Legislature(1993 - 1994)
03/15/1994 08:35 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 15, 1994
8:35 a.m.
TAPES
SFC-94, #41, Side 1 (000-end)
SFC-94, #41, Side 2 (end-000)
SFC-94, #43, Side 1 (000-end)
SFC-94, #43, Side 2 (end-500)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 8:35 a.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators Kelly,
Rieger, and Sharp were present. Senators Jacko and Kerttula
joined the meeting after it was in progress.
ALSO ATTENDING: Mary Gay, Director, Child Support
Enforcement Division, Department of Revenue; Laura Glaiser,
Special Assistant, Office of the Lieutenant Governor; Mark
LoPatin, LoPatin & Co., Developers; Jetta Whittaker, fiscal
analyst, and Mike Greany, Director, Legislative Finance
Division; aides to committee members and other members of
the legislature.
VIA TELECONFERENCE: Bob LeResche, LeResche & Co., Juneau,
and Eric Wohlforth, Wohlforth Argetsinger Johnson & Brecht,
attorneys, testified via teleconference from Anchorage
regarding SB 338.
SUMMARY INFORMATION
CSSB 148(TRA): An Act relating to legislative approval of
certain acts of the Alaska Railroad
Corporation; taxation of certain property of
the Alaska Railroad Corporation; members of
the board and chief executive officer of the
Alaska Railroad Corporation; meetings of the
board of directors of the Alaska Railroad
Corporation; and providing for an effective
date.
Scheduled but not heard.
CSSB 190(JUD): An Act relating to income withholding and
other methods of enforcement for orders of
support; and providing for an effective date.
Mary Gay, Director, Child Support Enforcement
Division, Department of Revenue, spoke in
support of SB 190. Discussion was held
between Co-chairs Frank & Pearce, Senators
Sharp, Kelly, Kerttula, and Rieger, regarding
child support enforcement issues. Amendments
1 and 2 were ADOPTED. CSSB 190(FIN) was HELD
over until Thursday, March 17, 1994.
SB 276: An Act relating to criminal justice
information; providing procedural
requirements for obtaining certain criminal
justice information; and providing for an
effective date.
CSSB 276(FIN) work draft "K" dated March 11,
1994 was before the committee. Amendments 1
and 2 had been ADOPTED in a prior meeting
(March 12, 1994). Discussion was held by Co-
chair Pearce, Senators Sharp and Rieger
regarding fiscal notes and other concerns.
Amendments 3 and 4 were ADOPTED. CSSB
276(FIN) was REPORTED OUT of committee with a
"do pass," zero fiscal notes from the
Department of Safety, Department of Law, and
the Department of Health & Social Services,
and pending a new fiscal note from the
Department of Corrections (present fiscal
note is in the amount of $181,874).
SB 303: An Act relating to voter eligibility, voter
registration, and voter registration
agencies; and providing for an effective
date.
Laura Glaiser, Special Assistant, Office of
the Lieutenant Governor, spoke in support of
SB 303. Discussion was held between Senators
Kelly, Sharp and Co-chair Pearce regarding
federal law and other concerns. Amendment 1
FAILED to be adopted. SB 303 was REPORTED
OUT of committee with individual
recommendations, zero fiscal notes for the
Department of Education and the Department of
Revenue, and fiscal notes for the Department
of Public Safety - $90.9, Lt. Gov. Elections
- $23.0, Department of Health & Social
Services (M.H. Admin.)-$10.7, Department of
Health & Social Services (WIC)-$4.4,
Department of Health & Social Services
(Pub.Assist.)-$10.4, and Department of
Commerce & Regional Affairs-$10.0.
CSSB 316(RES): An Act relating to commercial fishing
penalties.
Scheduled but not heard.
CSSB 321(JUD): An Act relating to the taking of a legible
set of fingerprints when a person is
arrested, upon initial appearance or
arraignment, upon the conviction of the
person, and when the person is received at a
correctional facility, and providing that the
set of fingerprints shall be provided to the
Department of Public Safety; relating to
criminal and crime records and information;
requiring the reporting of information
concerning homicides, suspected homicides,
and violent sexual assaults to the Department
of Public Safety for analysis; requiring the
Department of Public Safety to participate in
the Federal Bureau of Investigation, Violent
Crimes Apprehension Program.
Scheduled but not heard.
CSSB 338(L&C): An Act relating to the issuance of revenue
bonds for acquisition and construction of the
Northern Crossroads Discovery Center for the
Ship Creek Landings Project; relating to a
study of the feasibility and financial
viability of the Northern Crossroads
Discovery Center; relating to construction of
the Northern Crossroads Discovery Center; and
providing for an effective date.
Mark LoPatin, LoPatin & Co., Developers,
spoke in support of SB 338. Bob LeResche,
LeResche & Co., Juneau, and Eric Wohlforth,
Wohlforth Argetsinger Johnson & Brecht,
attorneys, testified via telecon-ference from
Anchorage regarding SB 338. The bill was HELD
over until March 16, 1994.
SENATE BILL NO. 276:
An Act relating to criminal justice information;
providing procedural requirements for obtaining certain
criminal justice information; and providing for an
effective date.
CO-CHAIR PEARCE announced that CSSB 276(FIN) work draft "K"
was before the committee. In a previous Senate Finance
Committee meeting amendments 1 and 2 from the Department of
Law had been ADOPTED and included in work draft "K". She
said that the bill had been held over and Senators Kelly,
Sharp, Rieger and Dean J. Guaneli, Chief, Legal Services
Section, Criminal Division, Department of Law, had been
asked to draft new language on legislative access to
records, now presented as amendment 4.
Co-chair Pearce also announced that her amendment 3 was also
before the committee. She explained that Senator Halford
had requested the fingerprinting language removed from SB
276. The fingerprinting language would stand alone in SB
321. She said the Department of Law was comfortable with
amendment 3 if SB 321 would pass. Co-chair Frank MOVED
conceptual amendment 3. No objection being raised,
amendment 3 was ADOPTED for incorporation within the Finance
Committee Substitute for SB 276.
