Legislature(1993 - 1994)
03/16/1994 09:10 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 16, 1994
9:10 a.m.
TAPES
SFC-94, #32, Side 1 (000-end)
SFC-94, #32, Side 2 (000-end)
SFC-94, #34, Side 1 (000-325)
CALL TO ORDER
Co-chair Drue Pearce convened the meeting at approximately
9:10 a.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators Kelly,
Rieger, and Sharp were present. Senators Jacko and Kerttula
arrived soon after the meeting began.
ALSO ATTENDING: Senate President Rick Halford; George
Utermohle and Jerry Luckhaupt, staff counsel, Legal Services
Division, Legislative Affairs Agency; Col. Bill Valentine,
Division of Fish and Game Enforcement, Dept. of Public
Safety; David Ingram, Commercial Fisheries Entry Commission,
Dept. of Fish and Game; Mark Hickey, Contract Lobbyist for
the Alaska Railroad; Kelly Goode and Dave Thompson, aides to
Senator Halford; and aides to committee members and other
members of the legislature.
ALSO PARTICIPATING VIA TELECONFERENCE:
Mark LoPatin of LoPatin & Company - Detroit,
Michigan
Ken Vassar of Wohlforth, Argetsinger,
Johnson & Brecht - Anchorage,
Alaska
SUMMARY INFORMATION
SB 148 - ALASKA RAILROAD CORPORATION
Comments were presented by Dave Skidmore and Mark
Hickey. Extended discussion of both SB 148 and SB
338 followed. The bill was subsequently HELD in
committee pending receipt of an opinion and
proposed new language from legal services as well
as testimony from directors of the railroad.
SB 266 - DIRECT-ENTRY MIDWIVES/BD & PRACTICES
Co-chair Pearce sought and received authority to
WAIVE SB 266 from committee.
SB 308 - ADMIN ACTION RE LAND/RESOURCES/PROPERTY
Co-chair Pearce announced that David Rogers had
been hired to meet with land-use entities
regarding the bill. Subcommittee work will not
commence until recommendations from those meetings
have been reviewed and evaluated.
SB 316 - FISHING VIOLATIONS:FINES/BURDEN OF PROOF
Testimony was presented by Dave Thompson, Col.
Bill Valentine, and George Utermohole. CSSB 316
(Res) was REPORTED OUT of committee with a "do
pass" recommendation, $10.4 fiscal note from the
Dept. of Public Safety, and a $60.1 note from the
Dept. of Law.
SB 321 - FINGERPRINTING AND CRIME RECORDS
Testimony was presented by Kelly Goode. CSSB 321
(Fin) was REPORTED OUT of committee with a "do
pass" recommendation and zero fiscal notes from
the Dept. of Public Safety. A zero fiscal note
from the Dept. of Corrections was later attached
to the bill as well.
SB 338 - ALASKA RR REVENUE BONDS:SHIP CREEK
Discussion was had with Mark Hickey and by
teleconference with Mark LoPatin and Ken Vassar.
The bill was subsequently HELD in committee
pending discussion with directors of the railroad.
SB 321 - FINGERPRINTING AND CRIME RECORDS
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 and suspected homicides 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.
Co-chair Pearce directed that SB 321 be brought on for
discussion and referenced a draft committee substitute (work
draft 8-LS1649\R, Luckhaupt, 3/15/94).
KELLY GOODE, aide to Senate President Halford, came before
committee. She explained that the proposed bill imposes a
statutory requirement that fingerprints be taken upon
arrest. It further requires law enforcement agencies,
statewide, to participate in the FBI violent criminals
apprehension program. That program involves a national data
base established for the purpose of locating serial killers
nationwide.
Ms. Goode next spoke to four changes between the Senate
Judiciary version and the draft "R" version:
1. Changes fingerprinting language to Dept. of Law
language
taken from SB 276.
2. Adopts the transitional period contained in SB
276.
The first year felonies would be fingerprinted,
and the second year misdemeanants would be
fingerprinted.
3. Removes language including violent sexual assault
in
homicides in the VICAP program.
