Legislature(1995 - 1996)
04/23/1996 08:45 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 23, 1996
8:45 a.m.
TAPES
SFC-96, #90-B, Sides 1 and 2
SFC-96, #91, Side 1 (000-462)
CALL TO ORDER
Senator Steve Frank, Co-chairman, convened the meeting at
approximately 8:45 a.m.
PRESENT
In addition to Co-chairman Frank, Senators Donley, Sharp,
and Zharoff were present. Senators Phillips and Rieger
arrived soon after the meeting began. Co-chairman Halford
arrived and assumed the chair as the meeting was in
progress.
ALSO ATTENDING: Representative Carl Moses; Keith Laufer,
assistant Attorney General, Governmental Affairs Section,
Dept. of Law; Lamar Cotten, Deputy Commissioner, Dept. of
Community and Regional Affairs; Dave Wilder, Vice-chairman,
Alaska Seafood Marketing Institute; Chris Gates,
representing The Aleut Company; Randy Simmons, Alaska Energy
Authority, Alaska Industrial Development and Export
Authority, Dept. of Commerce and Economic Development; Nico
Bus, Acting Director, Division of Support Services, Dept. of
Natural Resources; Sharon Young, State Recorder, Division of
Support Services, Dept. of Natural Resources; Tim
Benintendi, aide to Representative Moses; and aides to
committee members and other members of the legislature.
SUMMARY INFORMATION
SB 51 - DISPOSITION OF PERMANENT FUND INCOME
Senator Rieger moved to report the bill from
committee. The motion failed on a vote of 3 to 4.
SB 275 - STATE PROCUREMENT PRACTICES & PROCEDURES
Discussion was had with Dave Wilder. Senator
Donley distributed an Amendment for review by
members. The bill was held in committee for
further discussion.
SB 283 - DOCUMENT FILING, INDEXING, & RECORDING
Discussion was had with Sharon Young and Nico Bus.
The bill was subsequently REPORTED OUT of
committee with a zero fiscal note from the Dept.
of Natural Resources.
SB 284 - FOUR DAM POOL: RELATED FUNDS & BONDS
Discussion was had with Randy Simmons. CSSB 284
(Res) was subsequently REPORTED OUT of committee
with zero fiscal notes from the Dept. of Community
and Regional Affairs and Dept. of Commerce and
Economic Development.
SB 303 - MANAGEMENT OF CONSTIT BUDGET RESERVE FUND
Co-chairman Frank spoke to permissive rather than
mandatory provisions of a new draft. CSSB 303
(Fin) was then REPORTED OUT of committee with a
zero fiscal note from the Dept. of Revenue.
HB 466 - ADAK REUSE AUTHORITY
Discussion was had with Representative Moses,
Lamar Cotten, Chris Gates, and Tim Benintendi. An
Amendment by Senator Rieger was adopted. SCS CSHB
466 (Fin) was then REPORTED OUT of committee with
a $281.0 fiscal note from the Dept. of Commerce
and Economic Development and a zero note from the
Dept. of Community and Regional Affairs.
SENATE BILL NO. 283
An Act relating to filing, recording, and indexing of
documents with or by the Department of Natural
Resources; repealing certain filing requirements
concerning property involving nonresident aliens; and
providing for an effective date.
Co-chairman Frank directed that SB 283 be brought on for
discussion. NICO BUS, Acting Director, Division of Support
Services, Dept. of Natural Resources, came before committee
accompanied by SHARON YOUNG, State Recorder, Division of
Support Services, Dept. of Natural Resources. Mr. Bus
explained that the bill represents an effort to streamline
department operations. Due to budget reductions, the
department has explored means by which it might improve
processes. While much may be done internally to re-engineer
the work flow, certain statutes must be modified to gain
efficiencies. The department worked with title companies
and banks to produce the proposed legislation which will:
1. Streamline the recording process.
2. Reduce requirements documents must meet to be
recorded.
3. Allow a broader number of documents to be
recorded.
4. Reduce the likelihood that documents will be
rejected.
5. Make basic recording requirements specific and
easy
to understand.
With the foregoing changes, the division believes it can
process more work and make recording easier for the public.