Senator Sharp MOVED amendment 4 which added language so that
the legislature, for official legislative business only,
could upon written request, receive criminal justice
information. No objection being raised, amendment 4 was
ADOPTED for incorporation within the Finance Committee
Substitute for SB 276.
Senator Rieger asked if the fiscal note for the Department
of Corrections in the amount of $181,874 would be reduced to
zero because of amendment 3, removal of the fingerprinting
language. Co-chair Pearce said that the Department of
Corrections would provide an updated fiscal note. Senator
Rieger alerted the committee that the fiscal note for the
Department of Corrections should be looked at closely in
conference committee. Senator Sharp also raised a question
regarding travel and personal services for FY95 in that
fiscal note. Co-chair Pearce said that SB 276, once
reported out of committee, would be held until a new fiscal
note could be received for the Department of Corrections.
Senator Sharp MOVED for passage of CSSB 276(FIN) from
committee with individual recommendations. No objection
being raised, CSSB 276(FIN) was REPORTED OUT of committee
with a "do pass," zero fiscal notes for the Department of
Public Safety, Department of Law and the Department of
Health & Social Services. The bill was held in Senate
Finance until a new fiscal note was received for the
Department of Corrections. Co-chairs Pearce, Frank,
Senators Sharp, Kelly, Rieger and Kerttula signed a "do
pass."
CS FOR SENATE BILL NO. 190(JUD):
An Act relating to income withholding and other methods
of enforcement for orders of support; and providing for
an effective date.
Co-chair Pearce announced that CSSB 190(JUD) and CSSB
190(JUD) work draft "E" were before the committee. Also
before the committee was a letter from Senator Little noting
that the Judiciary Committee had pulled language from SB 190
over her objections which impacted the employer reporting
project. Proposed amendment 2 would add that language back
into the bill. Amendment 1 was proposed by the Department
of Revenue. Senator Kelly asked the difference between
version E and the original bill. Co-chair Pearce invited
Mary Gay to speak to the differences.
MARY GAY, Director, Child Support Enforcement Division,
Department of Revenue, said the difference between the
previous draft and the Judiciary Committee Substitute was
the removal of the sunset provision for employer reporting.
She also said that it was the Judiciary Committee's desire
to have the bill include all federal requirements in regard
to child support enforcement.
At this point, Co-chair Pearce asked the committee to
consider CSSB 190(JUD) before the committee. CSSB 190(JUD)
work draft "E" would not be used. She went on to explain
that the employer reporting project had been implemented by
the legislature in 1991 which required employers with at
least 20 employees to report new or rehired employees to the
Child Support Enforcement Division on a monthly basis. This
project sunsets on January 1, 1995, and had been extremely
successful. Collections have increased by 12 percent in
Alaska, even though many still go uncollected. The
continuance of the project would be expected to be cost
effective. The project would be extended by amendment 2.
Ms. Gay went on to explain that amendment 1 had been
requested by the Department of Revenue. The change on page
3, line 26, was a technical correction. On page 6, line 20,
the words "for a formal hearing" are added. This ensures
that the obligator has been through the informal process.
Senator Kerttula MOVED amendment 1. No objection being
raised, amendment 1 was ADOPTED for incorporation within a
Finance Committee Substitute for SB 190.
Senator Kerttula MOVED amendment 2. Senator Sharp OBJECTED.
Discussion followed by Co-chairs Pearce, Frank, Senator
Sharp, and Ms. Gay regarding the sunset of the employee
reporting program. Co-chair Pearce and Ms. Gay testified to
the success of the program and informed the committee that
Congress was considering mandating the employee reporting
program for all states. Co-chair Pearce called for a show
of hands on the adoption of amendment 2, and the motion
carried on a vote of 1 to 5 (Co-chairs Pearce and Frank,
Senators Kerttula, Rieger, Kelly were in favor, Senator
Sharp was opposed. Senator Jacko was absent from the
meeting at the time the vote was taken). Amendment 2 was
ADOPTED for incorporation within a Finance Committee
Substitute for SB 190.
Senator Kelly brought up concerns regarding the $1 fee
charged the obligator and the additional paperwork required
of employers because of child support withholding.
Extensive discussion followed between Co-chairs Pearce,
Frank, Senators Sharp and Kelly, regarding fees and who is
subject to the child support withholding. Ms. Gay explained
that if a parent was under a child support order before
1990, and had never missed a payment, that parent would not
be required to be under wage withholding unless one of the
parents requested it. If recently divorced, the non-
custodial parent/ obligator would be required to have
immediate wage withholding. As of January 1, 1994, the
courts are to include an immediate wage withholding in the
child support order, so the custodial parent could serve the
order on the employer her/himself or have an attorney do so.
The monies then run through the Child Support Enforcement
Division, it is receipted, and mailed to the custodial
parent. It would be considered an accounting function for
these individuals. The federal government wants this done
so there is a better accounting of child support payments in
case there are difficulties in the future where amounts may
be under dispute.
Co-chair Frank asked, if from this time on, all child
support payments would go through the Child Support
Enforcement Division. Ms. Gay agreed they would, unless the
parents had an alternative arrangement through the court,
i.e., a trust fund or such.
Co-chair Pearce informed the committee that the Alaska Court
System had provided a new fiscal note and voiced their
objection to not being included in SB 190. She went on to
review the fiscal note for the Court and its request for a
parttime employee because of unnecessary paperwork caused by
requirements for employers to notify the Court of terminated
employees. Co-chair Pearce asked why that requirement was
included in the bill. Ms. Gay said in referring to non-
child enforcement cases the wording "agency, the court, or
other entity" was often repeated, and agreed that notice of
termination did not need to be sent to the Court. The
notice, however, did need to be sent to the obligee. Ms.
Gay spoke to wording in Sections 6 and 8 that could be
removed.
Co-chair Pearce informed the committee that her intention
was to hold SB 190 so that she and Senator Sharp could
review the Court's responsibilities, and, hopefully, zero
out the fiscal note for the Court System. SB 190 would then
come back before committee.
