Legislature(2001 - 2002)
04/15/2002 09:29 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 15, 2002
9:29 AM
TAPES
SFC-02 # 56, Side A
SFC 02 # 56, Side B
SFC 02 # 57, Side A
CALL TO ORDER
Co-Chair Pete Kelly convened the meeting at approximately 9:29 AM.
PRESENT
Senator Pete Kelly, Co-Chair
Senator Dave Donley, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Gary Wilken
Senator Alan Austerman
Senator Lyman Hoffman
Senator Donald Olson
Senator Lyda Green
Senator Loren Leman
Also Attending: ZACH WARWICK, Staff to Senator Gene Therriault;
DAVID STEWART, Personnel Manager, Division of Personnel, Department
of Administration; DEBRA GERRISH, Wife of Warrant Officer in
National Guard; KIM OGNISTY, Staff to Senator John Torgerson; RICK
KAUZLARICH, Right of Way Chief, Department of Transportation and
Public Facilities; WILLIAM CUMMINGS, Assistant Attorney General,
Transportation Section, Civil Division, Department of Law; JON
TILLINGHAST, Attorney, Sealaska Corporation; RON WOLFE,
Representative, Sealaska Corporation
Attending via Teleconference: From Anchorage: TOM CHAPPLE,
Director, Division of Air and Water Quality, Department of
Environmental Conservation; From Fairbanks: BILL JEFFERS, Manager,
Environmental Services, Fairbanks Goldmining Inc, and Vice
President, Council of Alaska Producers; CHARLIE BODDY, Vice
President, Governmental Relations, Usibelli Coal Mines; From Offnet
Sites: JOHN SUND, Vice President, Norquest Seafoods; WILLIAM
SATTERBERG; PHIL EVANS
SUMMARY INFORMATION
SB 326-WASTEWATER DISCHARGE PROGRAM
The Committee heard testimony from the sponsor, the Department of
Environmental Conservation, and took public testimony. One
amendment was adopted, the Committee revised the bill's fiscal
note, and the bill reported from Committee.
SB 239-STATE EMPLOYEES CALLED TO MILITARY DUTY
The Committee heard testimony from the Department of Labor and
Workforce Development and took public testimony. The bill was held
in Committee.
SB 278-TAKING PROPERTY BY EMINENT DOMAIN
The Committee heard testimony from the Department of Transportation
and Public Facilities, the Department of Law, and took public
testimony. A committee substitute was adopted and the bill was held
in Committee.
CS FOR SENATE BILL NO. 326(RES)
"An Act relating to evaluating state assumption of the
wastewater discharge program under the federal Clean Water
Act; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
ZACH WARWICK, Staff to Senator Gene Therriault, explained that this
bill directs the Department of Environmental Conservation to
evaluate the benefits and consequences that would result from the
State assuming primacy for the National Pollutant Discharge
Elimination System (NPDES) currently managed by the federal
Environmental Protection Agency (EPA) Seattle, Washington office.
He explained that the federal Clean Water Act, enacted in 1972,
contains provisions allowing states, rather than the federal
government, to administer the NPDES permitting program, and noted
that 44 states currently do so. He continued that other states are
considering this option because it would allow each state to tailor
regulations to their specific environmental issues and determine
permit issuance timelines. He stated that, in addition to
evaluating the administration of the program, the Department would
determine associated costs and identify funding sources.
Senator Austerman, noting that this legislation involves
environmental issues, asked what "potential problems" might result
by this change.
Mr. Warwick commented that some people support continuing federal
management of the NPDES program, arguing that the federal
government does a better job than the State could; however, he
could not provide specific concerns.
Senator Austerman asked whether the intent of this legislation is
to conduct an evaluation of the benefits and consequences of this
proposal to present to the Legislature or whether enactment of this
legislation would be the actual evaluation. He pointed out that
Section 2 of the bill identifies the statutory and regulatory
changes, permitting procedures, and associated costs that would be
incurred by this transfer.
Mr. Warwick responded that the evaluation process involves a series
of steps, including regulatory and statutory changes that would be
considered in making a determination that the transfer would be
beneficial to the State.