Sharon Young advised that Section 1 relates to mining
documents. It streamlines the process and changes the date
by which mining records are recorded. The principal thrust
of AS 40.170.030 is contained within Section 3, which sets
forth basic recording criteria. The proposed bill adds a
few sections to existing criteria, but its major function is
to resolve some of the ambiguities in current statutes. A
further provision of the bill eliminates the classification
statute. That statute identifies specific documents
eligible for recording. It has been difficult to administer
because while 59 documents are identified, "hundreds and
perhaps thousands of different types of documents" reach
recording offices each year. Provisions within SB 283 would
do away with the classification and broaden law so that any
document is recordable if specific recording criteria are
met. It is estimated that 30 percent of all documents that
are now rejected would be recordable. Other provisions of
the bill are housekeeping and involve minor word changes
that will clarify the recording process in terms of
recording criteria and Uniform Commercial Code filings.
Brief discussion followed regarding signature requirements
for documents. Ms. Young advised that the proposed bill
identifies documents that require acknowledgements and would
limit acknowledgements to those documents.
Senator Sharp MOVED that SB 283 pass from committee with
individual recommendations and accompanying fiscal notes.
No objection having been raised, SB 283 was REPORTED OUT of
committee with a zero fiscal note from the Dept. of Natural
Resources. Co-chairman Frank signed the committee report
with a "do pass" recommendation. All other committee
members signed "no recommendation."
SENATE BILL NO. 284
An Act relating to the four dam pool transfer fund and
the power development fund.
Co-chairman Frank directed that SB 284 be brought on for
discussion. RANDY SIMMONS came before committee on behalf
of the Alaska Industrial Development and Export Authority
and was accompanied by KEITH LAUFER, Assistant Attorney
General, Governmental Affairs Section, Dept. of Law. Mr.
Simmons explained that the proposed bill would allow AIDEA
or AEA to issue bonds to make repairs to two of the four
projects which comprise the four dam pool. Repairs would be
made to the Tyee Lake project (which serves Wrangell and
Petersburg) and the Terror Lake project (which serves
Kodiak). Five utilities presently operate the four projects
(owned by AEA) through a long-term power sales agreement
with AEA. Under that power sales agreement, the state has
certain obligations which include making major repairs per
the proposed bill. The utilities have an obligation to:
1. Make payments that cover debt services on the
projects.
(Payments range between $8 and $11 million per
year.)
2. Cover day-to-day operational costs of the
projects.
Under 1993 legislation (AS 42.45.050), amounts paid by
utilities on debt service are pre-appropriated:
40% to PCE
40% to the Southeast Intertie
20% to the power development fund within the Dept. of
Community and Regional Affairs for small projects
and
grants.
The proposed bill addresses approximately $17 million of
repairs to the Tyee Lake Intertie. Over the last several
years, that intertie has been out of service on three
different occasions, cutting off power from the dam to
communities. The $3.5 million relates to the Terror Lake
tunnel. To meet contractual obligations, AEA can make the
repairs in one of three ways:
1. A capital appropriation
2. Through the issue of bonds
3. Allow utilities to use "self-help" rights under
the power sales agreement.
The third option allows utilities to withhold debt service
payments if the state does not meet its obligations. Last
year, the state started repairs. Utilities withheld $4
million "to get the engineering done." A limited "self-
help" arrangement was thus in effect last year.
Two things must occur before AEA may issue the needed bonds:
1. Utilities must agree to limit their "self-help"
rights for the amount of bond payments. Mr. Simmons
cited an example of how the agreement would
work. He said that if bond repayment costs
total $5 million of the debt service now paid
by utilities, the utilities have agreed not
to exercise "self-help" withholdings against
that $ 5 million. It is necessary to
guarantee a stream of repayment on the bonds
in order to sell them in the market.
2. A guaranteed revenue stream must be available.
Since present debt service payments are pre-
appropriated by statute, AEA must ensure that
it receives a portion of that for bond
payments.
The propose bill changes the 40/40/20 allocation to allow
AEA first priority on debt service payments. Remaining
amounts will then be allocated per the 40/40/20 arrangement.