Co-chair Frank said he supported SB 190 in light of the poor
child support payment records of most obligators, but would
like to know how the system worked in regard to AFDC. Ms.
Gay said that child support received by the Division for
children on AFDC was kept by the Division except for $50
which was sent to the obligee or, in a rare case, if the
child support was larger than the AFDC payments, any excess
was sent to the custodial parent. She also agreed that when
a parent was not working, child support was seldom received,
but when employed and the employer withheld the child
support, compliance was good. The non-traditional wage
earner (self-employed or persons working for cash) was one
type that was hard to reach. She reported that 25 percent
of the caseload paid on a regular basis. She did not know
the statistics but said the largest amount of money received
by the Division was withheld from wages. Co-chair Frank
asked why the Division did not provide a positive fiscal
note to that effect. Ms. Gay said that the Division had
been collecting child support by withholding since 1990 when
the federal regulation was enacted and initiated wage
withholding if a person had been delinquent more than 30
days. People that had child support orders before 1990, who
were not late on their payments, might begin wage
withholding in the future if they become delinquent. Child
support cases that came out of the court at present included
wage withholding in the child support order. The Division
would handle the monies as a bookkeeping process, not
enforcement.
In answer to Co-chair Frank, Ms. Gay said she did not know
what percent of persons not paying, or sporadic paying
persons, were wage earners.
Co-chair Pearce reiterated that the program had made an
increase in collection of child support but still 75 percent
of the obligators were not paying. Ms. Gay said that of the
caseload, only half had been completed. She went on to
explain, that since the federal government already required
this program as of 1990, there had not been a significant
change, but now the Court was effected because it was
required to include wage withholding in child support
orders. SB 190 updates the state's statutes in line with
federal requirements so funding could be sanctioned.
Senator Kerttula suggested that since this program is a
administrative burden, all departments should be asked for
suggestions or methods to reduce paperwork and still get the
job done. He maintained that the inefficiencies that exist
must be resolved in order to reduce overhead costs.
Senator Rieger asked if the same language (found in page 5,
Sec. 10) regarding an appeal paralleled modification of
support amounts. Ms. Gay replied that in a modification of
support, the person was told there was going to be a
modification and was requested to provide income
information. (She noted this was not usually provided
willingly). If it was an administrative modification, then
the person had already provided their income information,
and an informal conference was held. They were sent a
consent order, but if it was not signed, it would not take
effect. Ms. Gay stressed that with every step within the
process of child support enforcement there is the
opportunity for due process. When the opportunity for due
process in statute runs out, the person could always go to
court and present his/her case.
Senator Rieger said he received complaints from constituents
that increases in child support withholding were done
without their knowledge. Ms. Gay replied there might be
several causes for an increase in withholding such as a cost
of living that was included in their child support order, or
an amount past due that could be included. She said that a
yearly, or every two year cost of living was sometimes
written into child support orders and the person may have
forgotten about that provision.
Senator Rieger asked if support orders were based on a
percentage of income. Ms. Gay said a percentage was only
used when an arrearage amount was being collected. She
agreed that some judges used a percentage to decide on a
figure for a child support order. In answer to Senator
Rieger, she said that if either parent changed jobs or
remarried, it would not automatically trigger a change in
the amount withheld from their paycheck for child support.
End SFC-94 #41, Side 1
Begin SFC-94 #41, Side 2
In response to Senator Rieger, Ms. Gay said that either
parent could go to court and asked for a modification of
child support. Co-chair Pearce said that judges sometimes
take remarriage or change of jobs into account for
modification of support. She reminded him that it was not
up to the Division to set child support amounts. The Court
sets the amount, the Division administers that amount, and
cannot change it. Senator Rieger believed that there were
court orders for child support based on percentage of
income. Ms. Gay said that previous court orders may have
been done on a percentage, but, at present, the court orders
a set amount to be withheld for child support.
In answer to Senator Kelly, Ms. Gay confirmed that the
withholding amount was now determined by 27 percent for one
child, and 33 percent for two of the adjusted gross income
of the non-custodial parent, with a maximum of $6,000 a
month. Senator Kelly said that his constituents complained
that the Division was quick to raise amounts withheld but
were slow in stopping withholding when appropriate. Ms. Gay
said that the Division did not discriminate between cases.
In answer to a constituent complaint he mentioned, she said
that if a child is 18 and still a student, the child support
may continue until the child graduates.
In answer to Senator Kelly, Ms. Gay reiterated that all new
divorced parents would be placed on the withholding system
unless they have agreed on an alternative arrangement with
the Court. Ms. Gay felt that Congress decided on this
program because, not only was it an effective way to collect
child support, it did not discriminate against any parent by
saying a parent was bad for not paying. If everyone was
under immediate wage withholding, it just meant that they
owed child support.
Senator Sharp voiced his objection to having all obligations
under a mandatory withholding system. If someone was paying
on time, they should not be submitted to automatic
withdrawal because he feared it would have a negative effect
on their credit rating. He also felt it was an unnecessary
burden for the employer. Ms. Gay informed him that some
obligators did not mind their child support being withheld
from their paycheck. Co-chair Pearce remarked that
employers deal with many different kinds of withholdings,
such as savings bonds, direct deposit to bank accounts,
etc., and this was considered just another withholding and
would not negatively impact a credit rating unless the
obligator was past due. She also reminded Senator Sharp
that three out of four obligators were not paying and that
was not a very good record.
In answer to Senator Sharp, Ms. Gay said that all
administrative orders since 1990, established by the
Division, included wage withholding unless another
arrangement had been made with the Court. As of January 1,
1994, all court child support orders must include wage
withholding. However, there were orders previous to 1990,
being enforced by the Division, that did not have wage
withholding but would in the future if the obligee requested
it, or if there was a modification process. In those cases,
there had to be a good reason for initiating the wage
withholding.
