Legislature(1997 - 1998)

04/30/1998 09:27 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                          MINUTES                                            
                 SENATE FINANCE COMMITTEE                                    
                       30 April 1998                                         
                         9:27 A.M.                                           
                                                                               
                                                                               
TAPES                                                                      
                                                                             
SFC-98, Tape 147, Sides A and B                                                
                                                                               
CALL TO ORDER                                                              
                                                                             
Senator  Bert  Sharp,  Co-chair,  convened  the  meeting  at                   
approximately 9:27 a.m.                                                        
                                                                               
PRESENT                                                                    
                                                                             
In addition  to Co-chair  Sharp, Senators  Pearce, Phillips,                   
Donley  (via  teleconference),  Torgerson,  and  Adams  were                   
present at the meeting. Senator Parnell was absent.                            
                                                                               
Also  present:  Representative  Gary  Davis;  Pat  Davidson,               
Legislative  Auditor, Division  of  Legislative Audit;  Mike                   
McMullen,   Personnel   Manager,  Division   of   Personnel,                   
Department  of  Administration; Representative  Mike  Davis,                   
Sponsor;  Laddie  Shaw,  Director, Alaska  Police  Standards                   
Council;  Jeff  Logan,   Staff,  Representative  Joe  Green,                   
Sponsor;  Juanita  Hensley,   Division  of  Motor  Vehicles,                   
Department  of  Revenue;   Representative  Norman  Rokeberg,                   
Sponsor;  Dennis Poshard,  Department of  Transportation and                   
Public  Facilities; aides  to  committee  members and  other                   
members of the Legislature.                                                    
                                                                               
Via   teleconference:  Paul   Bowers,  Director,   Statewide               
Aviation,   Department   of    Transportation   and   Public                   
Facilities;   John   Steiner,   Attorney   General   Office,                   
Department of Law.                                                             
                                                                               
SUMMARY INFORMATION                                                        
                                                                               
SB 358    PERSONNEL RECORD DISCLOSURE: USE OF FUNDS                            
                                                                               
          SB 358 was REPORTED out of committee with no                         
          recommendation and attached zero impact fiscal                       
          note by the Office of the Governor.                                  
                                                                               
HB 261    LAW ENFORCEMENT TRAINING SURCHARGE                                   
                                                                             
          SCS CS  HB 261(FIN) was REPORTED  out of committee                   
          with  a  "do   pass"  recommendation,  two  fiscal                   
          impact notes  by the  Department of  Public Safety                   
          and the  Court System,  and two zero  impact notes                   
          by  the  Department  of   Public  Safety  and  the                   
          Department of Administration.                                        
                                                                             
HB 11     DRIVERS LICENSE REQUIREMENTS FOR MINORS                              
                                                                               
          SCS HB 11(FIN) was  REPORTED out of committee with                   
          no recommendation and attached  fiscal note by the                   
          Department of Administration.                                        
                                                                             
HB 210    AIRPORT DUTY-FREE CONCESSIONS                                        
                                                                               
          HB  210  was  HEARD  and  HELD  in  committee  for                   
          further consideration.                                               
                                                                             
SENATE BILL 358                                                              
                                                                               
     "An Act relating to the disclosure of certain                             
     personnel records that include information about the                      
     use of public resources."                                                 
                                                                               
Senator  Pearce explained  that  SB 358  was  the result  of                   
findings from  a legislative audit  made on the  Division of                   
Vocational  Rehabilitation in  the  Department of  Education                   
(DOE). She added  that the audit had  recently been released                   
at a Legislative Budget and Audit Committee meeting.                           
                                                                               
PAT DAVIDSON,  LEGISLATIVE AUDITOR, DIVISION  OF LEGISLATIVE                   
AUDIT, informed the committee that  during course of the DOE                   
Division   of    Vocational   Rehabilitation    audit,   the                   
legislative   auditors   were   asked  to   review   various                   
allegations. The conclusions of  the audit were contained in                   
the recently  released report. However,  certain information                   
was  found  that  could  not be  disclosed  because  it  was                   
considered private  under the Personnel Act.  The items that                   
could  not be  discussed  in  public had  to  do with  state                   
financial  transactions.  Legislative  Audit  believed  that                   
there  should not  be prohibitions  on how  state money  was                   
spent; SB  358 would amend  the personnel actions  and would                   
allow public disclosure  of the use and the  amount of state                   
funds, for whatever purpose.                                                   
                                                                               
