Legislature(1993 - 1994)
04/20/1994 09:45 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
April 20, 1994
9:45 a.m.
TAPES
SFC-94, #73, Side 2 (375-000)
SFC-94, #75, Side 2 (000-end)
CALL TO ORDER
Senator Steve Frank, Co-chair, convened the meeting at
approximately 9:45 a.m.
PRESENT
In addition to Co-chair Frank, Senators Rieger, Kerttula,
and Sharp were present. Senator Kelly joined the meeting
after it was in progress. Senator Jacko was absent from the
meeting.
ALSO ATTENDING: Benjamin Brown, aide to Representative
Toohey, sponsor to HB 327; Pete Jeans, Real Estate
Investment Officer, Alaska Permanent Fund Corp.; Jim Kelly,
Research & Liaison Officer, Alaska Permanent Fund Corp.;
Larry LaBolle, aide to Representative Richard Foster,
sponsor of HB 407; Juanita Hensley, Chief, Driver Services,
Division of Motor Vehicles, Department of Public Safety;
Terry Brenner, private citizen; Mike Greany, Director,
Legislative Finance Division; representatives of the media,
aides to committee members and other members of the
legislature.
SUMMARY INFORMATION
CSHB 498(FIN): An Act providing for exploration incentive
credits for activities involving locatable
and leasable minerals and coal deposits on
certain land in the state; and providing for
an effective date.
Withdrawn from the agenda.
HB 327: An Act extending the termination date of the
Board of Veterinary Examiners; and providing
for an effective date.
Benjamin Brown, aide to Representative
Toohey, sponsor to HB 327, testified in
support of the bill. HB 327 was REPORTED out
of committee with a "do pass," and a zero
fiscal note for the Department of Commerce &
Economic Development.
HB 373: An Act relating to investments of the
permanent fund involving equity interests in
and debt obligations secured by mortgages on
real estate; and providing for an effective
date.
Pete Jeans, Real Estate Investment Officer,
and Jim Kelly, Research & Liaison Officer,
Alaska Permanent Fund Corp., testified in
support of HB 373. Discussion was had by
Senators Kerttula, Rieger, Kelly, Sharp and
Co-chair Frank regarding real estate
investments and the Senate version of the
bill. HB 373 was HELD in committee.
HB 407: An Act relating to issuance of commemorative
gold rush motor vehicle license plates.
Larry LaBolle, aide to Representative Richard
Foster, sponsor of HB 407, testified in
support of the bill. Juanita Hensley, Chief,
Driver Services, Division of Motor Vehicles,
Department of Public Safety, answered
questions and addressed the fiscal note.
Terry Brenner, private citizen, spoke in
support of new plates and suggested changes
to the small plates on motorcycles and
trailers. A letter of intent was drafted to
address those concerns. SCSHB 407(FIN) was
REPORTED out of committee with a "do pass," a
letter of intent, and zero fiscal note for
the Department of Public Safety.
CSSB 67(FIN): An Act amending provisions of ch. 66, SLA
1991, that relate to reconstitution of the
corpus of the mental health trust and to the
manner of enforcement of the obligation to
compensate the trust; and providing for an
effective date.
Scheduled but not heard.
HB 327:
An Act extending the termination date of the Board of
Veterinary Examiners; and providing for an effective
date.
CO-CHAIR FRANK invited Benjamin Brown, aide to
Representative Toohey, sponsor of HB 327, to join the
members at the table.
BENJAMIN BROWN said that HB 327 simply extended the Board of
Veterinary Examiners for four years and made no other
changes to their statutory authority or composition other
than extending their life span to 1997.
SENATOR RIEGER said he had heard no complaints regarding
this Board. Senator Kerttula remarked that individuals
practiced veterinary services long before they were licensed
by the state.
SENATOR KERTTULA MOVED for passage of the corrected version
of HB 327 from committee with individual recommendations.