Again, in answer to Senator Sharp, Ms. Gay said that if a
parent went on AFDC, a case would automatically be
established with the Division, and only a small percentage
of these cases already had a court ordered divorce. The
largest percentage were never married or, if they were
married, never went through a divorce. At that point,
paternity and a child support order needed to be
established. The money was collected and 50 percent was
retained by the state, and 50 percent was returned to the
federal AFDC program. She agreed that the obligee assigns
his/her right to child support over to the state so funds
could be recovered.
Co-chair Frank pointed out that since 75 percent of
obligators were not paying child support, it seemed logical
and a more efficient process to have a withholding program
and thus, have the child receive the money. Unfortunately,
the employers were being inconvenienced. He wished it
wasn't necessary but felt it was. His next question was how
the state could contact the 75 percent that did not pay. He
also asked if an employer with less than 20 employees would
still be subject to the withholding program. Ms. Gay said
that employer reporting was required of any employer with
more than 20 employees, but any employer must withhold child
support if an order was received by them. She wanted the
committee to remember that employers were taxpayers.
Ensuring that families were provided for by child support
enforcement alleviated the need for those families to go on
ADFC. Employers understood that if families were kept
independent and off welfare, it would help keep their taxes
from increasing.
Ms. Gay said as a result of the Uniform Interstate Families
Support Act, there were two changes to interstate child
support laws. One would be that the original order would be
effective in all states rather than each state having to
initiate their own order. The other outcome was that it
would allow the Division to send its child support orders
directly to the employers instead of through another agency.
Senator Kelly reiterated his concern over credit reports
when a person had child support withheld from his paycheck.
Ms. Gay informed him that credit bureaus look at past due
child support over $2,000 the same as any other past due
account. She assured him that credit bureaus were not
interested in withholdings from a person's paycheck but were
concerned with the person's debts. Co-chair Pearce
confirmed that if child support was withheld from a person's
paycheck, it would not restrict his/her ability to buy a
house or car. However, if a person was delinquent, it
should show negatively on their credit rating. Senator
Sharp voiced his concern regarding the word garnishment and
felt it had a negative consequence. Co-chair Frank said
that credit bureau's would not receive notification unless
the obligator was past due. He did not see a problem with
withholding by the employer.
Senator Kerttula voiced his concern over individuals who
married, divorced, and then remarried, creating two or more
families, and chose not to support any of them. He asked if
there was any national solution to this welfare abuse. Ms.
Gay said there was no solution to her knowledge, and
affirmed that in 25 percent of the Division's cases, the
obligator had two or more families. She said often the huge
amounts of back child support owed by obligators had been
caused by this phenomenon. In answer to Co-chair Pearce,
Ms. Gay said she did not know what percent of past due cases
were multiple family cases.
Co-chair Frank asked if the federal government had
considered using the IRS to collect back child support. Ms.
Gay said that the federal government had considered moving
the collection portion to the IRS but the IRS was not that
successful in collecting unpaid taxes. Senator Kelly felt
there probably was a correlation between unpaid taxes and
unpaid child support.
Since the object was to support the child, Senator Sharp
wanted to know if any collections were being made when the
parents were not married. Ms. Gay affirmed that an unwed
father was responsible for his child(ren), but paternity
must first be proved, and then collections could be
attempted to be made.
Co-chair Pearce announced that CSSB 190(FIN) would be held
in committee until Senator Sharp and Co-chair Pearce's staff
could present a new CS that incorporated amendment 1 and 2
ADOPTED, and deleted the Court System's responsibility where
possible. She hoped to reschedule it on March 17, 1994.
SENATE BILL NO. 303:
An Act relating to voter eligibility, voter
registration, and voter registration agencies; and
providing for an effective date.
Co-chair Pearce announced that SB 303 was before the
committee and invited Laura Glaiser, Special Assistant,
Office of the Lieutenant Governor, to speak to the
committee.
LAURA GLAISER said that SB 303 was drafted to bring the
state into compliance with the National Voter Registration
Act of 1993. The main significance of the bill was the
designation of the Division of Motor Vehicles as a voter
registration agency. It also included those Divisions
within Health & Social Services that administer WIC, ADFC,
Medicaid, and Food Stamp programs as voter registration
agencies. As well as those state funded agencies that
primarily provide services with disabilities, all armed
services recruitment offices in Alaska would also be
designated as voter registration agencies. The
administration also had decided to add the Division of
Municipal and Regional Assistance, Department of Community &
Regional Affairs, as well, because members of that Division
travel to the bush areas and could provide bilingual
assistance with voter registration. The Director may also
designate other state and local agencies as voter
registration agencies.
Ms. Glaiser went on to say that being designated as a voter
registration agency meant the agency would assist voter
applicants in filling out voter registration forms. The
form would be offered to everyone (not just when requested)
and the person could choose to fill it out or not. If they
decided not to fill it out, they would be required to sign a
declination form so that the agency had a record of their
refusal to register.
Ms. Glaiser went on to say that SB 303 made technical
changes to the election laws to bring the state into
compliance with the Voter Registration Act. One item
changed was that all witnessing requirements would be
removed from voter registration forms. In answer to Senator
Kelly, Ms. Glaiser said that federal law did not require
witnessing or formal notarization on voter registration
forms.
In addition, the system by which voters were purged from the
voter registration rolls had been changed. A voter remained
on the master list two years longer than presently. It
would not effect the precinct list. In addition, it named
the Director of Elections responsible for state coordination
and reporting requirements under the federal act.
Currently, if a person were convicted of a felony moral
turpitude under federal law, but resided in the state of
Alaska, he/she could still register and vote at the last
known residence on an absentee ballot. One other change to
state law, in compliance with this federal act, was that
federal felonies would be reported to the state Division of
Elections and the felon would not be allowed to vote until
that felony had been cleared.
Co-chair Pearce announced that Juanita Hensley, Division of
Motor Vehicles, Dept. of Public Safety, and Curtis Lomas,
Program Officer, ADFC program, Dept. of Health & Social
Services, were in the audience and available to answer
questions in regard to SB 303.