4. Provides that local law enforcement agencies be
given forms by the Dept. of Public Safety on which
to submit discovery homicide information for
matching with federal criteria.
A further technical change was made changing the word
"crimes" to "criminals."
Co-chair Pearce voiced her understanding that fiscal notes
for the "R" version would remain zero. Ms. Goode concurred
and advised that the Dept. of Corrections would also be
submitting a zero note.
Senator Kerttula MOVED for adoption of CSSB 321 (Fin), "R"
version. No objection having been raised, CSSB 321 (Fin)
was ADOPTED.
Co-chair Pearce called for additional testimony on the bill.
None was forthcoming. Senator Kerttula MOVED that CSSB 321
(Fin) pass from committee with individual recommendations.
No objection having been raised, CSSB 321 (Fin) was REPORTED
OUT of committee with two zero fiscal notes from the Dept.
of Public Safety (one for the State Troopers and the other
for criminal records). A zero fiscal note from the Dept. of
Corrections was subsequently attached to the bill on March
18, 1994. Co-chairs Pearce and Frank and Senators Kelly,
Kerttula, and Sharp signed the committee report with a "do
pass" recommendation. Senator Rieger signed "no
recommendation."
SENATE BILL NO. 316
An Act relating to commercial fishing
penalties.
Co-chair Pearce directed that SB 316 be brought on for
discussion and referenced CSSB 316 (Res), a $10.4 fiscal
note from the Dept. of Public Safety, a $60.1 note from the
Dept. of Law, a sectional analysis, comments from the
commercial fisheries entry commission, and information from
the Division of Fish and Wildlife Protection regarding the
Bristol Bay Enforcement Program.
DAVE THOMPSON, aide to Senate President Halford, explained
that the proposed bill would tighten commercial fishing
penalties and increase the burden of proof on fishermen with
respect to evidentiary materials. There has been no stated
opposition to the bill up to this time.
Data compiled by the Dept. of Public Safety indicates that a
small group of fishermen are repeat offenders who make it
difficult for honest fishermen to ply their trade. During
the 1993 fishing season in Bristol Bay, 90 repeat offenders
were cited. In one case the history of offenses went back
to 1986. That individual had broken the law 18 times. Data
supports the contention that habitual violators cause the
bulk of the problems in commercial fishing. The proposed
bill targets those individuals.
Changes contemplated by the bill would add three new
subsections:
1. Allow for suspension of one or more of the
individual's
commercial fishing privileges for a period of at
least two years.
2. Allow for suspension of one or more of an
individual's
commercial fishing privileges and licenses for a
period of at least four years.
3. Allow for forfeiture of commercial or fishing
privileges and licenses upon a person's fifth or
subsequent conviction in a ten-year
period.
The bill also doubles the fines and changes the burden of
proof from a "preponderance of" to "clear and convincing"
evidence with respect to fish found on board a vessel and
whether or not they have been taken illegally.
Data gathered by the Division of Fish and Wildlife
Protection Services shows that in 1993 the Bristol Bay
fishery had an all-time high number of violations resulting
in 509 criminal charges. Gross fines exceeded $1 million.
There was also more than a 100% increase in "closed water"
cases, exceeding the previous high by more than 210 cases.
In the course of plea bargaining, misdemeanors are reduced
to violations. When that occurs, there is no record of the
wrong-doing. It is thus difficult to effect subsequent
fines, much less attach an individual's fishing permit. The
number of cases in Bristol Bay are increasing while the
fines per case are decreasing. Both judges and prosecutors
are culpable. A fine of $1.0 against an illegal catch of
$10.0 creates an economic incentive to break the law. The
Division of Fish and Wildlife Protection made a great effort
to increase surveillance and "crack down on violators."
Senator Rieger inquired concerning the difference between
"clear and convincing evidence" and a "preponderance" of the
evidence. Mr. Thompson voiced his understanding that the
change increases the burden of proof upon the fisherman.
BILL VALENTINE, Director, Division of Fish and Wildlife
Protection, Dept. of Public Safety, came before committee.