The bill also says that AEA cannot issue the bonds for
longer than eight years. That ensures a rough estimate of
bond payments of $4.3 to $4.6 million a year. The total
cost of the bond issue is approximately $35 million.
Under the foregoing change, PCE and the Southeast Intertie
will not receive $1.8 million a year, each, and the power
development fund will not receive $900.0, annually, for the
term of the eight-year bonds. Per current allocations, if
$11 million in debt service is paid, PCE and the Southeast
Interties receive $4.4 million and the power development
fund receives $2.2 million. Mr. Simmons reiterated that
annual debt service payments range from $8 million to $11
million, depending upon the amount of power purchased. Last
year payments totaled $10.5 million.
If the proposed bill does not pass, utilities are expected
to utilize their "self-help" rights. Discussions with
utilities are ongoing regarding how repairs would be made if
they proceed per "self-help" rights. AEA believes it could
make the repairs within two years. If the utilities use
"self help" for two years, no moneys would flow to PCE, the
Southeast Intertie, or power development. Mr. Simmons
further advised that at the time the bonding approach was
undertaken, the state was in negotiations with utilities to
buy the dams. AEA hoped to return to the legislature next
year with a long-term solution, divesting the projects to
utilities or other parties. While bonding would cost the
state an additional $13 million for financing, no payments
would be made for a year or two, and it would allow AEA to
come back to the legislature with a long-term solution.
Negotiations broke down soon after SB 284 was introduced.
AEA no longer has high hopes a long-term solution will be
forthcoming next year, but it will continue to pursue
divesting to the utilities or other parties. The intent was
to maintain the revenue stream for a two-year period until
another solution could be found.
Senator Rieger suggested that the proper thing to do is
allow the utilities to invoke their "self-help" rights. A
transfer of all projects to the utilities is in process.
The capital budget contains a request for funding to
facilitate the transfer. An additional bond issue will only
complicate the situation.
In response to additional comments by Senator Rieger, Mr.
Simmons advised that AEA will make the repairs under either
the "self-help" or bond scenario. Utilities will withhold
the payments and transfer the moneys to AEA. The state owns
the projects, and it is the state's responsibility to
oversee repairs.
As further support for bonding over "self-help," Mr. Simmons
expressed a reluctance to "tie up these other entities such
as PCE, the Southeast Intertie, and all the small projects
that are being done by DCRA."
Mr. Simmons referenced recent correspondence from utilities
inquiring about the possibility of resuming negotiations.
AEA replied that it would be "happy to go back to the table
but both sides are going to have to move somewhat because
we're so far apart on the purchase price . . . ." AEA is,
at the present time, "getting ready for full self-help."
In response to a question from Senator Sharp, Mr. Simmons
explained that the proposed bill would not exclude any
option. It does set AEA on a course where it would most
likely "do the bonding." It would be better to make a
decision at this time whether to utilize bonding or full
"self-help."
Senator Sharp voiced his belief that it appears cheaper to
utilize the "self-help" approach. He acknowledged that PCE,
the Southeast Intertie, and power development would be
severely impacted the first two years, but that approach
might be preferable to eight-year bonds.
Responding to a further question from Senator Sharp, Mr.
Simmons advised that while in negations with utilities, it
was anticipated that divesture could be worked out so that
utilities could assume the bonds if they chose to do so, or,
in the alternative, not take on the bonds. Further
discussion of divesture negotiations followed. Mr. Simmons
advised that PCE and Southeast Intertie funding were not
part of the negotiations.
Additional discussion followed concerning existing statutory
authority for repairs and yearly maintenance.
Senator Zharoff inquired concerning potential litigation
from four dam pool members. Mr. Simmons attested to a past
agreement with utilities to limit "self-help" to $2 million
to commence the engineering process. That agreement fell
through, and the utilities filed suit and employed full
"self-help" rights, withholding all moneys last year. AEA
achieved an agreement with the utilities for a withholding
of $4 million from last year's payment to start engineering,
with the understanding that the state would work with them
toward divesture and accomplishment of repairs. That is how
the proposed bill developed. If the bill does not pass,
full "self help" will be implemented.