MIKE  MCMULLEN, PERSONNEL  MANAGER,  DIVISION OF  PERSONNEL,                   
DEPARTMENT  OF ADMINISTRATION,  testified that  the position                   
of the Department of Administration  (DOA) was that the bill                   
would not  fix the  perceived problem in  the right  way. He                   
stated that  trying to fix  the personnel record  section in                   
statute to deal with the  issue would be misplaced since the                   
financial documents  were not personnel records.  He did not                   
know the solution but was  willing to work with the Division                   
of Finance to  find one. He referred to the  first and third                   
sentences of the  bill. The second sentence  would reverse a                   
long-standing  practice of  what  the department  considered                   
public information  under AS 39.25.080  (authorized employee                   
compensation).  The  department believed  that  compensation                   
was authorized before it got  paid, so that all compensation                   
was  reportable  in  a  gross amount;  on  that  basis,  the                   
Division of  Finance had been  able to  periodically release                   
lists of  employees who  made more  than $50,000,  more than                   
the governor,  or other numbers  to the legislature  and the                   
press.  The information  was considered  public; the  second                   
sentence  would reverse  that and  force  the department  to                   
release only  something like the  authorized range  and step                   
and bargaining  unit. He believed  the department  would not                   
be able to respond to inquiries.                                               
                                                                               
Senator  Adams echoed  concerns  stated  earlier related  to                   
page 1,  lines 7  and 8. He  believed information  was being                   
hidden from  the public. He  queried suggestions  for fixing                   
the  problem.  Mr.  McMullen suggested  leaving  the  second                   
sentence out and  moving the rest of  the language someplace                   
else in  statute related to  public finances; the  issue was                   
not personnel records but financial records.                                   
                                                                               
In response  to a question  by Senator Pearce,  Ms. Davidson                   
addressed  concerns brought  up by  DOA, beginning  with the                   
question of  why the language  was not in statute  under the                   
Personnel Act. She explained that  the instance the auditors                   
had come  across related  to certain  financial transactions                   
that were  wrapped around  a personnel  disciplinary action,                   
based  on rules  about what  a disciplinary  or a  personnel                   
action   was.  The   Division  of   Legislative  Audit   had                   
recommended  the measure  be  placed where  it  was so  that                   
confidentiality did  not include  limiting public  access to                   
information about the use of public funds.                                     
                                                                               
Ms. Davidson  reported that the  second sentence was  put in                   
by  Legislative Legal  Services when  the bill  was drafted.                   
She  believed  the  concerns  related  to  using  the  words                   
"actual amount  paid" because while information  about gross                   
pay was public, certain  deductions, withholdings, and so on                   
were confidential  and therefore should not  be available to                   
the  public. Legislative  Legal  had used  the language  for                   
clarification.                                                                 
                                                                               
Senator  Pearce (unclear  and faint  recording) referred  to                   
the  public  nature  of pay  received  by  legislators.  She                   
questioned  why the  information could  not be  made public.                   
Mr. McMullen responded  that DOA was willing  to do whatever                   
it could  within broad constitutional protections  of rights                   
to privacy.  He claimed there  were several ways  to address                   
an employee  who did something wrong.  For example, criminal                   
activity  could  be  prosecuted under  criminal  law,  while                   
violation of  the Alaska Executive  Branch Ethics  Act could                   
be dealt  with another  way. Employee discipline  could also                   
be  used. The  only  option  that seemed  to  fall under  AS                   
39.25.080   was   the   employee  discipline   option.   The                   
department  believed that  the  financial transactions  that                   
were the basis  for finding the employee  guilty were public                   
documents. The Division of Finance  had considered the issue                   
and determined that the financial  parts were already public                   
records.  He  understood that  the  two  issues (the  action                   
taken on  the employee and  the actions that were  the basis                   
for taking the  action) were intertwined. He  was willing to                   
work  on  sorting the  issues,  including  working with  the                   
auditors.                                                                      
                                                                               
Co-chair  Sharp  opined  that the  statement  sounded  "like                   
garbage" and suggesting moving the bill.                                       
                                                                               
Senator Pearce thought  more work could be  done. She stated                   
concerns about accountability  regarding the process because                   
of  other issues.  The public  could not  find out  what the                   
disciplinary  actions were  in at  least one  case involving                   
alleged misuse  of access to  a private  individual's police                   
records. She  referred to an  employee who got  a promotion,                   
and "special prosecution" by the  Department of Law. She did                   
not feel  comfortable with the  level of public  access. She                   
agreed that  the bill  should be  moved from  committee. She                   
stated  that  she wanted  the  auditor  and not  Legislative                   
Legal to work with  the department on streamlining language,                   
but she did not want to hold the bill in committee.                            
                                                                               