HB 327 was REPORTED OUT of committee with a "do pass," and a
zero fiscal note from the Department of Commerce & Economic
Development. Co-chair Frank, Senators Kerttula, Sharp and
Rieger signed "do pass."
HOUSE BILL NO. 373:
An Act relating to investments of the permanent fund
involving equity interests in and debt obligations
secured by mortgages on real estate; and providing for
an effective date.
Co-chair Frank announced that HB 373 was before the
committee. He invited Pete Jeans, Real Estate Investment
Officer, and Jim Kelly, Research & Liaison Officer, both of
the Alaska Permanent Fund Corporation, to join the members
at the table.
JIM KELLY said the purpose of the bill was to allow the
Permanent Fund to purchase up to 100 percent interest in
real estate, which was now limited to 40 percent. He noted
that the Board of Trustees completely supported this change,
and the bill had passed the House with only one opposing
vote. The bill also passed out of Senate Judiciary
unanimously. He said the Permanent Fund had about $1
billion invested in real estate out of a $15.1 billion fund.
This equated to a seven percent investment in real estate.
Fifteen years ago the legislature had given the fund a real
estate investment limit of 15 percent. The Board of
Trustees had further limited real estate investments to 10
percent, give or take a percent or two. Passage of HB 373
would enable the Fund to achieve the 10 percent investment
in real estate.
Mr. Kelly gave two reasons that the Permanent Fund chose
real estate for investments. One, to minimize portfolio
risk, and two, to maximize return on investments. The real
estate portfolio had been a good performer over the long
term with an 8.17 percent return over the last ten years.
It was in the top five percent among institutional investors
in the country. The Permanent Fund was in the top ten of
the largest institutional investors and one of the very best
in the country. In the last two quarters, real estate had
been the best performer. HB 373 would help the Board do a
better job in real estate investments.
In answer to Senator Kerttula, in regard to overseas
investment loss, Mr. Kelly said that of March 14, there had
been a $1.5 billion investment in overseas stock which was
now worth $1.7 billion putting that investment $200M above
water in non-US equities. Senator Rieger commented that
international markets had held well in the last few weeks,
and felt it was one of the best diversifications the Fund
had done.
PETE JEANS said that the 40 percent rule in regard to real
estate had worked well for the past 10 years. But one of
the problems that had come up in the last few years was that
more pension funds were getting involved in real estate, and
by only holding 40 percent, the Fund was in a minority
position in all holdings. It was an issue of control. If
the Fund decided to sell a property, and the partners were
not convinced to sell, the property must be held. It tied
the hands of the Fund in over 200 properties. He felt the
Fund needed to be able to control its own destiny and had
proved itself with a history of success. He said, however,
there was still the intention to co-invest. Senator Rieger
agreed that in a real estate partnership it was the worst
position to not have the power to affect decisions, and
spoke in support of the Fund receiving this alternative.
In answer to Senator Kerttula, Mr. Kelly said that an REIT
was stock secured by real estate. He felt they were
overpriced and the Fund had not invested in any. Mr. Kelly
went on to answer another question by Senator Kerttula,
saying that there were three real estate investments in
Alaska; the Frontier Building in Anchorage, the Goldbelt
Building in Juneau, and the Port Plaza in Ketchikan.
In regard to the Frontier Building, the Fund only held the
mortgage, did not own the building, and was not involved in
negotiating leases. Mr. Kelly explained that there was no
limit on the amount of investments that could be done in
Alaska but the Board felt that Alaska did not have the
opportunity for much institutional real estate.
Senator Kelly requested a copy of the Senate version of HB
373, CSSB 245(STA).
Recess 9:50am
Reconvene 10:05am
Senator Kelly said that a provision was added to the State
Affairs version that said the Board of Directors had a
fiduciary responsibility to the people of the state. It
seemed clear but Senator Rieger wanted that language added
to the statute.
He went on to say that this version said the Fund could own
up to two-thirds of a project not to exceed $100M in any one
project. He cited testimony in the State Affairs Committee
that said control was the issue not necessarily 100 percent
ownership.