Senator Sharp inquired regarding the remaining balance owed
on the projects. Mr. Simmons said that, depending upon the
discount value used, the present value of debt service today
is "roughly $165 to $170 million." The actual principal is
$180 million. That amount was part of the negotiations on
the sale price. Liabilities associated with the projects
are subtracted from the present value of the debt service
payment.
In the course of further discussions, Mr. Simmons said that
the problem with the agreement signed by the state is that
the amount of money set aside yearly to provide repairs is
wholly inadequate. Utilities put aside approximately $500.0
a year. That does not come close to meeting repair costs.
[Co-chairman Halford assumed the chair at this point in the
meeting.]
Senator Sharp MOVED that CSSB 284 (Res) pass from committee
with individual recommendations. Senator Rieger said he did
not believe that bill was moving in the right directions.
He advised that he would not object to movement from
committee, but he would sign "do not pass" on the committee
report. Co-chairman Halford called for a show of hands.
The motion CARRIED on a vote of 5 to 2, and CSSB 284 (Res)
was REPORTED OUT of committee with zero fiscal notes from
the Dept. of Community and Regional Affairs and Dept. of
Commerce and Economic Development. Senator Zharoff signed
the committee report with a "do pass" recommendation. Co-
chairmen Halford and Frank and Senators Donley, Phillips,
and Sharp signed "no recommendation." Senator Rieger signed
"do not pass."
SENATE BILL NO. 303
An Act relating to management of the budget reserve
fund; and providing for an effective date.
Co-chairman Frank directed attention to a draft CSSB 303
(Fin) (9-LS1697\F, Cook, 4/19/96) which he explained allows
the Dept. of Revenue to transfer management responsibility
over all or part of the budget reserve fund to the permanent
fund corporation. It is left to the administration to
determine the amount and the appropriateness of the
transfers. The Co-chairman voiced his belief that the state
could substantially increase its yield by making such
transfers without incurring any risk to the state or
permanent fund. It is not necessary for the legislature to
outline details of the transfer in law. The new draft
merely contains permissive language. Co-chairman Frank
MOVED for adoption of CSSB 303 (Fin) as a working document.
No objection having been raised, CSSB 303 (Fin) was ADOPTED.
Co-chairman Halford voiced his understanding that the
legislation is permissive rather than a mandate.
Senator Donley inquired concerning the administration's
position on the bill. Co-chairman Frank acknowledged that
representatives of the administration had earlier raised
questions about how the transfer would be made and what the
impact might be. He further acknowledged that nothing would
happen if the department chose not to implement the bill.
The Co-chairman expressed his belief that transfer and
management by the permanent fund corporation could add $40
million to the state treasury. He then MOVED for passage of
CSSB 303 (Fin). No objection having been raised, CSSB 303
(Fin) was REPORTED OUT of committee with a zero fiscal note
from the Dept. of Revenue. Co-chairman Frank and Senators
Donley, Phillips, Rieger, and Sharp signed the committee
report with a "do pass" recommendation. Co-chairman Halford
and Senator Zharoff signed "no recommendation."
SENATE BILL NO. 51
An Act relating to income of the permanent fund; and
providing for an effective date.
Senator Rieger referenced additional legislation involving
the Alaska Permanent Fund and MOVED for passage of SB 51,
relating to inflation proofing for the fund. Senator Sharp
OBJECTED and Co-chairman Halford joined in the objection.
The Co-chairman then called for a show of hands. The motion
failed on a vote of 3 to 4 with Senators Rieger, Donley, and
Phillips voting in support of passage.
[Senator Rieger subsequently withdrew the bill on May 4,
1996.]
CS FOR HOUSE BILL NO. 466(FIN) am
An Act establishing the Adak Reuse Authority.
Co-chairman Halford directed that CSHB 446(Fin)am be brought
on for discussion. REPRESENTATIVE CARL MOSES came before
committee accompanied by his aide, TIM BENINTENDI. The
Representative advised that Adak could become a showpiece
for the nation, demonstrating what could be done with a base
closure. He suggested that the magnitude would be
comparable to closure of Elmendorf or Eielson Air Force
Base.
While some question the opportunity at Adak, future economic
opportunity is limited only by imagination. Fresh fish to
the Orient presents great opportunity because of the
adequate airport. Representative Moses specifically noted
that tuna could be flown from the site since, in the
summertime, the tuna industry is "considerably closer to the
Aleutians" than to Midway where the product is normally
sold.