He explained that under a preponderance of the evidence, all
the fisherman needs to verify his argument is one more bit
of evidence than the department has in proof of the
violation. An additional crewman who says that the fish
were not caught in violation would tip the scale in his
favor. Much more would be needed to establish "clear and
convincing" evidence. The fisherman would need the
testimony of workers on a tender, other fishermen, etc.,
individuals other than those crewing his boat.
Senator Rieger noted that language speaks not only to fish
found aboard a vessel but also fish "found at the fishing
site." He then inquired as to the extent of existing
language. Mr. Valentine advised that current language
speaks to "the preponderance at the site or on board the
vessel." He added that he had not been party to a scenario
in which a whole season's worth of fish would be at a
particular site. In the Bristol Bay salmon fishery, fish
are generally delivered daily to preserve freshness.
Senator Rieger next pointed to language in Sec. 3, relating
to forfeiture of fish taken as a result of commission of a
violation. He then asked if failure to have one's
identification aboard the vessel would constitute a
violation. Mr. Valentine acknowledged that it would be but
stressed that lower-level, small violations are covered by
the uniform bail schedule. That is similar to a traffic
ticket involving an established fine and "mail-in bail."
Those offenders cannot be charged at a higher level.
Senator Rieger voiced his understanding that uniform bail
provisions would override forfeiture. Mr. Valentine
concurred. He clarified that no forfeitures or loss of
fishing privileges are associated with small violations.
That is the distinction between a violation and a
misdemeanor. Senator Rieger referenced Sec. 3 language
calling for forfeiture for violations and again raised
questions. Mr. Valentine explained that the language in
question relates to higher violations for commercial fishing
in closed waters, commercial fishing during a closed period,
etc. Those violations have a direct impact on the fishery.
GEORGE UTERMOHLE, Legislative Counsel, Legal Services,
Legislative Affairs Agency, came before committee. He said
that preponderance of the evidence standards require that
the evidence be more likely than not that the evidence
supports a particular conclusion. Clear and convincing
evidence is a higher standard requiring more than just a
reasonable probability. It must create in the fact finder a
clear conviction that the facts exist. The highest standard
is "beyond a reasonable doubt."
Senator Jacko MOVED that CSSB 316 (Res) pass from committee
with individual recommendations. No objection having been
raised, CSSB 316 (Res) was REPORTED OUT of committee with a
$10.4 fiscal note from the Dept. of Public Safety and a
$60.1 note from the Dept. of Law. Co-chairs Pearce and
Frank and Senators Jacko, Kelly, and Sharp signed the
committee report with a "do pass" recommendation. Senators
Kerttula and Rieger signed "no recommendation."
SENATE BILL NO. 148
An Act relating to the Alaska Railroad Corporation; and
providing for an effective date.
Co-chair Pearce directed that SB 148 be brought on for
discussion. She noted that it was introduced by committee
in the first session of the current legislature, and she
referenced 1993 adoption of work draft CSSB 148 (Fin) (8-
LS0583\X, Utermohle 4/12/93) and Amendments 1 through 3.
Co-chair Pearce next directed attention to an updated work
draft (8-LS0583\I, Utermohle 3/11/94) which she explained
incorporates the previously adopted amendments. Co-chair
Frank MOVED for adoption of CSSB 148 (Fin), "I" version in
place of the previously adopted "X" version. No objection
having been raised, CSSB 148 (Fin), "I" version, was
ADOPTED.
Co-chair Pearce referenced a pending Amendment No. 4 and a
March 11, 1994, memorandum (copy on file) thereto. DAVID
SKIDMORE, aide to Senator Frank, came before committee. He
explained that the proposed bill would bar the chief
executive officer of the Alaska Railroad Corporation from
serving as the member of the railroad board of directors
required by statute to have certain types of railroad
experience. If the bill were to become effective
immediately, it would render Mr. Hatfield's position on the
board illegal. Amendment No. 4 creates a transition period
to delay the effective date of that provision of the bill
until the Governor appoints a board member who fills the
railroad experience qualification. The Amendment states
that the Governor is to appoint an individual with the
necessary qualifications, this fall, should either Mr.