In answer to Senator Kelly, Ms. Glaiser said that a person
applying for driver's license could refuse to register to
vote. The forms would be printed so the applicant would
simultaneously fill out similar information. If he/she
chose not to sign the voter registration section, that would
be considered a declination. There would be no formal
declination at the Department of Motor Vehicles. Ms.
Glaiser said there would be training sessions similar to
registrar training on what can be said to the applicant, and
how to assist the applicant.
In answer to Senator Sharp, Ms. Glaiser said the state would
not require witness signatures on voter registration forms
but would retain the registrar program. The state would not
make the registration agency employees voter registrars. In
answer to Senator Sharp, Ms. Glaiser agreed that anyone
could gather signatures for voter registration and the
election official would not know who had filled them out.
Ms. Glaiser said that amendment 1 would change the way names
were placed on the ballot. She explained that the state had
one of the most complex systems of ballot rotation in the
country. Many states were doing away with ballot rotation
as a cost saving measure because it is believed voters did
not vote for candidates because of their placement on the
ballot. She proposed that letters of the alphabet would be
drawn by the Director of Elections, names would be placed on
the ballot accordingly, and the names would not rotate.
Sample ballots could be printed and then used in the voting
booth as a reference since the names would stay in the same
order. Senator Kerttula voiced his opposition to this
amendment. In answer to Co-chair Frank, Ms. Glaiser said
that the ballot rotation was not part of the National Voter
Registration Act. She also informed the committee that the
National Voter Registration Act was a federal mandate
without federal funding. The state would have the threat of
a lawsuit if it did not come in compliance and because
Alaska was a Voting Rights Act state, all party rules and
state election laws pass through the Department of Justice
which would flag this issue.
In answer to Co-chair Pearce, Ms. Glaiser said that the
Division estimated a savings of approximately $189,000 with
the addition of amendment 1. If the Republican rule stayed
in effect, and there was a separate ballot, it would save
$267,000 every election cycle. Ms. Glaiser said that
Washington, Oregon and California have noticed no complaints
or difference for candidates when ballot rotation was used.
Co-chair Frank MOVED amendment 1. Senator Kerttula
OBJECTED. Co-chair Pearce called for a show of hands on the
adoption of amendment 1, and the motion FAILED on a 2 to 3
vote. (Co-chairs Pearce and Frank were in favor, Senators
Sharp, Kerttula and Kelly were opposed. Senator Jacko was
absent from the meeting at the time the vote was taken).
Senator Kelly asked what part of SB 303 was not mandated
under federal law. Ms. Glaiser said the only addition
outside of federal requirements was the inclusion of the
Community & Regional Affairs as a voter registration agency.
She reiterated that this agency was added because it
contacted the bush and could provide bilingual service for
voter registration. The federal government mandated voter
registration forms had to be bilingual if a large population
used another language but since parts of Alaska had so many
oral and dialect changes, the administration thought that
the Department of Community & Regional Affairs could address
that situation.
Senator Sharp MOVED for passage of SB 303 from committee
with individual recommendations. Senator Kerttula OBJECTED.
Co-chair Pearce asked for a show of hands. SB 303 was
REPORTED OUT of committee with a "no recommendation," zero
fiscal notes for the Department of Education, Department of
Revenue, and fiscal notes for the Department of Public
Safety-$90.9, Elections-$23.0, Department of Health & Social
Services-M.H. Admin. $10.7, WIC-$4.4, Pub.Assist. $10.4 and
the Department of Community & Regional Affairs-$10.0. Co-
chair Pearce signed a reluctant "do pass," and Co-chair
Frank, Senators Sharp, Kelly, Rieger, Jacko, and Kerttula
signed "no recommendation."
CS FOR SENATE BILL NO. 338(L&C):
An Act relating to the issuance of revenue bonds for
acquisition and construction of the Northern Crossroads
Discovery Center for the Ship Creek Landings Project;
relating to a study of the feasibility and financial
viability of the Northern Crossroads Discovery Center;
relating to construction of the Northern Crossroads
Discovery Center; and providing for an effective date.
MARK LOPATIN, LoPatin & Co., Developers, provided the
committee with a handout titled "Northern Crossroads
Discovery Center" (Attachment A, copy on file) and used
slides to illustrate his presentation. He said that the
land considered for Ship Creek Landing was surrounded by the
Comfort Inn, the new Alaska Railroad headquarters office, as
well as the Alaska Railroad depot. LoPatin & Co. had been
paying lease payments on this land and intended to develop
it into one of the finest mixed-use developments in this
part of the United States. The development would contain
four major components; a hotel, an office building, an
upscale residential area, and a multi-attraction, tourist-
oriented entertainment center. Mr. LoPatin wanted to speak
to the last component, the proposed Northern Crossroads
Discovery Center.
End SFC-94 #41, Side 2
Begin SFC-94 #43, Side 1
Mr. LoPatin pointed out that in today's world of financing,
it was difficult to get project financing, especially for
leased land. However, his company was comfortable and
confident that the hotel, office building, and upscale
residential units would be conventionally financed. He
placed the 42-year history of his company's success as a
testimony that such financing would be achieved. In regard
to the Northern Crossroads Discovery Center, he believed
there was a unique opportunity allowing the railroad to
issue tax-exempt bonds that could be sold for the
development of a private-purpose corporation. This unique
opportunity was part of federal legislation that allowed the
railroad to be sold from the federal government to the state
of Alaska. He said that Bob LeResche, LeResche & Co.,
Juneau, and Eric Wohlforth, Wohlforth Argetsinger Johnson &
Brecht, attorneys, Anchorage, could attest to this fact.
The Alaska Railroad, as an agency of the state, was free to
sell tax-exempt bonds for trains, rails, office buildings,
etc. for public and railroad purpose. The provision in the
federal law that allowed the development for Ship Creek
Landing had nothing to do with the railroad's ability to use
tax-exempt financing for trains and railroad purposes.
These tax-exempt bonds were something special and unique.