In answer to Co-chair Frank, Mr. Kelly said that Tyson's
Corner in Washington D.C. was the single, biggest project
invested in by the Fund. It was a shopping center, and the
Fund owned 38 percent with an investment of $150M. He said
that he could not imagine the Board of Trustees ever
allowing the Permanent Fund to invest $500-600M in one
property.
End SFC-93 #73, Side 2
Begin SFC-93 #75, Side 1
Mr. Kelly spoke in opposition of placing a $100M limit on
each investment. He said the Fund needed the option of
getting out of a bad deal when it was in a bad deal and
getting into a good one when it could. Instead of
increasing safety, this limitation added risk. In answer to
Co-chair Frank, Mr. Kelly said the Board did not want a
limit. Senator Kelly commented that these investors did not
invest those amounts of money in their own lives and why
should they be given the authority to do it with the Fund's.
To everyone's amusement, Co-chair Frank cited the
legislature that dealt with a billion dollar budget.
Mr. Jeans said that on every real estate investment, there
had been a buy-sell provision, and it had never been
exercised because of its legality. He noted that provision
was used to pull partners to the table to talk but the
partners always knew the Fund could not go to 100 percent
which caused a loss of negotiating power. Co-chair Frank
suggested that language be added to HB 373 that would allow
the Fund to invest to 100 percent on a project for the
purpose of exiting a real estate investment. Mr. Jeans was
not in total support of that suggestion but agreed that
anything was better than the present situation.
Co-chair Frank and Senator Kelly suggested additional
language be drafted using CSSB 245(L&C) as a base document.
Senator Rieger agreed with the concept of increasing
holdings in order to exit a real estate investment.
Mr. Kelly said that CSSB 245(L&C) would be acceptable to
work with except for one exemption. He said a provision
regarding fiduciary duties required a title change from HB
373, and asked it be removed so the title could remain the
same. Senator Rieger said that a legal opinion would be
requested regarding the title.
In answer to Senator Kelly regarding how large a project the
Fund could invest, Mr. Jeans said that a resolution was
presented to the Board once a year that detailed what could
be done in real estate, including specific limits. He said
that process would not change and limits would continue to
be put on real estate investments.
Co-chair Frank announced that HB 373 would be HELD in
committee.
CS FOR HOUSE BILL NO. 407(STA):
An Act relating to issuance of commemorative gold rush
motor vehicle license plates; and providing for an
effective date.
Co-chair Frank announced that HB 407 was before the
committee. He invited Larry LaBolle to join the members at
the table.
LARRY LABOLLE, aide to Representative Foster, sponsor of HB
407, said the bill established a commemorative plate for the
Gold Rush Centennial. In answer to Senator Kelly, Mr.
LaBolle asked Juanita Hensley to speak to the cost of the
plate.
JUANITA HENSLEY, Chief, Driver Services, Division of Motor
Vehicles, Department of Public Safety, said the $30 fee
would be the same as most vanity plates. She said the
Department did not have any objection to $30 or $50. She
cited the hot rod plate fee in last year's legislation by
Senator Kelly was $50.
Senator Sharp MOVED amendment 1 which would insert the words
"in consultation with the Alaska Gold Rush Centennial Task
Force" on page 1, line 8, giving some oversight to the Task
Force. No objection being heard, it was ADOPTED.
In answer to Senator Kelly, Ms. Hensley said that the plates
would cost approximately $15,400 and revenue would be
$30,000.
Senator Rieger asked if this bill could be used to make a
new design for regular Alaskan license plates. Senator
Kelly said that would be a floor amendment. Ms. Hensley
said the State Affairs version in the House would have
allowed the state to design a new license plate. The House
Finance Committee later went back to the original bill.
In answer to Senator Kelly, Ms. Hensley said that Alaska
required two plates per car.
Senator Rieger agreed that might be a floor amendment but
felt the Commemorative Gold Rush license plate would make a
good standard plate for the next couple of years and would
relieve boredom. Mr. LaBolle said Representative Foster had
not been opposed to the State Affairs version which did
accomplish that.