Chapados or Mr. Lounsbury fail to continue to serve on the
board.
Co-chair Pearce noted that Amendment No. 4 was drafted for
incorporation within the previously adopted version "X"
which has since been replaced by version "I." She then
voiced need to conceptually adopt the amendment for
inclusion in the proper place within CSSB 148 (Fin), "I"
version. Co-chair Frank MOVED for adoption of Amendment No.
4. No objection having been raised, Amendment No. 4 was
CONCEPTUALLY ADOPTED into CSSB 148 (Fin).
MARK HICKEY, next testified on behalf of the Alaska Railroad
Corporation. He remarked that the newly-adopted draft
addresses a number of concerns raised by the railroad, but
three areas of concern remain:
1. Sec. 7, page 3, contains language allowing
participation
by board members by teleconference. This is
current practice. Sec. 7 may not be necessary.
2. Sec. 8, page 4, lines 8 through 12, raises concern
regarding the debt limit, particularly in light of
SB 338. There appears to be a problem between
these two pieces of legislation. Although non-
recourse revenue bonds are proposed, debt of the
railroad will be issued and the railroad will
already have exceeded "the total aggregate limit."
A possible fix might involve exemption of non-
recourse revenue bonds from this language. The
language was included as a way to deal with equity
participation in non-transportation activities.
Since that is addressed by subsection (6), another
means of curing the problem would be deletion of
subsection (3) (lines 8 through 12).
3. Sec. 8, page 4, line 18, contains a limitation to
prevent the railroad from obtaining an equity
position in a non-transportation activity.
The board of directors adopted a policy that
the railroad would not enter such an
arrangement. That policy remains in effect.
Placing this language in statute may create
potential for litigation.
Mr. Hickey next referenced provisions relating to the Nenana
land fill and informed members that the railroad is no
longer pursuing the project. Parties involved found that it
was not financially feasible, and there was local
opposition.
Speaking to the above-noted limitation on debt, Co-chair
Frank explained that it arose from the fact that statutes
presently require that the railroad receive legislative
approval prior to issuance of bonds. The Senator
acknowledged numerous methods of issuing debt. It was the
intent of the legislature, when it authorized acquisition of
the railroad from the federal government, to include the
legislature "in the loop" when the railroad issued debt.
Mr. Hickey noted that the original bill required that debt
exceeding $1 million be approved by the legislature.
Discussion followed between Co-chair Frank and Mr. Hickey
regarding language associated with issuance of debt rather
than bonds. The Co-chair said he would not support allowing
the railroad to issue debt of any kind while maintaining a
limitation on bonds.
Senator Rieger advised of his preference for incorporation
of the railroad as a stock corporation and issuance of all
shares of common stock to the state. That represents a step
toward independence and eventual privatization of the
railroad. He observed that the proposed bill provides a
good vehicle for development of that structure. Chapter 40
would then become the by-laws of the corporation, instead of
statute. Mr. Hickey explained that, at the time of
purchase, there was discussion of a similar arrangement.
One of the principal concepts involved the permanent fund,
and that raised many concerns. That approach was
subsequently dismissed, and the state conducted a "straight
purchase." The railroad board has not devoted time to this
issue. The approach raises many questions "about how this
would ultimately work down stream." Senator Kelly voiced
his understanding that selling the railroad would be in
direct conflict with the intent of the proposed bill. He
suggested that entities seeking to purchase the railroad
would not buy it "to run trains" but to develop railroad
land. That is where the value is. Co-chair Frank observed
that "that would be fine" if the entities were private.
Senator Rieger concurred, advising that if the railroad was
private, the legislature would not be adjudicating endless
issues relating to competition with truckers, land
developers, etc. Privatization would relieve 20 to 40 hours
of finance committee time per session. He suggested that
that effort be set in motion.
End: SFC-94, #32, Side 1
Begin: SFC-94, #32, Side 2
Mr. Hickey stressed need to consider transportation services
provided by the railroad and the importance of that service.