He wanted to clarify that this was not something that the
Railroad was using for private purpose.
He attested to the fact that Anchorage was the center of a
European and Asian crossroads and that could provide
tremendous opportunities to market both the Northern
Crossroads Discovery Center and Shipcreek Landing. LoPatin
& Co. expected this facility to bring more international
travelers, tourists, businesses, and companies to the
Anchorage and Alaska area.
With a slide (third page of the handout) Mr. LoPatin
illustrated the proposed development on the leased land. In
answer to Senator Jacko, he said the point of land already
existed and was called Shipcreek Point. It was now a boat
storage with an existing municipal launch facility. The
next slide and page of the handout showed a closeup of the
Northern Crossroads Discovery Center and its relationship to
the hotel, conference center, residential, and railroad
station. He explained that HB 338 addressed only the
Northern Crossroads Discovery Center and not the other
portions of the development.
He went on to say that the Discovery Center was a public
amenity, and the construction cost was estimated to be $58
million, not including some soft costs. It would be
composed of three major pavilions, the Omnimax Theatre, the
Hologram Theatre, and finally the Museum of St. Petersburg.
In addition, there would be crafts, demonstrations, and
other inter-activities for the public. It was designed
around a study done by Economic Research Associates, Beverly
Hills, California, who started with Disney. They had
estimated this facility would generate an additional $41.6M
to the area economy in lodging facilities, food, etc., not
including revenues to the facility.
He said the facility complements downtown and would not
compete with existing shops. The concept was that it would
give tourists the opportunity to see the beauty of Alaska
and use Anchorage as a gateway to enter other areas of
Alaska. In addition, the facility would allow residents of
Anchorage an opportunity to view an Omnimax film series
during the off-season.
In answer to Co-chair Frank, Mr. LoPatin said the existing
Alaska Experience Theater in downtown Anchorage was a wide
screen theater, a different format than the Omnimax. Co-
chair Pearce made the point that these were still additional
theatres and the tourist would likely visit only one. Mr.
LoPatin argued that this facility would bring a better
market to the community and travelers would stay longer. He
reiterated that financing was difficult to obtain for leased
land and his company was not competing on equal ground in
regard to the ability to finance. Co-chair Frank disagreed
with that statement and indicated the location could be a
cause for their problems with financing. Mr. LoPatin
assured him that the Discovery Center was not in a bad
location, and that financing and location were two separate
issues.
Mr. LoPatin went on to say that an exhibit by the
Smithsonian shown in Juneau called "Crossroads of the World"
brought together some of the finest pieces of Alaskan
artifacts. Forty percent of them came from the museum in
St. Petersburg, Russia. An agreement had been reached with
the museum of St. Petersburg to have a permanent annex in
the Discovery Center creating the first permanent annex of a
foreign museum in America.
Co-chair Pearce questioned the total visitor numbers used in
Mr. LoPatin's presentation. Mr. LoPatin quoted the number,
764,000 visitors to Anchorage, as confirmed by the Anchorage
Economic Development Corp., the Tourist Bureau in Alaska,
and McDowell & Associates of Juneau. Other calculations had
been made based on that number. He also remained convinced
that an additional 125,000 business related travel trips
were made to Anchorage. Co-chair Pearce said those numbers
did not seem to match any Division of Tourism statistics.
In answer to Co-chair Frank, Mr. LoPatin said that the
second largest tourist attraction was the Museum in
Anchorage which boasted a high rate of 40 percent
penetration. He said Denali was the highest reported with
Portage Glacier also an important attraction. Co-chair
Frank asked Mr. LoPatin if he was estimating 60 percent of
765,000 visitors at $30 each. Mr. LoPatin noted that the
McDowell Group believed the $30 admission price could be
raised. He had met with two large tour companies and
interest was strong. The biggest problem in Anchorage was
finding hotel rooms. He made the point that 76 percent of
the 765,000 tourists arrived in a three and half month
period so any facility needed to be able to handle a "bulge"
of visitors over a short span of time.
Co-chair Pearce asked how many of the 765,000 overnight in
Anchorage. She explained that tour ships bring tourists
from Seward and Whittier on buses to Anchorage giving the
tourist a small amount of free time to see anything. She
was afraid that the Discovery Center would just displace
other Anchorage attractions that were home owned. Mr.
LoPatin felt that Anchorage was a gateway (point of
departure or arrival) for most cruise ships and there was
the opportunity to catch tourists the day before their
cruise begins or the day after their cruise ends. The
cruise ships were not encouraging people to stay because
rooms were not available and they cannot afford passengers
staying in rooms that are reserved for in-coming cruising
passengers in those hotels. The hotel in this new facility
alone would have a large effect on Anchorage. It would not
decrease people's activities but increase Anchorage's
capacity for more overnight tourists.
Co-chair Pearce asked if financing through this bond
proposal would facilitate more conventional financing for
the hotel, since the hotel would be needed to provide the
rooms for these visitors. Mr. LoPatin felt that the room
generator (the Discovery Center) needed to be created before
the rooms were created. He expected other hotels to be
generated in addition to the hotel in this facility because
of the interest created by the Discovery Center. In answer
to Co-chair Pearce, Mr. LoPatin said that the first phase of
this facility would require about $125-150 million.
Co-chair Pearce noted that in testimony from the railroad,
and in her opinion, building a new World Trade Center was
fine, but all that was being done was a displacement of
people from the Tudor Road facility. Some of the
departments of the state were also interested in moving to
the new building and might negotiate lower rental
agreements. She reiterated that new businesses were not
being created to fill the new building. Mr. LoPatin said he
would not deny that tenants would move from one facility to
another but he maintained that if the World Trade Center
could operate efficiently, it would bring new businesses to
the area and help existing businesses expand. He felt the
World Trade Center was a much better advocate of that. He
repeated their belief that there were businesses in the
international markets looking for a home that would come to
Anchorage if it had a real World Trade Center. Also,
businesses in Anchorage would be able to expand if they
could go to a World Trade Center for one-stop shopping. He
had met with the Russian ambassador in Seattle where the
Russian council office operates even though over 50 percent
of its business is with Alaska. He felt a much better case
could be made for their relocation if Anchorage had a first
class World Trade Center.