Senator Austerman requested further information of the Department.
TOM CHAPPLE, Director, Division of Air and Water Quality,
Department of Environmental Conservation testified via
teleconference from Anchorage to respond to Senator Austerman's
question about "how in-depth" the Departments' evaluation would be.
He disclosed that this issue has been discussed for approximately
fifteen years, and the question is whether "it would be in the
State's best interest to take on this permitting program." He
stated that without an in-depth analysis, the determination would
not be possible; therefore, he continued, the inclusion of draft
regulations, permitting procedures and proposed corresponding
statutes is required to thoroughly evaluate the benefits and
consequences of the transfer.
Mr. Chapple surmised that if it becomes obvious, early in the
process, that the transfer would not be beneficial to the State; it
would be likely that the effort would be curtailed; however, he
reiterated, the complexity of the issue requires the State to
evaluate regulation and statute changes to determine what would be
required to thoroughly answer the question.
Senator Ward, referring to information provided on page 25 of the
May 15, 1998 Easton Environmental Consulting Engineering and
Sciences report titled "The State Role in NPDES Wastewater
Discharge Permitting in Alaska, Options for Improvement" [copy on
file], asked which industries have been granted administrative
NPDES extensions by the EPA.
Mr. Chapple commented that the Easton Report is not available at
the teleconferencing site.
JOHN SUND, Vice President, Norquest Seafoods, testified from an
offnet site and spoke in favor of the bill. He informed the
Committee that his seafood processing company holds NPDES permits
for each of its processing plants in Ketchikan, Petersburg,
Cordova, and Chignon as well as for two floating vessels that
process crab, herring, and salmon. He stated that this legislation
would streamline the process explaining that currently the DEC and
the EPA jointly administer the program, and the permit holder is
required to file joint, duplicate reports to each entity. He
furthered that whenever a discharge issue arises, the permit holder
is required to contact both the DEC and the EPA.
Mr. Sund asserted that this legislation does not alter the terms or
conditions of the permit; however, a single program administrator
would allow for a more uniform interpretation and enforcement of
the standards. He informed the Committee that at meetings where
representatives of the seafood industry, the EPA, and the DEC have
met to discuss and resolve discrepancies regarding the current
permit, it has been noted that some of the EPA personnel
administering the program have never been to Alaska and "do not
know much about the State or the seafood industry."
Mr. Sund informed the Committee that although the quality of the
water in mixing zones locations as well as the sizes of the mixing
zones are federal issues; the allowable quantity of seafood waste
deposits on the ocean floor is a State issue. He continued that
when a situation involves both jurisdictions, the permit applicant
gets "caught in the middle". He expressed that this situation would
be avoided if a single entity were responsible for the entire
process.
Mr. Sund summarized that this legislation would provide the
opportunity to explore whether this transfer would be beneficial to
both the State and the affected industries, and stressed that
inclusion of the statutory and regulatory details are paramount in
the determination. He noted that the question of how the program
would be funded is a significant issue, and he qualified that,
currently; the federal government funds its operation.
BILL JEFFERS, Manager, Environmental Services, Fairbanks Goldmining
Inc, and Vice-President, Council of Alaska Producers, testified via
teleconference from Fairbanks in favor of the bill. He voiced that
Mr. Chapple's testimony fairly represents Alaskan industries'
discussions and concerns regarding steps that should be taken to
address the issue, and that Mr. Sund adequately expressed the
concerns and problems that have been encountered under the current
system.
CHARLIE BODDY, Vice-President Governmental Relations, Usibelli Coal
Mines, testified via teleconference from Fairbanks in favor of the
bill as he stated that this legislation would provide the State the
ability to determine whether this transfer would be in the State's
and the industry's best interest. He stated that the mining
community, which is "dynamic" rather than "static" in its mining
endeavors, factors water discharge permit applications into its
timelines, and he attested that the continuous permitting delays of
"the ever-changing" EPA office staff in Seattle has been
detrimental to operations.
Senator Austerman asked if the EPA charges a permit fee.
Mr. Boddy responded that while there is no fee for the federal
NPDES permit, the State charges a certification fee.
