Legislature(2011 - 2012)BELTZ 105 (TSBldg)

02/02/2012 03:30 PM COMMUNITY & REGIONAL AFFAIRS


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03:34:48 PM Start
03:35:13 PM SB156
03:51:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 156 ALASKA RAILROAD LAND LEASES
Heard & Held
Bills Previously Heard/Scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                        February 2, 2012                                                                                        
                           3:34 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Donald Olson, Chair                                                                                                     
Senator Thomas Wagoner                                                                                                          
Senator Albert Kookesh                                                                                                          
Senator Linda Menard                                                                                                            
Senator Johnny Ellis                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 156                                                                                                             
"An Act extending the time period for which the Alaska Railroad                                                                 
Corporation may lease land without reserving the right to                                                                       
terminate the lease."                                                                                                           
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 156                                                                                                                  
SHORT TITLE: ALASKA RAILROAD LAND LEASES                                                                                        
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
01/17/12       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/17/12       (S)       L&C, CRA                                                                                               
01/24/12       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
01/24/12       (S)       Heard & Held                                                                                           
01/24/12       (S)       MINUTE(L&C)                                                                                            
01/26/12       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
01/26/12       (S)       Moved SB 156 Out of Committee                                                                          
01/26/12       (S)       MINUTE(L&C)                                                                                            
01/27/12       (S)       L&C RPT 4DP 1NR                                                                                        
01/27/12       (S)       DP: EGAN, GIESSEL, DAVIS, MENARD                                                                       
01/27/12       (S)       NR: PASKVAN                                                                                            
02/02/12       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DANA OWEN, Staff                                                                                                                
Senator Dennis Egan                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Introduced SB 156.                                                                                        
                                                                                                                                
TIM SULLIVAN, Manager                                                                                                           
External Affairs                                                                                                                
Alaska Railroad Corporation                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supports SB 156.                                                                                          
                                                                                                                                
JOHN COOK, Member                                                                                                               
Board of Directors                                                                                                              
Alaska Railroad Corporation                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supports SB 156.                                                                                          
                                                                                                                                
BILL HUPPRICH, Vice President                                                                                                   
General Counsel                                                                                                                 
Alaska Railroad Corporation                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supports SB 156                                                                                           
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:34:48 PM                                                                                                                    
CHAIR  DONALD  OLSON called  the  Senate  Community and  Regional                                                             
Affairs Standing Committee meeting to  order at 3:34 p.m. Present                                                               
at the call to order  were Senators Wagoner, Kookesh, Menard, and                                                               
Chair Olson.                                                                                                                    
                                                                                                                                
               SB 156-ALASKA RAILROAD LAND LEASES                                                                           
                                                                                                                                
3:35:13 PM                                                                                                                    
CHAIR OLSON announced the consideration of SB 156.                                                                              
                                                                                                                                
3:35:18 PM                                                                                                                    
DANA OWEN,  staff to Senator Egan,  aide to the Senate  Labor and                                                               
Commerce Committee, sponsor  of SB 156, said  the Alaska Railroad                                                               
Corporation (ARC) is currently limited  to 55-year terms for land                                                               
leases.  He said  ARC was  approached by  developers to  consider                                                               
extending land lease terms to 95 years for economic reasons.                                                                    
                                                                                                                                
3:36:00 PM                                                                                                                    
SENATOR ELLIS arrived to the committee meeting.                                                                                 
                                                                                                                                
SENATOR WAGONER  asked if lease  rates would  also be set  for 95                                                               
years.                                                                                                                          
                                                                                                                                
MR. OWEN answered yes.                                                                                                          
                                                                                                                                
SENATOR WAGONER  commented on a  commercial lease he  had entered                                                               
into  with  Kenai  where  the   lease  rate  was  tied  into  the                                                               
property's appraisal  rate. He said  he could not support  a bill                                                               
that allows 95-year leases without rate adjustments.                                                                            
                                                                                                                                
3:38:24 PM                                                                                                                    
TIM   SULLIVAN,   Manager-External   Affairs,   Alaska   Railroad                                                               
Corporation, said he was available for questions.                                                                               
                                                                                                                                
3:39:02 PM                                                                                                                    
SENATOR MENARD  asked if all of  the ARC Board of  Directors were                                                               
in agreement with the 95-year land lease proposal.                                                                              
                                                                                                                                
MR. SULLIVAN answered that the ARC board supports SB 156.                                                                       
                                                                                                                                
SENATOR  MENARD asked  if  the ARC  board  unanimously agreed  to                                                               
support SB 156.                                                                                                                 
                                                                                                                                