He concurred that private entities would be "very interested
in portions of the real estate . . . ." A mechanism has yet
to be developed that would ensure continuation of
transportation services under privatization. That is what
precipitated purchase of the railroad by the state. The
transportation services save the state considerable moneys
in terms of what moves on the railroad versus on the highway
system. Real estate assets are key to continuance of the
transportation role. Freight was an overall loss during the
past year. That service, even when well run, in marginal.
Senator Rieger commented on inability to secure tariff
charges to evaluate the economics of railroad freight
service with respect to the private sector. Senator Kelly
suggested that lack of competition to railroad
transportation would result in problems were the railroad
privatized. He pointed to lack of airline competition
between Juneau and Anchorage as an example.
Co-chair Pearce referenced page 4, line 9, noted provisions
precluding aggregated debt exceeding $50 million, and
concurred that passage of SB 338 would "arguable put them
over that limit." Senator Kelly suggested that addition of
"excluding non-recourse revenue bonds" would cure the
problem. Co-chair Pearce voiced her understanding that the
proposed language would preclude the railroad from issuing
bonds of more than $50 million for its own use, but the
current "federal window of opportunity" could be exploited.
In response to a question from Senator Kelly, Mr. Hickey
explained that the state wrote the majority of the transfer
act. It sought to ensure that the railroad would have a
wide range of authority, equal to public entities elsewhere,
to engage in railroad related projects to support the goals
and viability of the railroad without a state subsidy.
Co-chair Frank advised that his staff had been working with
legal services on issues relating to legislative approval.
Mr. Utermohle has said, and will provide written
confirmation, that subsection (3) ceilings set forth at page
4, lines 8 through 12, would not apply to debt specifically
authorized by the legislature. Co-chair Frank suggested
that language offered by Senator Kelly would provide an
exclusion from legislative approval for all non-recourse
bonds. Both Co-chair Pearce and Senator Kelly noted language
within Sec. 8 (2) requiring legislative approval prior to
issuing bonds. Co-chair Frank raised concern that another
form of debt would be utilized. Co-chair Frank stressed
need to work with legislative attorneys on development of
workable language. Senator Kelly voiced committee intent to
ensure that if the railroad issues the $55 million in non-
recourse revenue bonds, the issue is excluded from the debt
cap. Senator Rieger voiced his belief that draft "I"
language is sufficient to accomplish committee intent, and
no amendment would be necessary. Co-chair Pearce asked that
Mr. Utermohole provide a written opinion.
Senator Rieger inquired concerning the net profit for the
railroad over the past year. Mr. Hickey advised of a net
loss of $2.6 million comprised of $800.0 in freight and a
one-time write down of $1.8 based on reorganization and
early-out retirement payments to reduce the work force.
Senator Rieger remarked that the railroad should pay a
dividend similar to AHFC. Mr. Hickey spoke briefly to
continued losses in passenger services. Since that service
returns a considerable dividend to the state, the railroad
has covered the loss from operating moneys rather than
seeking a subsidy.
Senator Sharp voiced his understanding that the transfer act
provided tax exempt status for financing of railroad
upgrades and railroad related activities. He then suggested
that the tax exempt benefit might be lost if it is used for
other financing. Mr. Hickey noted that railroad real estate
(and flexibility in its development) was critical to
purchase of the railroad and its viability. Senator Sharp
voiced need for testimony from the chief executive officer
and railroad board of directors on both SB 148 and SB 338.
Discussion of the relationship of the two bills and the
railroad's position on them followed.
Co-chair Frank directed attention to Sec. 10 provisions
relating to the regional land fill at Nenana and noted
earlier comments that it could be removed from the bill. He
expressed reluctance to do so without consultation with
legislators from that area. Mr. Hickey voiced his
understanding that there is a possibility discussion of the
landfill will resume in the near term, at the proposed site.
There is potential over the next two to five years that the
project might make sense.
Senator Rieger pointed to information from the railroad
charting the corporation's real estate revenue plan
projected for 1993 through 1998 and cautioned that until the
railroad is privatized, the legislature will "have many more
hours at this table discussing the equity of each of those
projects . . . ."