Co-Chair Kelly asked whether this legislation is time critical.
Mr. Boddy responded that it is not.
Mr. Jeffers concurred.
Senator Leman voiced that, in his professional perspective, State
management of the NPDES permit process would be preferred; however,
he questioned why the evaluation process would take approximately a
year and a half to complete and require the hiring of additional
staff. He opined that the study could be conducted in less time at
a lower cost.
Senator Ward re-visited his question concerning which category of
industries received EPA administrative permit extensions as
specified in the Easton Report. He stated that this information
would be helpful in developing program receipt funding mechanisms
similar to those developed by other states to fund up to 96 percent
of program administration costs. He additionally asked for further
information about the permit extension process.
Mr. Chapple explained that NPDES permits are issued for five years,
and due to limited resources, it has been common for the EPA office
in Seattle to administratively extend seafood and mining permits
another five years. He exampled that the Municipality of Anchorage
sewage treatment plant permit was administratively extended for
more than ten years. He informed the Committee that a few years
ago, Congress notified the EPA that too many permitting delays were
occurring, and that the Seattle Region 10 office was among the
offices with the most delays. He communicated that the Seattle EPA
office is now current on the majority of its permits.
Senator Ward asked the testifier which industry holds the bulk of
the NPDES permits.
Mr. Chapple responded that NPDES permits are applicable to any
discharge affecting surface water. He stated that EPA characterizes
these discharges as "minor source" or "major source." He exampled
that major source discharges include such things as a sewage
treatment plant for medium to large communities and regulated
industries such as seafood processing plants, mining, and oil and
gas activities. He continued that all of the oil platforms
operating in Cook Inlet are permitted under a general permit issued
by the EPA whereas the North Slope activities have both general and
individual permits.
Senator Ward asked how much revenue the NPDES permits fees generate
toward the cost of administering the program. He informed the
Committee that a pulp mill in the State is currently charged
$80,000 for its permit.
Senator Leman voiced the understanding that the fees would need to
be increased to support the program.
Mr. Chapple stated that program funding is one of the major
components in the determination of whether the State should solely
administer the NPDES program. He shared that program receipts or a
combination of program receipts and state general funds or federal
funds are used to fund other states' programs.
Co-Chair Kelly reiterated that while no fee is currently charged
for the federal NPDES Permit, the State charges a certification
fee. He continued that were the process to transfer entirely to the
State, DEC would assess a fee for the issuance of the permit, and,
he surmised, the certification procedure would no longer be
necessary.
Mr. Chapple confirmed that only one fee would be assessed if the
State were the sole manager of the NPDES permitting process. He
stated that the fee levels would be determined during the
evaluation process as funding options are reviewed.
Senator Austerman stated that page 54 of the Easton Report
specifies that the NPDES permitting process could require up to
twenty-three, full-time EPA employees, and he asked whether the DEC
would need to staff at approximately this level, as this would
increase the cost of managing the program.
Senator Austerman voiced the understanding that the evaluation
would identify available federal funding in addition to industry
permit fees that would support the program; however, he expressed
concern regarding the level of the fees the industry might be
required to pay.
Senator Leman voiced that "some efficiency should be realized" by
the State assuming primacy of the process because of "the reduced
interaction with the EPA" and the benefit of absorbing the
certification process within the permitting process. He opined that
having Alaskans administer the program would produce additional
benefits, and he asserted that the "major goal" of this endeavor
should be to realize "substantial efficiencies."
AT EASE 10:01 AM / 10:03 AM
Senator Austerman agreed that the State's assumption of the
permitting process should result in more efficiencies and that the
Easton Report indicates that the State's management of the program
would result in a more accessible and predictable process; however,
he voiced, the report additionally specifies that, "the industry
shall be requested to contribute financially" by way of a permit
fee. He stated that historically, the amounts levied for State
permit fees have increased dramatically, and he continued to voice
concern about the costs incurred to the industry.
Senator Austerman opined that if the Department of Environmental
Conservation desires this process to be entirely assumed by the
State, they would produce a favorable report, and he expressed the
hope that the State's $315,000 investment in generating this report
would provide the necessary information to evaluate this endeavor.