Co-chair Sharp  agreed. He thought  any attempt to  bring in                   
three or four  departments to work on something  in the last                   
ten  days of  the  session  in the  house  of  origin was  a                   
stonewall tactic. He did not want  to hold a bill when there                   
were no  solid suggestions  regarding what  to do  about the                   
problems.                                                                      
                                                                               
Senator Torgerson  MOVED to REPORT  SB 358 out  of committee                   
with  individual  recommendations  and the  attached  fiscal                   
note.                                                                          
                                                                               
Senator Adams  commented that  he had  problems with  line 7                   
but would not be opposing the motion.                                          
                                                                               
There being no OJBECTION, it was so ordered.                                   
                                                                               
SB 358 was REPORTED out  of committee with no recommendation                   
and attached  zero impact fiscal  note by the Office  of the                   
Governor.                                                                      
                                                                               
HOUSE BILL 261                                                               
                                                                               
     "An Act relating to fines and to a surcharge imposed                      
     for violations of state or municipal law and to the                       
     Alaska police training fund."                                             
                                                                               
Co-chair Sharp  explained that the committee  had thought HB
261 had  moved from  committee, but  more action  was needed                   
related to the fiscal note and an amendment.                                   
                                                                               
REPRESENTATIVE  MIKE DAVIS,  SPONSOR,  clarified that  there                   
had  been  no  misrepresentation  of  his  position  on  the                   
amendment,  which  was  neutral.   However,  review  of  the                   
implications of the amendment had  revealed problems. He had                   
spoken to  the Senator Donley,  the maker of  the amendment,                   
who agreed  that it would  be appropriate for  the committee                   
to review the bill again.                                                      
                                                                               
Representative Davis  detailed that the primary  concern was                   
as the amendment  related to Section 5 of  the bill; another                   
group that  the training  fund dollars could  be distributed                   
to had been  added. Existing wording in  the legislation had                   
indicated  that  the distribution  would  be  made in  equal                   
amounts  to the  different groups.  The amendment  therefore                   
diluted the  dollars that  would be  utilized by  the Alaska                   
Police  Standards Council  and the  academy by  providing an                   
equal distribution  to municipalities. He referred  to a new                   
amendment  before  the  committee  that  would  correct  the                   
problem, which  he supported. The new  amendment would allow                   
the   legislature  to   distribute   the  various   eligible                   
functions as it saw fit.                                                       
                                                                               
Senator Adams pointed out that the amendment was good.                         
                                                                               
LADDIE  SHAW,  DIRECTOR,  ALASKA POLICE  STANDARDS  COUNCIL,                   
provided  the  committee  with more  information  about  the                   
bill.  He   highlighted  that  the  council   had  statewide                   
responsibility as  a regulator agency for  over 50 municipal                   
departments, state  troopers, and  corrections; part  of the                   
reason  he  thought  the  bill  was  so  important  was  the                   
increased need  to support statewide basic  training as well                   
as in-service  training. For  example, in  FY 96  (the first                   
year the  initial surcharge went  into effect),  13 recruits                   
were supported;  in FY 98,  30 basic-training  recruits were                   
supported, and  a community corrections-officer  program was                   
initiated.  Projected   for  FY  2000,   responsibility  for                   
supporting the  Anchorage Police Academy would  be taken on,                   
and on  May 11, 1998,  the Fairbanks academy would  start up                   
with 15  officers in its  first class  (primarily supporting                   
the Interior  and Western regions). He  emphasized that over                   
100 officers would be supported in FY 2000.                                    
                                                                               
Mr. Shaw  described how officers were  trained. For example,                   
there was  an advanced criminal investigation  course put on                   
in  Anchorage; 74  officers participated,  32  of whom  were                   
from  Anchorage (43  percent).  Twenty-two departments  were                   
represented statewide at the one class.                                        
                                                                               
Senator Phillips MOVED to ADOPT Amendment 2.                                   
                                                                               
Co-chair Sharp detailed that the  amendment would delete the                   
equal amounts and make them subject to appropriation.                          
                                                                               
There being no OBJECTION, Amendment 2 was adopted.                             
                                                                               
Senator Phillips MOVED to ADOPT Amendment 3.                                   
                                                                               
Co-chair  Sharp explained  the amendment.  His only  concern                   
related to putting  the amount in the new section  on page 4                   
that  would  allow the  municipality  to  be reimbursed  for                   
collection   costs.  He   was   concerned  about   "creative                   
accounting"  that  could be  used  regarding  what could  be                   
deducted  or billed  to the  state for  collection fees.  As                   
long as  it was constitutionally  legal, he wanted a  cap on                   
reimbursement so that it did  not exceed 10 percent (or some                   
appropriate   number)  of   the   surcharge  collected   and                   
transmitted.                                                                   
                                                                               