3:39:57 PM                                                                                                                    
MR. SULLIVAN answered that he did not know.                                                                                     
                                                                                                                                
SENATOR  MENARD   said  she  respected  the   diverse  ARC  board                                                               
membership and  would like  to know the  amount of  personal "buy                                                               
in" by the board to bring SB 156 forward.                                                                                       
                                                                                                                                
MR. SULLIVAN  said Mr.  Cook, an ARC  board member,  would answer                                                               
her question.                                                                                                                   
                                                                                                                                
3:40:45 PM                                                                                                                    
CHAIR  OLSON commented  that long-term  leases without  continued                                                               
appraisal would put the state at a disadvantage.                                                                                
                                                                                                                                
3:41:18 PM                                                                                                                    
JOHN COOK,  Board of Directors, Alaska  Railroad Corporation said                                                               
all  ARC land  leases are  reappraised every  five years  and the                                                               
majority  of lease  rates are  set  at 8  percent increases  with                                                               
higher  rates for  more valuable  property. He  said some  leases                                                               
have rate increase caps set at 25 to 35 percent.                                                                                
                                                                                                                                
He  said   the  ARC  Board  of   Directors  unanimously  endorsed                                                               
extending land leases  to 95 years. He  said current leaseholders                                                               
with significant  investment stated  that 55  years was  not long                                                               
enough to sell or finance  properties with banks. He said 95-year                                                               
lease options would be considered  an exception and primary usage                                                               
would be  on large  capital investment  developments. He  said SB                                                               
156 would allow ARC to capitalize on more marketable properties.                                                                
                                                                                                                                
3:44:38 PM                                                                                                                    
SENATOR  WAGONER  asked  if  each   property  was  appraised  and                                                               
reassessed every five years.                                                                                                    
                                                                                                                                
MR.  COOK answered  yes  and said  ARC  is considering  providing                                                               
leaseholders  with  more  rate certainty  by  providing  a  fixed                                                               
escalator lease that is brought back to level after 20 years.                                                                   
                                                                                                                                
SENATOR WAGONER  commented that he  understands the need  for 95-                                                               
year  leases, as  long  as  reappraisal on  a  regular basis  was                                                               
included.                                                                                                                       
                                                                                                                                
3:46:27 PM                                                                                                                    
MR. COOK said all land leases include reappraisal.                                                                              
                                                                                                                                
3:46:47 PM                                                                                                                    
SENATOR  MENARD asked  what happens  to leases  with scheduled  8                                                               
percent increases when land appraisals decrease.                                                                                
                                                                                                                                
3:47:31 PM                                                                                                                    
MR. COOK  answered that land  appraisals rarely decline.  He said                                                               
fair market  value and lease  rates are two different  things. He                                                               
said  ARC  had  a  lease  rate  study  done  and  8  percent  was                                                               
considered a  fair rate increase. He  noted that he was  aware of                                                               
only one  property with  an appraisal decline  and that  was with                                                               
Craig Taylor Equipment in Fairbanks.                                                                                            
                                                                                                                                
3:48:57 PM                                                                                                                    
CHAIR OLSON  asked how  many land  leases does  ARC have  and how                                                               
many are 55 years.                                                                                                              
                                                                                                                                
MR. COOK  answered that  ARC has  approximately 400  total leases                                                               
with the majority being 35 years.  He noted that new requests and                                                               
renewal leases have primarily been 55 years.                                                                                    
                                                                                                                                
3:49:40 PM                                                                                                                    
CHAIR  OLSON  asked  how  many  development  ventures  have  been                                                               
cancelled due to not being able to obtain a long term lease.                                                                    
                                                                                                                                
MR. COOK  answered that  ARC was  approached for  developments in                                                               
Ship Creek and Fairbanks with only 95-year lease terms.                                                                         
                                                                                                                                
3:50:31 PM                                                                                                                    
BILL HUPPRICH, Vice President-General Counsel, Alaska Railroad                                                                  
Corporation, said he was available to answer questions.                                                                         
                                                                                                                                
3:50:42 PM                                                                                                                    
CHAIR OLSON asked what he does at ARC.                                                                                          
                                                                                                                                
MR. HUPPRICH answered that he was general counsel for ARC.                                                                      
                                                                                                                                
3:51:13 PM                                                                                                                    
CHAIR OLSON announced he would hold SB 156 in committee.                                                                        
                                                                                                                                
3:51:33 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Olson adjourned the Senate Community and Regional Affairs                                                                 
Standing Committee at 3:51 p.m.                                                                                                 

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