Senator Olson characterized his professional experiences with the
Department of Environmental Conservation as positive encounters. He
stated that the current permitting process is cumbersome to
applicants, who are often working within critical timelines, for it
requires them to jointly coordinate the permit and any subsequent
events with the State and the EPA. He voiced that it can be "very
aggravating" to not have any one entity take responsibility, and he
asserted that the State should endeavor to make this process as
efficient as possible.
Amendment #1: This amendment changes the effective date of the
legislation to January 1, 2003.
Co-Chair Kelly moved to adopt Amendment #1.
There being no objection, Amendment #1 was adopted.
AT EASE 10:10 AM /10:11 AM
Co-Chair Kelly recommended that the Department of Environmental
Conservation FY 03 fiscal note amount be reduced by half to align
with the legislation's new effective date.
The Committee concurred and the fiscal note was revised.
Senator Leman stated, "I move to report the Finance version of the
bill with individual recommendations and the accompanying revised
fiscal note."
Senator Ward objected and stated that his concerns about the
effects of this legislation prevent him from supporting the
expenditure of $100,000 in general funds to conduct the study.
A roll call was taken on the motion.
IN FAVOR: Senator Austerman, Senator Olson, Senator Hoffman,
Senator Wilken, Senator Leman, Co-Chair Kelly
OPPOSED: Senator Ward
ABSENT: Senator Green, Co-Chair Donley
The motion PASSED (6-1-2)
CS SB 326 (FIN) was REPORTED from Committee with a $109,100 fiscal
note, dated April 16, 2002, from the Department of Environmental
Conservation.
SENATE BILL NO. 239
"An Act relating to state employees who are called to active
duty as reserve or auxiliary members of the armed forces of
the United States; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
DAVID STEWART, Personnel Manager, Division of Personnel, Department
of Administration, explained that the State personnel policy allows
for up to sixteen days of paid leave to State employees undergoing
Army or Air National Guard or Militia training; however, in times
of emergency, State law limits paid leave to five days for State
employees called to active duty by the Governor. He continued that
the balance of that active duty time is considered leave without
pay or as arranged with the employing agency.
Mr. Stewart continued "that individuals who are called to active
duty by the federal government are protected by federal legislation
that provides for return to employment with essentially no loss of
benefits accrued by time;" however, there is no allowance for a
supplementation of wage or continuation of benefits.
Mr. Stewart explained that most State employees who are activated
for more than five days for Army or Air National Guard service,
receive a military wage that might be "more than or less than their
State wage." He commented that this legislation would allow for an
administrative order to be issued by the Governor, under specified
circumstances, to require the State to pay the difference if the
military wage is less than the State wage for a specified period of
time. He noted that this legislation additionally provides that the
State be responsible for health care or retirement contribution
coverage, again for a specified period of time, if the military
does not provide military benefits or if the employee would be
activated for an extended period of time.
Mr. Stewart informed the Committee that other states have passed
similar legislation in response to the terrorism attacks of
September 11, 2001. He referenced a Department of Administration
handout titled "Implementation of Uniformed Services Employee
Return and Reemployment Act (USERRA)" [copy on file] that details
the benefits other states provide. He exampled that Colorado allows
its governor to authorize supplemental military wages for ninety
days and that the District of Columbia specifies that employers
provide health insurance benefits for the first year.
Mr. Stewart disclosed that the Department of Administration has
ascertained that since September 11, 2001, 41 of the 189 State
employees in the Air or National Guard Reserve have been called to
active duty, and, of that number, eight would qualify for the
supplemental wage condition. He noted that depending on whether the
Governor or the federal government activated the employee's
service, the employee might receive military health insurance
coverage, however, their dependents might not be eligible. He
reminded the Committee that State employee dependents could be
covered through COBRA insurance plan provisions; however, he noted
that this coverage is expensive.
Senator Ward asked whether the Governor or the federal government
called to active duty the eight State employees who would qualify
for the supplemental wage.
Mr. Stewart responded that the Governor, on behalf of the federal
government, activated these individuals.
Senator Ward asked the nature of the duties assigned to these eight
individuals.