Representative Moses referenced information from
representatives of the Aleut Corporation suggesting that the
state would become a "deep pocket" for U.S. Department of
Defense involvement at Adak. He countered that statement,
saying that the opposite is true. HB 466 would enable an
unbiased public authority to work toward the future of Adak.
The Navy will be much more lenient in dealing with a public
authority, in terms of what the military will leave behind.
It will not be a black hole for the state. The authority
would be in a position to dispose of property to commercial
interests to support management expenses of the authority
until adequate municipal entities develop.
Representative Moses expressed resentment regarding false
information indicating that Senator Stevens had suggested
creation of a profit or non-profit entity. The Senator
merely suggested that that approach should be considered.
Technically, the proposed authority is a non-profit which
would operate for the benefit of the future of Adak. The
Congressional delegation and the U.S. Navy are waiting for
HB 466 to pass. Time is of the essence.
Representative Moses next referenced concern raised by the
Aleut Corporation that stripping of facilities might occur.
He said he did not believe an authority delegated with
economic development of Adak would do anything to
disadvantage that goal. Much equipment left behind by the
U.S. Navy will be sold to commercial interests moving into
Adak. The Representative termed "ridiculous" a caveat that
equipment could not leave the island. Much equipment will
be surplus to needs on Adak. He said he was a stockholder
of the Aleut Corporation, and he suggested that a majority
of the members were in favor of the proposed bill. He urged
passage as soon as possible.
Senator Zharoff asked if the authority would receive
ownership of the land. Representative Moses said that would
have to be decided by Congressional legislation.
END: SFC-96, #90-B, Side 1
BEGIN: SFC-96, #90-B, Side 2
Senator Zharoff attested to problems associated with a
similar transfer at Kodiak. He then voiced his
understanding that if the Aleut Corporation has "top filed"
on the land, and it is vacated by the present owner, the
corporation would have first option on the land.
Representative Moses acknowledged that possibility but
reiterated that the final decision would be made by
Congress. He then described past discussion of land
selections with the corporation. He attested to
difficulties that would arise should one entity own the land
while another owns the improvements.
Further discussion followed regarding the impact of "top
filing," using both Ft. Richardson, Adak, and Kodiak as
examples. Senator Zharoff suggested that the proposed reuse
authority would merely add an additional layer of
bureaucracy.
LAMAR COTTEN, Deputy Commissioner, Dept. of Community and
Regional Affairs, came before committee. He explained that
discussions relate to an exchange rather than "top filing."
The exchange involves land that would revert from withdrawal
status from the refuge back into the refuge. It then
becomes the property of the U.S. Department of the Interior.
Interior has expressed interest in undertaking exchanges
with the Aleut Corporation for over-selection. In light of
that, the state initiated discussions involving itself, the
U.S. Navy, and the Aleut Corporation. Discussion focused on
the proper configuration of land status, in the future, for
Adak. The state recognizes that consensus on status must be
reached. Senator Stevens would then introduce legislation
to make appropriate exchanges and/or transfers.
Mr. Cotten said the state is not interested in becoming a
participant in a situation where the base is to be
transferred to the Aleut Corporation and an authority is in
place. If there is an economic value to parts of the base,
and two-years of revenue stream can be demonstrated to cover
operating costs, the authority would want to choose those
lands. The problem between the Aleut Corporation and the
authority (or the state) rests in the fact that the
corporation would prefer that "We take over things that are
traditional municipal or state responsibility." Those
things (breakwaters, roads, etc.) do not make money. The
department believes the authority should acquire properties
that can produce a revenue stream to cover responsibilities
that do not produce income.
The proposed bill reflects a conservative approach for state
review of pros and cons and to ensure a cash flow from
properties it acquires through the authority. Under a
likely scenario, the authority would not take over the
entire base. Mr. Cotten referenced over 500 housing units
and many buildings for which no use is envisioned. The
premise is private sector interest in renting, leasing, or
buying certain facilities: the fuel station, water front
property, warehousing, the school, buildings near the
airport, machine shops, etc.