SENATE BILL NO. 266
An Act extending the termination date of the Board of
Certified Direct-Entry Midwives; relating to the scope
of practice of certified direct-entry midwives; and
providing for an effective date.
Co-chair Pearce referenced a request from Senator Leman that
Senate Finance Committee waive referral of SB 266. The bill
issued by the Senate Labor and Commerce Committee simply
extends the board from 1994 to 1998. Senator Kelly
requested that Senator Leman be asked to ensure that
additional language incorporated within the original bill,
allowing midwives to regulate themselves, is not reinserted
when CSSB 266 (L&C) reaches the House. Co-chair Pearce said
she would advise Senator Leman of the request. No objection
having been raised, Senate Finance Committee referral of SB
266 was WAIVED.
SENATE BILL NO. 338
An Act relating to the issuance of revenue bonds for
acquisition and construction of the Alaska Discovery
Center for the Ship Creek Project in Anchorage;
relating to a study of the feasibility and financial
viability of the Alaska Discovery Center; relating to
construction of the Alaska Discovery Center; and
providing for an effective date.
Co-chair Pearce directed that SB 338 be brought on for
discussion, referenced correspondence of this date from
Wohlforth, Argetsinger, Johnson & Brecht as well as a copy
of the 1984 session law establishing the railroad, and noted
the teleconference participation of Ken Vassar from
Anchorage and Mark LoPatin from Detroit.
The Co-chair next directed attention to CSSB 338 (L&C), page
1, line 7, and noted need to correct the session law
citation from sec. 1(a) to sec. 1(b). NOTE - The proper
citation was subsequently determined to be sec. 1(a)(1)(B).
Senator Kelly MOVED to effect the technical change. No
objection having been raised, IT WAS SO ORDERED.
MARK LoPATIN, of LoPatin & Company, spoke via teleconference
from Detroit, Michigan. He concurred in dovetailing aspects
of SB 148 and SB 338. He stressed need to ensure that the
railroad understands that approval of SB 338 as a
legislative action should not impinge on the $10 million and
$50 million limitations set forth in SB 148.
Addressing concerns raised by Senator Sharp regarding use of
tax exempt financing for other than railroad related
purposes, Mr. LoPatin acknowledged that the benefit is a
quirk in federal law which was part of the original transfer
act. He stressed that the federal government has no ability
to prevent the railroad, as an agency of the state, from
selling tax exempt bonds for railroad purposes. That
includes rolling stock, track, storage, etc. That right
will not be impacted by "our using it." If the benefit was
abused or disappeared, the railroad would continue to have
the federal right to sell tax exempt bonds for public
purposes/railroad purposes. Mr. LoPatin acknowledged that
the federal government could eliminate the benefit, but, in
doing so, it would be eliminating the benefit for all public
agencies. He advised that he could not conceive of a
situation where it would "just apply to the railroad." The
railroad receives this benefit because it is owned by the
State of Alaska. The benefit allows the railroad to "go out
and do non-railroad purposes." The transfer act
contemplated non-railroad oriented activities that would
generate revenue to support railroad oriented activity.
In response to questions from Co-chair Frank, Senator Kelly
advised that provisions of CSSB 338 (L&C) were intended to
guard against "a half built building." The bottom line is
that if the project does not work, the railroad has a
building which can be used for something.
Discussion followed regarding lease arrangements and owner,
bondholder, and railroad interest in the project in case of
default. Mr. LoPatin acknowledged that the bondholders
would stand in primary position to take over operation of
the facility. They would not do so without assurance of a
return on capital. They would, however, continue to pay
rent to the railroad, or they too would be in default, and
the railroad would own the facility, free and clear. The
railroad's interest is prior to and superior to other
interests.
Discussion followed concerning lease terms for the 120
acres. Mr. LoPatin explained that the owner of the project
is responsible for rent payments to the railroad. Should
the owner default, the bondholders have a period of time to
cure the default. If they decline to do so, their interest
is extinguished. The railroad, state, and municipality
would be under no legal or moral obligation to make
payments. He further advised that he would have no
objection to language, suggested by Co-chair Frank, that the
state and/or the railroad would be under no obligation to
cure the default.