Mr. Stewart responded that the duty information is not available;
however, he noted that one individual was activated for 365 days
and others were activated in October or December 2001 for a period
of twelve months.
Senator Ward asked the Department to investigate these individuals'
active duty assignments and provide the information to the
Committee.
Mr. Stewart responded that the Department would attempt to gather
this information.
SFC 02 # 56, Side B 10:19 AM
DEBRA GERRISH, identifying herself as the wife of a Warrant Officer
in the National Guard, informed the Committee that the military
does not generally disclose duty assignments. She clarified that
the actual number of State employees called to active service is
189, and she confirmed that of that number, eight would have
qualified for the supplemental wage, as their military wage was
less than their State wage. She stated that most of the people
called to active duty are serving as airport and pipeline security.
Ms. Gerrish shared with the Committee that her family's health
benefits would be negatively affected in the event that her husband
were called to active duty. She explained that in the military, a
call to active duty for less than 180 days disqualifies dependents
from receiving benefits, and that the Army's benefits seldom
provide coverage for pre-existing conditions. She stressed that
this situation could result in families being required to make
decisions whether or not to seek medical care because of the
expense. She noted that, because her husband is an officer, her
family would have sufficient income to cover house payments,
utilities, and basic living needs; however, families of privates or
sergeants would not. She stated that the expense of the COBRA
insurance plan is cost-prohibitive, and she asserted that "if an
officer's wife doesn't have money for COBRA, the private and the
sergeant's wife is certainly not going to have the money to cover
COBRA."
Senator Wilken voiced general support for this legislation, and he
asked how a person qualifies for the Alaska Naval Militia.
Mr. Stewart responded that the Naval Militia is a component of the
Department of Military and Veterans Affairs.
Senator Wilken asked how this program compares to the federal
National Guard program.
Mr. Stewart responded that it is a State program similar to the
National Guard.
Senator Wilken asked that further information be provided to the
Committee regarding the Naval Militia.
Senator Wilken stated that the fiscal note analysis implies that
replacements would not be hired to fill the positions of State
employees called to active duty, but rather that the Department
would absorb the workloads. He asked whether this is the intent of
the legislation.
Mr. Stewart explained that it is not the intent of the bill to
specify that no replacements be hired, but rather it was the intent
of the fiscal note to indicate that, given the event of September
11and its affect on the State's National Guard, it is not possible
to determine the impact or the duration of the activation.
Senator Wilken reiterated his question as whether the intent of the
legislation is not to hire people to replace those individuals
called to active duty.
Mr. Stewart replied that it is not.
Senator Wilken suggested that the fiscal note be revisited. He
further advised that the "trigger mechanism," or rather, what
constitutes an emergency that would result in the Governor calling
people to active duty, should be "clearly defined."
Senator Austerman asked if specific timeframes have been
established for the components of the bill.
Mr. Stewart responded that timelines have not been established for
the bill. He stated that the aforementioned report regarding other
states' legislation would be provided to the Committee, along with
current information pertaining to the individuals who have been
activated and their wage schedule.
Senator Austerman asked Ms. Gerrish if providing health benefits
for the initial 180-days of active service would be beneficial to
those State employees called to active duty.
Ms. Gerrish responded that this would address the health insurance
problem. She furthered that this would also benefit the situation
where people are asked to volunteer for such things as airport
security to fill those positions as people are rotated in and out
of service.
Ms. Gerrish urged the Committee to act on this legislation.
Senator Wilken asked for clarification that the wage supplemental
component of this bill applies to eight rather than all of the
State employees called to active service.
Mr. Stewart replied that is correct.
The bill was ordered HELD in Committee.
CS FOR SENATE BILL NO. 278(JUD)
"An Act requiring a good faith effort to purchase property
before that property is taken through eminent domain; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
KIM OGNISTY, staff to Senator John Torgerson, informed the
Committee that this legislation "introduces a reasonable and
diligent effort clause that attempts to place a comdemnor of land
and a private landowner in an equal negotiating position." She
asserted that the bill would not reduce the ability of the State to
acquire land by eminent domain or complicate existing proceedings;
but would rather require the State to apply reasonable and diligent
efforts to negotiations with private landowners and encourage
"reasonable offers," and that "striving to initiate communications
from a more equitable bargaining position would promote more
productive negotiations" and "facilitate dialogue over reasonable
concerns and encourage suggestions from all parties involved."