Mr. Cotten directed attention to page 13, lines 9 through
16, and noted that if a municipality other than a second
class city is created or the area is annexed by a
municipality to the east, the authority would be integrated
into that municipal government within a year. The assets
and liabilities assumed by the authority would be
transferred to the municipality.
Senator Rieger asked if establishment of the authority could
evolve into a situation similar to the Alaska Railroad. Mr.
Cotten said he was unfamiliar with operations of the
railroad. He advised that any bonded indebtedness to be
issued by the authority would require legislative approval.
Tim Benintendi added that referenced language at page 13 was
tightened to accommodate the concern raised by Senator
Rieger. The authority would not linger in the wake of a
viable municipality.
Discussion of annexation followed. Two entities have
expressed interest: Unalaska and the Aleutians East
Borough.
Co-chairman Halford suggested that the ultimate means of
bringing the issue back before the legislature would be a
four-year sunset provision. Representative Moses said he
was so optimistic about the future of Adak he did not feel
sunset would be necessary. The Aleutians East Borough has
already prepared annexation paperwork, and the City of
Unalaska is having a study conducted. Mr. Cotten advised
that he had written to the Aleutians East Borough
registering concern over annexation. Concern has less to do
with Adak than state policy regarding "leapfrogging" over an
existing municipality (Unalaska). The department is leery
about setting that precedent.
Senator Zharoff referenced ability of the authority to bond.
He further referenced succession on dissolution of the
authority providing for the municipality to succeed to
authority assets, liabilities, rights and powers. He then
pointed to exemptions from taxation and asked how all
aspects of the foregoing would fit together. Mr. Cotten
explained that issuance of debt would require state
approval. The authority would be exempt from taxation, but
those who lease or buy could be taxed. Assets would consist
of properties and revenue streams; liabilities would be
contracts or bonded indebtedness.
Mr. Cotten stressed the unknown nature of the undertaking.
At the present time, there is an idea of what the authority
would acquire and what it would not, but that is the extend
of what is known. The state, the U.S. Navy, the Aleut
Corporation, and the Department of Interior are attempting
to "look at what's realistic." The Aleut Corporation has
some "chips" to deal with Interior. Mr. Cotten stressed
that the state is not going to be a "cash cow" to pay for
the operating expenses of somebody to become a capitalist.
He further advised that frustration with the Aleut
Corporation approach stems from the fact that while the
corporation anticipates taking over a portion of the
facilities, it expects the state to operate the airport
through state general funds. The state would need to
balance that general fund expenditure with a revenue stream
from the area. Co-chairman Halford suggested that once the
area is incorporated within a municipality, it is eligible
for revenue sharing, community grants, equal treatment in
terms of airports and roads. It appears that the U.S. Navy
is giving the state a multi-billion dollar asset which could
become a multi-million dollar annual drain on the treasury.
As the Navy moves out, the department will not allow
creation of a city of twenty-five people. A minimum of 400
people is needed for a first class city capable of
incorporating and taking over the assets of the base. Mr.
Cotten acknowledged that, in theory, the state might be
obligated to take on certain operations such as the airport.
He voiced a reluctance to do so unless an offsetting revenue
stream could be developed.
Representative Moses stressed that need for state
participation would triple under the Aleut Corporation
proposal. He voice need for a state authority to lease the
fuel facilities for which four different concessions are
bidding. The authority would be delegated with development
of Adak for the benefit of the future. Representative Moses
noted that it would be difficult for Alaska's Congressional
delegation to obtain federal transitional moneys if take
over is by a private entity. That is the reason for the
proposed bill.
Discussion followed between Senator Zharoff and
Representative Moses regarding responsibility for hazardous
cleanup. Representative Moses advised that the $90 to $100
million in federal cleanup over the next two years would
jump start the economy of Adak. Mr. Cotten added that
cleanup is to be coordinated with state selection of what
has the highest reuse. As an example, he noted that the
existing waterline goes through the landfill and would not
meet EPA standards. Representative Moses cited factory
trawler interest in renting warehouses for base operations.
The 1,000 units of housing are worth $50 million at "rock
bottom prices."