End: SFC-94, #32, Side 2
Begin: SFC-94, #34, Side 1
Co-chair Frank inquired concerning fair market aspects of
the rental agreements with the railroad. Mr. LoPatin
explained that as each piece of land is "carved out," there
is a new appraisal, and a new rental rate is structured.
Discussion of lease assignments followed.
Senator Sharp noted that it appears that, statutorily, the
board of directors of the Alaska Railroad is required to
exercise substantial discretionary power over the project in
review of studies to determine whether the center is
feasible and financially viable, etc. He then suggested
that the foregoing exudes a sense of direct project
involvement and responsibility. He further questioned
language at page 2, line 3, stating that the "Alaska
Railroad Corporation may loan the proceeds from the sale of
revenue bonds . . . ." Mr. LoPatin directed attention to
correspondence (copy appended as Attachment A) from
Wohlforth, Argetsinger, Johnson & Brecht and noted that
requirements for a feasibility study make a strong case for
the fact that the railroad has no obligation to repay these
bonds. They are purely revenue bonds.
KEN VASSAR, Wohlforth, Argetsinger, Johnson & Brecht, next
testified via teleconference from Anchorage. He
acknowledged the connection between the railroad and the
project but stressed that the connection does not translate
to a legal or moral obligation with respect to the bonds.
The legislation is extremely clear on that point. The bonds
are payable solely from revenues pledged for the bonds and
not from any other source. Railroad control of aspects of
the project does not impact that issue.
As background information, Mr. Vassar explained that in
order for the bonds to be tax exempt, they must be issued by
the railroad. The proceeds of bond sales will accrue to the
railroad which will, in turn, lend the proceeds to the
developer. Repayment of the loan and land lease payments
will be made from revenues from the project. The loan
payments will then repay the bonds. Mr. Vassar stressed
that the proposed bonds will not create state debt.
Senator Sharp again voiced need to hear from the railroad.
Co-chair Pearce asked if the railroad board had taken action
on the project. Mr. Hickey responded negatively. He said
the board had reviewed the project, and there is support for
the overall proposal. The board has not yet made a decision
as to whether or not the railroad will issue the bonds.
That decision will not be made until a number of thing
happen, including the independent feasibility study.
Senator Kelly asked if the board was "gun-shy." Mr. Hickey
acknowledged that since the proposed project represents "the
first use of this authority," the board has reservations.
In response to questions from Co-chair Frank, Mr. Vassar
described the sequence of events should the project be
approved. The railroad corporation would issue its bonds,
and underwriters selected by the corporation would buy the
bonds. Proceeds from the sale of bonds would flow to a
trustee--a large bank with trust powers, capable of handling
the accounts and doing the paperwork. The trustee would
deposit the proceeds of the bond sale into an account that
would be used to make the loan to the developer. Mr. Vassar
voiced his belief that the bank would handle the loan
similar to a construction loan with release of funds upon
completion of phases until the project is complete.
Following distribution of the loan, the trustee would
thereafter be responsible for collection of revenues to pay
back bond holders.
Co-chair Pearce noted that the board must feel a certain
level of comfort with the LoPatin proposal since the
railroad hired Mr. LoPatin to "do the development" over
strenuous objections by AEDC and others in Anchorage. She
then directed that SB 148 and SB 338 be HELD in committee
pending future discussion with Mr. Hatfield and members of
the board of directors of the railroad.
SENATE BILL NO. 308
An Act modifying administrative procedures and
decisions by state agencies that relate to uses and
dispositions of state land, property, and resources,
and to the interests within them, and that relate to
land, property, and resources, and to the interests
within them, that are subject to the coastal management
program; and providing for an effective date.
Co-chair Pearce noted that the committee had hired David
Rogers to work on oil and gas issues associated with SB 308.
He is presently in Anchorage meeting with land-use entities.
Subcommittee work on the bill will not commence until
recommendations from the Anchorage meetings have been
reviewed and evaluated.
ADJOURNMENT
The meeting was adjourned at approximately 11:10 a.m.
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