Ms. Ognisty stated that approximately twenty-three states have
adopted similar measures and the intent of this language is "to
reduce the amount of litigation by encouraging more cases to be
settled up front." She noted that a zero fiscal note accompanies
the current version of the bill; however, she informed the
Committee that an indeterminate fiscal note accompanied previous
versions.
RICK KAUZLARICH, Right of Way Chief, Department of Transportation
and Public Facilities, testified that the Department is not in
favor of the bill, and he voiced "exception to the inclusion within
the bill about the reasonable and diligent effort." He opined that
given his 22-years of employment as a right-of-way agent with the
Department, he could attest to the fact that the Department "does
act in good faith to purchase property before it" is condemned. He
stated that this bill would further complicate "an already complex
process."
Mr. Kauzlarich reminded the Committee that the Alaska Constitution
specifies that no property shall be taken without just
compensation, and he elaborated that the Department has established
procedures to support that objective. He stated that the process
involves "the uniform act" which mandates that each acquisition
file include documentation of ownership, initial contact
information, appraisals, and community and individual meetings. He
stated that appraisers hired by the Department are required to
provide documentation to demonstrate that effort is taken to
contact and provide information to the property owner regarding the
appraisal process.
Mr. Kauzlarich stressed that throughout the negotiations, the
Department's right-of-way agents maintain contact with property
owners to address and resolve issues that the property owner might
have about such things as the "configuration of the project," the
affect the project might have on the property, questions about
valuation of the property, and relocation of the property owner if
need be. He reiterated that every effort is made to reach a
consensus in order to avoid condemnation of property.
Mr. Kauzlarich reiterated that the entire process is a matter of
record and is included in Departmental files to create "a
decisional document" that identifies negotiation steps taken with
the property owner. He asserted that this process provides the
documentation to prove that the Department "does make a diligent
and reasonable effort to ensure that people that are affected by a
project get all the benefits that are due to them."
WILLIAM CUMMINGS, Assistant Attorney General, Transportation
Section, Civil Division, Department of Law, commented that
"extensive statutory authority" exists that identifies the State's
negotiation practices to assure that individuals whom the State
acquires land from are treated fairly. He continued that the State
is "pretty successful" in its acquisition endeavors, and he
specified that condemnation of property only occurs in two to five
percent of the right-of-way acquisitions. He attested that this
supports the position that the State works well with landowners.
Mr. Cummings continued that this bill would amend AS 09.55.430 to
require a statement be included in each file specifying that the
State has conducted the acquisition process diligently and in good
faith. He stressed that this statement "could become a point of
litigation in the case where opposing council could stand up and
pound on the table and say the State hasn't been fair, the State
hasn't been reasonable, look how pitifully low the offer is." He
voiced that this could result in elevating the valuation of the
property, and as the State has experienced with similar situations,
could cause the delay of a project for as long as a year while
further analysis of the valuation is conducted. He summarized that
the State "already is" diligent and operates in good faith in these
matters, and that these statute amendments would result in delaying
a project "while this relatively complex litigation proceeds
forward."
Senator Austerman summarized that the Department's position is that
it already conducts the negotiation process in a reasonable and
diligent manner before the eminent domain step is reached.
Mr. Kauzlarich responded that is correct as "quite extensive
negotiations" are conducted.
Senator Austerman asked why the Department opposes the legislation
since it already conducts business in this manner.
Mr. Kauzlarich stressed that the Department's concern is that the
legislation would result in "additional delays to an already
complex process, and allow in statute, allow a reason for further
delay in a project." He explained that delays in right-of-way
projects generate substantial cost increases, and "that the more
litigation, the more time that the attorneys get involved in this
type of situation, the more delay that we can have." He invited
Committee members to examine any regional file and see the effort
that has been exerted "to reach negotiations amicably with property
owners."
