked off [teleconference] and we'd be happy to try to get him to
conference in."
CHAIRMAN WILLIAMS replied that's all right. He asked if there was
anybody else in the audience that would like to testify.
Number 0314
REPRESENTATIVE HUDSON made a motion to move CSHB 476 as amended,
with individual recommendations and attached fiscal zero note.
CHAIRMAN WILLIAMS asked if there were any objections. There being
no objections, CSHB 476(STA) moved from the House Transportation
Committee.
ADJOURNMENT:
Number 0322
CHAIRMAN WILLIAMS adjourned the House Transportation Standing
Committee at 1:45 p.m.
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