Co-chairman Frank asked what would happen to properties that
are not acquired. Mr. Cotten said that the property would
be transferred to the Department of Interior. The Navy and
Interior will then determine whether facilities remain or
are demolished. Since the area is within a wildlife refuge,
the Department of Interior would probably prefer removal.
The U.S. Fish and Wildlife Services wishes to continue its
presence on the island. Representative Moses cited
difficulty in determining what might be useful in the
future.
Discussion followed regarding approval of a majority of the
membership of the authority prior to disposal of property or
facilities. Senator Zharoff asked if more than a simple
majority should be required. Representative Moses expressed
reluctance to tie the hands of the unbiased authority
delegated to what is best for the future of Adak.
CHIS GATES, representing the Aleut Corporation, next came
before committee. Senator Zharoff again posed the question
of the majority needed to approve a disposal. Tim
Benintendi clarified that it would not be possible to move
on an action on a tie vote or less than a majority of the
board. Mr. Gates voiced his understanding that Senator
Stevens believes consideration of a non-profit corporation
instead of an authority might have merit. He then read from
correspondence from the Senator indicating that the Aleut
Corporation proposal "offers a mechanism to jump start the
process of attracting commercial enterprises to Adak."
Further, while the fiscal note is for $600.0, real state
expenditures for operation of the airport and seaport will
total millions. The Aleut non-profit (including the
Aleutians East Borough, Dutch Harbor, state representation,
and villages of the region) proposes that a corporation
operate the airport. That would save millions of general
fund dollars. Mr. Gates noted that reuse arrangements in
Alaska generally utilize non-profits rather than
authorities. He expressed his hope that the proposed bill
would not allow ability to "strip out the assets" without a
super majority (three-quarter) vote of the board. There
will be great incentive to "sell stuff that we're going to
need to make that town work."
Co-chairman Halford asked if it was the intent that the
state maintain the airport. Representative Moses
acknowledged that someone would have to operate it since it
is the mainstay of Adak. He said he anticipated a
substantial amount of help from the federal government.
Under a public authority, the Navy, other federal agencies,
and the Congressional delegation would be better able to
assist the future of Adak than if it is in the hands of a
private entity.
Co-chairman Halford referenced the $281.0 fiscal note and
voiced his understanding that $100.0 of the total is
federal. He sought assurance that only that amount would be
spent. Representative Moses noted that, one way or another,
the airport would be kept open since it serves as an
alternate for all planes to the Orient. He stressed that
the proposed bill provides a vehicle to take in moneys to
support public needs until a municipality is in place.
Discussion followed regarding activities leading to
establishment of a new town. Representation Moses stressed
that that would happen. The proposed bill would allow it to
happen along an organized path. Once seed money is
provided, the authority will be self-supporting. The
authority must be in place for the Navy and Congressional
delegation to commence transition. The Navy will be gone by
January of 1998. Senator Randy Phillips inquired regarding
a five or ten-year sunset. Representative Moses said while
he did not think it was necessary, he would have no
objection. He added that "Things are going to happen a lot
faster than that." Senator Zharoff voiced concern that
sunset provisions might impact ability to bond. Mr. Cotten
concurred in that concern.
END: SFC-96, #90-B, Side 2
BEGIN: SFC-96, #91, Side 1
Senator Rieger expressed concern that bonded indenture or
lease obligations not prevent transfer of the authority to a
successor. Co-chairman Halford agreed with the concern and
voiced his belief that pledge of the state language at page
9 has problems. It appears that the authority could enter a
covenant that supercedes state ability to change the powers
and duties of the authority at a later date.
Discussion followed regarding transition language to ensure
that bond holders would not lose their investments, since
the state would pick up the obligation, in the event of any
change. Representative Moses reiterated that the
legislature would have to approve any bonding. Further
discussion followed regarding bond issues by AIDEA.
Senator Rieger suggested that pledge of the state language
might work if coupled with a restriction on bond indenture
language so as not to preclude eventual transfer to a
municipality or other entity.
Co-chairman Halford observed that wording within the
succession section at page 13 appears in conflict with
pledge of the state language at page 9. If language in
these sections is read so as not to include transition
provisions, it may work as is.