Senator Wilken announced that this bill is one of the bills that he
would like to get passed this session. He voiced amazement that the
Department is testifying that this process is conducted in a fair
and diligent manner, yet it does not support legislation to that
effect. He opined that there is a reason for this bill, and he
shared that two small business owners in Fairbanks have been
"jerked around" by the Department of Transportation and Public
Facilities (DOT) and "the heavy hand of the wealth of DOT"
concerning the valuation and settlement of their separate pieces of
property.
Senator Wilken continued that one of these acquisitions is going to
trial, and, he stated that, after looking at the documentation,
"this is embarrassing that our State has not settled this and,
instead, has gone forward with a very expensive, for both parties,
litigation," involving less than half a million dollars. He stated
that the other situation involved an individual who settled out of
Court because he did not have the money to fight the State.
Senator Wilken stated that Senator Torgerson, the sponsor of the
bill, could relate similar stories regarding experiences of people
in the Kenai Peninsula area. Senator Wilken stated that these cases
are examples that the Department does not operate in a diligent
manner, and these are the reasons why the bill has been presented,
and why he considers it a "priority bill."
Co-Chair Kelly voiced that while he supports language concerning
the appraised value of the property, he questions the need to
include the diligent effort report as specified in Section 2 (8) of
the bill.
Senator Ward quoted the sponsor statement as saying that "by
requiring a reasonable and diligent effort that this would create a
full disclosure of information." He asked whether there is any
information being withheld from a property owner under the current
procedure.
Mr. Kauzlarich asserted that all the information available to the
right-of-way staff is available to the property owner. He continued
that the goal of the process is to facilitate "an exchange of
ideas, and an exchange of information between the property owner
and the Department of Transportation and Public Facilities." He
explained that the Division "only litigates over necessity" to
acquire a piece of property. He reiterated his concern that this
bill "would require litigation over the reasonableness of the
Department's efforts," as he understands that people "may not feel
that they are getting what they deserve from the Department of
Transportation, and that is why the process carries on to the
eminent domain situation." He summarized that the Department's job
"is to make sure that people are justly compensated for the
acquisition of the property and also to make sure that projects are
built."
Senator Ward asked for confirmation that all the material upon
which the final and best valuation of the property is based is
available to the property owner.
Mr. Kauzlarich confirmed that it is.
Senator Ward asked what would happen if this material omits an
issue that is important to the property owner.
Mr. Kauzlarich responded that in a situation where the property
owner and the right-of-way agent discussed an issue but reached an
impasse in the negotiations, the case would go into litigation. He
continued that if the property owner prevails, the State would pay
the cost of the litigation.
JON TILLINGHAST, Attorney, Sealaska Corporation, voiced support for
the bill. He shared that similar legislation has been adopted by at
least 23 states and is recommended by recognized authorities on the
process of eminent domain. He stressed that the intent of the
legislation is to minimize litigation and to reduce acquisition
costs. He stated the argument that as a result of this legislation;
the State would "treat the private sector as partners in a
negotiation rather than as victims."
RON WOLFE, Representative, Sealaska Corporation, conveyed that the
Corporation supports the bill and the Committee's approach to it.
WILLIAM SATTERBERG testified from an offnet site to advise that
rather than this legislation being directed at the Department, this
legislation proposes revisions to the State's eminent domain code
that affects the State, other municipalities and governmental
organizations as well as the private sector. He cited ten court
cases regarding eminent domain that resulted in "massive judgments
against" the State. He asserted that many people prefer to settle
rather than enter into litigation with the State because it is time
consuming and expensive.
Mr. Satterberg suggested that the Committee request an audit be
conducted on the last four years of eminent domain cases that would
reflect "the initial deposited amount" offered by the State and the
judgment or settlement that was reached. He stated that the
disparities in the amounts would "amaze you." He stated that one of
the problems is that the State condemns a piece of property,
deposits money into the Court registry and specifies that it be for
the benefit of the landowner.