At a public hearing at the Anchorage Assembly, an Alaskan
company said they were being solicited by Seattle to leave
Anchorage. Mr. LoPatin felt a World Trade Center in this
new location would be a huge step in the right direction in
helping keep local businesses in Anchorage.
In answer to Co-chair Pearce, Mr. LoPatin said that the
World Trade Center's inability to attract new businesses and
their lack of success was due to location and an inadequate
facility. He felt the World Trade Center needed to be first
class with meeting and conference space at a downtown
location.
In answer to Co-chair Frank, Mr. LoPatin said that expenses
on this kind of facility available for debt service would be
about 75 percent of the revenue, and $14M would go towards
operating, maintenance, and capital improvement expenses.
In answer to Co-chair Frank, Mr. LoPatin agreed that $3.5M
would be available to service debt. In answer to Co-chair
Frank's question regarding projected debt service, Mr.
LoPatin said that the project was about 300 basis points
above matching treasuries, placing the project at about 8
and half to 9 percent.
BOB LERESCHE, LeResche & Co., Juneau, via teleconference
from Anchorage, added that it would be 3 to 4 points about
treasuries, putting the project at about 9 to 10 percent and
debt service would be pushing that suggested $3.5M figure.
Co-chair Frank said that $55M times 10 percent would be
$5.5M. Mr. LeResche said that bonds would not be sold for
the entire $55M. In answer to Co-chair Frank, Mr. LoPatin
agreed that his company would provide equity of roughly 40
percent or $20M cash. Mr. LoPatin said that today it was
not possible to borrow $55M or any amount of money without
putting in some equity. Co-chair Frank said that 40 percent
equity seemed high. Mr. LoPatin argued that 25 to 33
percent was a standard cash equity requirement needed for
any financing.
Co-chair Frank asked Mr. LoPatin what return on their
investment was expected on the $20M. Mr. LoPatin said that
he could not give the committee an answer to that question
but his company was as demanding as a bank on their expected
return. He said they were not doing this not to make money,
and five, six, seven or eight percent would not make money
for them. Co-chair Frank said that the proposed $3.5M, to
cover interest and a little principle, would leave no return
on their investment at all. He then asked if the Discovery
Center was a "lost leader" for the hotels. Mr. LoPatin said
that some of that would be factored into the return but was
not able to give them an answer as to the exact expected
percentage of return on their investment. Mr. LoPatin
maintained that the Discovery Center would have to stand on
its own, and would not be treated as a throw-away, or a
break-even facility. The other element that would help
bring some of the numbers down was the expectation of
sponsorship grants of $5M to $8M. In answer to Co-chair
Frank, he said tour or communications companies might be
possible sources for grants.
Senator Kelly noted that many changes had been made in the
Labor and Commerce substitute of SB 338 including requiring
a feasibility study to be done by the railroad, paid for by
the LoPatin Developers, and a full performance and
completion bond by LoPatin payable to the railroad if the
Center was not completed. Senator Kelly went on to speak to
financing. He said the bill was structured so there would
be no faith and credit or moral obligation from the state of
Alaska, Alaska Railroad Corporation, or the municipality of
Anchorage on this project. That exact language would be
placed on the face of the tax-exempt bonds. Senator Kelly
called them "junk bonds" and Mr. LoPatin used the words
"high-yield." Senator Kelly admitted that there was a
demand for tax-exempt bonds. He felt that the state or
Anchorage would not be liable, and voiced his support of the
downtown project.
Co-chair Pearce asked for confirmation that the Alaska
Railroad Corporation would have no equity in the project.
Mr. LoPatin agreed that it would not. Mr. LoPatin asked Mr.
Wohlforth to respond to the railroad or the state's
obligation to pay as well as the railroad's ability to
borrow additional moneys for railroad purposes.
ERIC WOHLFORTH, Wohlforth Argetsinger Johnson & Brecht,
attorneys, via teleconference from Anchorage, agreed that
the language of SB 338 made it absolutely clear that there
was no railroad liability for the Discovery Center's bonds
or debt. The offering documents would contain bold-face
print to that effect. He confirmed that everything had been
done so far to exclude Railroad liability for the debt. As
far as the basic railroad statute was drafted, the only
ability of the Railroad to borrow for any purpose, recourse
or non-recourse, was with legislative permission and that
was what was sought with SB 338 for bonds for the Discovery
Center. The legislature would have to act to permit any
further borrowing for major capital purposes such as a
development like this.
Mr. LoPatin said that in terms of federal law, the Railroad
still had the ability to borrow tax-exempt money. Mr.
Wohlforth said that what inhibits the Railroad from
borrowing was the lack of legislative permission to do so.
Federal law had survived several major revisions of the
income tax code. The railroad still continued to have this
unique provision to borrow tax-exempt money for private
purposes which was essentially wiped out for other borrowers
in the 1986 reform bill.
Senator Jacko asked how the legislature could approve a $55M
authorization and still have no moral or legal obligation to
the state. Mr. LoPatin reiterated that federal law gave the
Railroad the unique ability to sell tax-exempt bonds for a
private purpose. The Alaska legislature had restricted how
the Railroad can use that distinct ability. As to this
project, the bonds were not general obligation bonds. They
would not in any way impinge on the Railroad's ability to
act like a railroad. The bonds would only be supported by
and backed by the revenues from this facility. If this
facility failed, the Railroad, the state, or the Anchorage
municipality, would in no way be effected. The bonds would
specifically say that the bonds were high-risk, and this
facility was sole collateral for repayment of those bonds.
Mr. LoPatin reiterated that there was no moral or legal
obligation to the Railroad, state, or municipality.
Senator Jacko asked at what point the 65 percent penetration
of 700,000 visitors would be achieved after the opening
date. Mr. LoPatin corrected the projection to 60 percent
and proposed those levels of penetration would be achieved
in three to four years.