Referencing AIDEA financing, Senator Rieger voiced his
understanding that the state has always been obligated to
defer to language in a contract or a bond indenture. That
is governed by a breach of contract provision in the
Constitution. Co-chairman Halford suggested that if general
language covers the issue, perhaps pledge of the state
language is not necessary. He concurred that necessary
provisions could be added when bonds come before the
legislature for approval.
Senator Rieger MOVED for adoption of the following
amendment:
Page 5, line 17, after "transfer" insert:
(d) The authority may not enter into a
trust indenture or contract which has
the effect of precluding the transfer of
the assets and liabilities of the
authority to a successor.
No objection having been raised, the AMENDMENT was ADOPTED.
Senator Rieger directed attention to page 11, lines 23
through 29, and advised that provisions set forth do not
reflect a "good deal" for the authority. Risk associated
with loans often occurs in the outer years. There is a
large differential in risk between initial and outer years.
He suggested that no state agency should enter such an
arrangement. Co-chairman Frank acknowledged the concern and
commented that AIDEA presently has such authority.
Senator Sharp MOVED for passage of SCS CSHB 466 (Fin) with
individual recommendations and accompanying fiscal notes.
No objection having been raised, SCS CSHB 466, (Fin) was
REPORTED OUT of committee with a $281.0 fiscal note from the
Dept. of Commerce and Economic Development and a zero note
from the Dept. of Community and Regional Affairs. All
members present signed the committee report with a "do pass"
recommendation. Senator Randy Phillips was temporarily
absent and did not sign.
SENATE BILL NO. 275
An Act relating to state procurement practices and
procedures; and providing for an effective date.
Co-chairman Halford directed that SB 275 be brought on for
hearing. Senator Donley referenced his amendment relating
to employment of staff outside of Alaska. DAVE WILDER,
Vice-chairman, Alaska Seafood Marketing Institute, came
before committee. He explained that as a fisherman in
Bristol Bay for 30 years, he has great interest in
legislation impacting the industry.
Mr. Wilder noted that ASMI saved approximately $200.0 as a
result of last year's exemption from the procurement code.
That allowed for hire of an additional field representative
in Southeast. In addition to ASMI staff in Juneau and
Seattle, three representatives presently market Alaska
seafood products domestically. ASMI manages its own
promotions.
Mr. Wilder remarked on industry distress and competition
from farmed salmon in both domestic and export markets. The
declining value of the product is having a "very stressful
impact on the industry." ASMI must remain responsive to
opportunities. The institute does as much contracting as
possible within the state. The majority of the board are
Alaska residents, and half of the members of the board are
fishermen. Mr. Wilder again attested to savings derived
from exemption from the procurement code.
Senator Donley voiced his understanding that CSSB 275 (STA)
would not return ASMI to the procurement code. It would
merely place it back under the bidder preference for Alaskan
products. Mr. Wilder concurred but added that inclusion
would add costs to future contracts. He cited a recent
advertising contract as an example and said the bidder
preference would have made no difference. He again stressed
need to timely and efficiently respond to the market. ASMI
is becoming less dependent on the state as it improves its
processes. More regulations do not improve that process.
Senator Donley voiced his belief that all should comply with
the bidder preference.
Discussion of past practices relating to advertising
contracts followed between Senator Randy Phillips and Co-
chairman Halford.
Senator Donley noted that the 5 percent bidder preference
applies "if everything else is equal." Bidders have to meet
the basic contract criteria before they are eligible for the
preference. If they do not have expertise in the
marketplace (in the instance of a foreign campaign), they
will not meet qualifications, and the 5 percent preference
would make no difference.
Mr. Wilder cited an instance in which an Alaska firm was
hired for a project. The Alaska firm then "went outside and
got all the expertise . . . ." The state ended up paying an
"extra $100.0, plus, a year to honor the bidder preference."
If that $100.0 could have been put into marketing, it would
have been much more responsive to the legislature and the
industry. Senator Donley suggested that bid specifications
could be crafted to require greater involvement.
Co-chairman Halford noted need to recess for attendance at
the Senate floor session and suggested that the meeting
reconvene at 4:00 p.m.
ADJOURNMENT
The meeting was recessed at approximately 11:00 a.m.
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