Discussion followed regarding CSHB 407(STA). Senator Rieger
MOVED for adoption of CSHB 407(STA) "K" version. No
objection being heard, it was ADOPTED.
Co-chair Frank MOVED for adoption of amendment 2 which would
leave the words "The Last Frontier" on the plates. No
objection being heard, it was ADOPTED.
Ms. Hensley pointed out that the Department had already
ordered the plates for 1995 so the effective date of the
bill would be September 1, 1996. She offered a new fiscal
note for this version of the bill. She said the first half-
year would generate revenue of $66.5 and operating costs of
$45.0. FY97 showed $135 revenue and operating costs of
$90.1 for the full year. She said operating costs were
based on the department's estimate that 25 percent of
registered owners would want the new design.
Senator Sharp MOVED amendment 1 that had been ADOPTED
earlier in the meeting. Senator Rieger questioned giving
the Task Force much say considering this new version of the
bill. Senator Sharp confirmed that the Task Force would
only provide suggested designs and the Commissioner would
make a final decision. Senator Rieger REMOVED his
objection. No further objection being heard, it was
ADOPTED.
Senator Sharp MOVED for passage of CCSHB 407(FIN) as amended
out of committee with individual recommendations. No
objection being heard, it was REPORTED OUT of committee with
a "do pass" and a zero fiscal note for the Department of
Public Safety. Co-chairs Frank and Pearce, Senators Kelly,
Rieger, and Sharp signed "do pass." A letter of intent was
ADOPTED after the following testimony and included with the
bill.
Co-chair Frank apologized to Terry Brenner, private citizen,
who had wanted to testify on HB 407 and now invited him to
join the members at the table.
TERRY BRENNER spoke in support of HB 407. He pointed out
that the colors blue and gold of the Alaska flag had been
used since 1948. There had been two exceptions, the totem
and the bear, which were both excellent plates. He felt the
license plate was an important symbol of the state as a
person travels. It was widely read and should reflect the
taste of the state in general. He wanted to encourage any
commemorative plate be expanded to include light trucks and
motorcycles. He toured extensively on motorcycles around
the country and had been mistaken for an Oregon resident
several times. He reiterated his support of HB 407 and the
commemorative plate becoming the standard one.
Ms. Hensley returned to the table and explained that HB 407
would not include the small license plates used on
motorcycles, or trailers. They were so small, it was hard
to include any additional information. In answer to Co-
chair Frank, Ms. Hensley said that the colors could be
reversed so not to be confused with Oregon. After
consideration, she suggested the department might just use a
different color because the plate numbers needed to reflect
easily.
Mr. Brenner suggested the possibility of a change in
lettering like the 1966 plate. He agreed that the design
could not be included on the smaller plates.
Co-chair Frank asked if a letter of intent could be included
in the bill asking the Department of Public Safety to
consider changing the colors of the smaller plates to
distinguish them from other states. Ms. Hensley said she
saw no problem with that. She also stated that more designs
were being considered to be offered as vanity plates.
Co-chair Frank MOVED for adoption of a letter of intent to
be included with SCSHB 407(FIN). No objection being heard,
it was ADOPTED. (Earlier in the meeting the bill had been
REPORTED OUT of committee.)
SCHEDULED BUT NOT HEARD:
CS FOR SENATE BILL NO. 67(FIN):
An Act amending provisions of ch. 66, SLA 1991, that
relate to reconstitution of the corpus of the mental
health trust and to the manner of enforcement of the
obligation to compensate the trust; and providing for
an effective date.
WITHDRAWN FROM THE AGENDA:
CS FOR HOUSE BILL NO. 498(FIN):
An Act providing for exploration incentive credits for
activities involving locatable and leasable minerals
and coal deposits on certain land in the state; and
providing for an effective date.
ADJOURNMENT
The meeting was adjourned at approximately 10:45 a.m.
| Document Name | Date/Time | Subjects |
|---|