In answer to Senator Jacko, Mr. LoPatin explained that the
"salmon center" referred to on page 19 of the Economics
Research Associates handout dated April 1992 (Attachment B,
copy on file) was a Juneau hatchery and was being used as an
example of visitor penetration. Mr. LoPatin said that the
Discovery Center would act as a marketing tool for all of
Alaska and could market salmon.
Senator Jacko asked if this was the first time the
legislature had authorized "junk bonds." Senator Kelly said
that "junk bonds" was his term because he himself would not
invest in them because of lack of collateral. He believed
other people would be willing to take the chance and invest
in this facility. Senator Kelly said he was not aware of
the legislature ever before authorizing these kind of bonds
through the railroad.
End SFC-94 #43,
Begin SFC-94 #43, Side 2
Mr. LeResche noted that this was unique today but prior to
the 1986 Tax Reform Act, AIDEA sold billions of dollars of
high-yield bonds secured only by project revenues. People
around the country also sold billions of dollars worth of
these kinds of bonds. There were still some in people's
ownership and a demand probably existed for these high-yield
municipal bonds. It was not a new concept, but this type of
bond had survived the 1986 Tax Reform Act.
Co-chair Frank asked if there was any dollar limit to the
number of bonds that could be issued by the Alaska Railroad
Corporation. Mr. Wohlforth said the only limit was
legislative approval. Co-chair Frank asked what pay-back
terms would be on the bonds. Mr. LeResche said that the
term for the bonds would be as long as possible, perhaps 20
years.
Co-chair Frank asked for other examples of projects financed
prior to 1986 through stand-alone AIDEA financing where
there would be no moral obligation to the state. Mr.
Wohlford listed Alaska Airlines, Alaska Pipeline (M-Star),
Louisiana Pacific, American President Line's dock at
Unalaska, as examples of companies that had issued bonds.
In answer to Co-chair Frank, Mr. Wohlford said that
typically, general obligation bonds were issued by private
companies. Co-chair Frank, referring to one of his
examples, asked if it would have been termed "Alaska
Airlines full faith and credit." Mr. Wohlford agreed.
Co-chair Frank asked what was envisioned for this project.
Mr. Wohlford said that he did not know what the ultimate
financing would be. It would be project financing and that
would be where the parties would look for ultimate
repayment. Mr. LeResche said other bonds had been issued
that did not remotely include anyone's full faith and
credit. For example, several native corporations in
southeast built a dock at Klawock with $12M-$14M worth of
AIDEA project bonds. At the Energy Authority, $30-35M worth
of conduit bonds were sold for the Solana Energy Project.
Co-chair Frank asked if LoPatin & Co.'s full faith and
credit would be put up for the bonds. Mr. Wohlford said
that if the bonds were enhanced by an outside letter of
credit bank, or bond insurance, those entities would tie up
every full faith and credit of LoPatin & Co.'s assets that
they could to provide a letter of credit. In answer to Co-
chair Frank, Mr. Wohlford said it was not appropriate to
discuss this with LoPatin & Co. until the feasibility study
for the bond market was complete.
Co-chair Frank asked Mr. Wohlford if he thought it was
proper for the legislature to authorize this before the
feasibility study was complete and terms and conditions were
still unknown. Mr. Wohlford said that this bill included a
requirement for a feasibility study, and the bond market
would absolutely require it. He felt Mr. LoPatin would not
want to complete a feasibility study without assurance that
if the study came out positively, the Railroad would have
the authority to sell the bonds. Senator Kelly noted that a
feasibility study had been done but the problem was Mr.
LoPatin's company contracted it making it unacceptable to
the bond market (some parts of it are found in Attachment
B). He pointed out that this feasibility study had said
that the Discovery Center would be feasible and that was why
LoPatin & Co. was in support of the Discovery Center
project. The feasibility study needed for the bond market
would have to be done and the cost would be paid for by
LoPatin & Co.
Mr. LoPatin explained the process that was to follow.
Before the sale of bonds, a detailed feasibility study must
be completed with performas including capital construction
contracts and budgets. Once that happens, the bond market
would know what the facility would cost, and its revenues,
as best projected, so that an amount could be set for the
sale of bonds. For all this to happen, legislative
authority had to be in place first. Moving this bill would
not guarantee that this facility would be built. Other
steps would have to happen, but this was the first step. It
could not proceed without it. Senator Kelly remarked that
the Anchorage municipality's approval had been the first
step and $5.5M had been put into the Ship Creek landing
project a few years ago.
Co-chair Pearce announced that SB 338 would be HELD until
March 16, 1994, 9:00 a.m. At that time SB 316, SB 321, and
SB 148 would also be heard. She hoped SB 190 would be heard
March 17, 1994.
SCHEDULED BUT NOT HEARD:
CS FOR SENATE BILL NO. 148(TRA):
An Act relating to legislative approval of certain acts
of the Alaska Railroad Corporation; taxation of certain
property of the Alaska Railroad Corporation; members of
the board and chief executive officer of the Alaska
Railroad Corporation; meetings of the board of
directors of the Alaska Railroad Corporation; and
providing for an effective date.
CS FOR SENATE BILL NO. 316(RES):
An Act relating to commercial fishing penalties.
CS FOR SENATE BILL NO. 321(JUD):
An Act relating to the taking of a legible set of
fingerprints when a person is arrested, upon initial
appearance or arraignment, upon the conviction of the
person, and when the person is received at a
correctional facility, and providing that the set of
fingerprints shall be provided to the Department of
Public Safety; relating to criminal and crime records
and information; requiring the reporting of information
concerning homicides, suspected homicides, and violent
sexual assaults to the Department of Public Safety for
analysis; requiring the Department of Public Safety to
participate in the Federal Bureau of Investigation,
Violent Crimes Apprehension Program.
ADJOURNMENT
The meeting was adjourned at approximately 11:10 a.m.
| Document Name | Date/Time | Subjects |
|---|