Mr. Satterberg argued that the money does not benefit a landowner
because many people cannot continue to finance their litigation
proceedings because the money has to be withdrawn to pay for the
deed of trust and obligations such as appraisals that could cost
between $10,000 to $40,000 plus attorney fees. He stated that the
Committee should support this bill and should additionally
recommend language be included to specify that if the State chooses
to appeal a "Masters Award," the State should be required to make
another deposit in the Court equal to the amount awarded, as well
as pay for the private party's expenses up to that time. He stated
that 95 percent of the State's cases are funded by federal money,
and measures should be undertaken to give a landowner an
opportunity to continue litigation proceedings. He suggested that
language be included to the effect that the State could not appeal
a Masters Award. He urged support of the bill and the addition of
financial support for the landowners.
PHIL EVANS testified from an offnet site to detail his recent
experience with the State over condemnation of a portion of his
property for a road construction project. He stated that during the
initial negotiation process, the right-of-way agent was courteous,
but misleading in the attempt to convince him "to accept a
settlement that was completely unfair." He stated that the
appraiser did not provide him with thorough information and was
insistent in her authority to be on his property and utilize office
space in a business on the property. He asserted that the
"appraiser was deceptively courteous and misleading in her attempt
to promote an unfair evaluation of the property," and he stated
that he was not provided with either a complete copy of the
appraisal or a market data book. He stated that he could not settle
with the State because he considered the appraisal valuation as
"totally inadequate and unfair," and that rather than based "on the
highest and best use of the property," it was based on the
property's current use. He continued that the negative effect of
such things as loss of parking, changes in highest and best use,
declined market appeal, changes in the business use of the
property, and decline in market value were also not considered in
the valuation of the remainder of the property.
Mr. Evans stated that when it became apparent that the State was
misleading and unfair in the attempt to reach a settlement, he
hired an attorney and an appraiser. He stated that while the State
determined that just compensation for the property was $80,229, the
appraiser he hired valued it at $676,000, and the Master's Hearing
appraiser valued the property at $324,000 for property taken and
damages.
Mr. Evans stated that rather than continue the litigation, he
decided to settle; however, the State opted to appeal. He noted
that this situation has incurred expenses amounting to
approximately $60,000, and that the next hearing is not scheduled
until 2003; however, he is still incurring expenses because of the
State's demands that he provide such things as eight years of
profit and loss records, income statements, and correspondence with
businesses, attorneys and appraisers. He stated that the co-owner
of the property has not been asked for these records.
Mr. Evans stated that while the Department's testimony regarding
the process is accurate, he questioned what the bill would
accomplish other than suggest that the property owner hire their
own appraiser. He elaborated that the State controls the process,
condemns the land, hires an appraiser to establish values and upon
being challenged, the case goes to a Masters Hearing to decide fair
settlement, which the State then appeals. He opined that the State,
through a costly intimidation process, causes the property owner
"to fold." He summarized that this legislation "needs more teeth,"
and while he appreciates that the State has a job to do, the
landowner needs to be a participant in the process.
Senator Olson asked the testifier whether this bill adequately
addresses some of the difficulties associated with the process.
Co-Chair Kelly interjected that the testifier voiced that this bill
does not adequately address the process. Co-Chair Kelly pointed out
that the original version of the bill includes language that might
more adequately address some of the concerns raised.
SFC 02 # 57, Side A 11:08 AM
Senator Ward asked whether a binding valuation determined by a
jointly approved appraiser would be a feasible option in resolving
a situation where the parties disagreed on the valuation of the
property.
Mr. Evans stated that would "be a reasonable approach."
Senator Ward stated that this is the process used in most
commercial transactions.
Co-Chair Kelly commented that while language included in the
original bill might be more appropriate than subsequent committee
substitutes, further revisions appear to be necessary. He referred
the Committee to a new committee substitute in the bill packet in
which language from the original bill has been reintroduced.
Senator Wilken moved "to adopt the SB Number 278, original version,
for consideration."
Co-Chair Kelly clarified that this version is SB 278, 22-LS1399\A.
Without objection, the committee substitute was ADOPTED as a
working draft.
Co-Chair Kelly stated that this version "contains more extensive
language regarding the appraised value of the property and the
property owner" being supplied that information.
The bill was HELD in Committee.
ADJOURNMENT
Co-Chair Pete Kelly adjourned the meeting at 11:12 AM
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