Representative Davis stated  that he did not  have a problem                   
with Amendment  3. He  recalled that  Amendment 1  had added                   
the opportunity for municipalities  to charge for collection                   
of the  surcharges. He  questioned complications  that could                   
arise   in   the   future   regarding   collections,   which                   
municipalities  might want  to  charge for.  He thought  the                   
amendment would  protect the agencies  that the  money would                   
go to.                                                                         
                                                                               
Co-chair  Sharp   stated  that   he  definitely   wanted  to                   
reimburse reasonable  charges, as there  would be a  cost to                   
municipalities  to  do what  was  required.  He referred  to                   
conversation  with  the   municipalities  about  the  costs.                   
Representative  Davis understood  that  the Municipality  of                   
Anchorage had reported that there  would be hardly any cost;                   
they did not feel there was a need for a charge.                               
                                                                               
There being no OBJECTION, Amendment 3 was adopted.                             
                                                                               
Senator Phillips MOVED to REPORT  HB 261 from committee with                   
individual  recommendations and  the attached  fiscal notes.                   
There being no OBJECTION, it was so ordered.                                   
                                                                               
SCS CS HB 261(FIN) was REPORTED  out of committee with a "do                   
pass"  recommendation,  two  fiscal   impact  notes  by  the                   
Department of  Public Safety and  the Court System,  and two                   
zero impact  notes by  the Department  of Public  Safety and                   
the Department of Administration.                                              
                                                                               
HOUSE BILL 11                                                                
                                                                               
     "An Act relating to driver's licensing; and providing                     
     for an effective date."                                                   
                                                                               
Senator  Torgerson  MOVED  to ADOPT  SCS  HB  11(FIN)  ("\H"                   
version,  4/24/98)   as  a   working  document   before  the                   
committee.                                                                     
                                                                               
Senator Adams OBJECTED for discussion.                                         
                                                                               
JEFF  LOGAN,  STAFF,   REPRESENTATIVE  JOE  GREEN,  SPONSOR,                   
explained the  \H version CS.  He reviewed changes  that had                   
been requested from drafters:                                                  
                                                                               
   · Section 1. No changes.                                                    
                                                                               
   · Section 2. One change, page 2, line 2, now says that a                    
     person accompanying a permittee  shall be 21 years old.                   
     The previous version said 22 years old.                                   
                                                                               
Mr. Logan  detailed that  21 years was  the lowest  age that                   
could  be put  into  the  bill to  qualify  for the  federal                   
funding needed to implement it.                                                
                                                                               
   · Section 3. Goes through AS 28.15.055 and AS 28.15.057;                    
     previously   057    included   a    nighttime   driving                   
     restriction,  which  has  been   deleted  from  the  \H                   
     version.                                                                  
                                                                               
   · Page 3, line 5, which allows the department through                       
     the Division of Motor Vehicles  (DMV) to require that a                   
     person who has  had six points in a  12-month period to                   
     attend   a  driver-improvement   course.  He   noted  a                   
     technical change  on page 3,  line 7; the  word "court"                   
     should be replaced with the word "department."                            
                                                                               
Senator Torgerson turned to page  2, line 30, related to the                   
improvement course.  He queried  the definition  of "traffic                   
law" related to  conviction of violation of  traffic law. He                   
noted exemptions in statute under the same section.                            
                                                                               
JUANITA HENSLEY,  DIVISION OF MOTOR VEHICLES,  DEPARTMENT OF                   
REVENUE, listed examples of offenses that would apply:                         
                                                                               
   · A speed-racing contest; 10-point violation                                
   · Fleeing or attempting to elude a police officer; 10-                      
     point violation                                                           
   · Failure to stop at a school bus while the red lights                      
     were flashing; 6-point violation                                          
   · Speeding three to nine miles per hour over the limitl                     
     2-point violation                                                         
   · Careless driving; 4-point violation                                       
                                                                               
Ms.  Hensley explained  that anything  not specified  in the                   
legislation that  was an actual moving  violation (driving a                   
car)  would  be  a  2-point  violation,  and  any  equipment                   
violation  such as  a  non-functioning  headlight or  broken                   
windshield   was  a   traffic  violations,   not  a   moving                   
violation.   She  noted that  the bill  would not  require a                   
driver-improvement  course unless  the  violator received  a                   
"point-able" offense made when a vehicle was being driven.                     
                                                                               
Senator  Torgerson pointed  out that  the language  spoke to                   
any conviction of "traffic law."  He queried the difference.                   
Ms.  Hensley   replied  that   parking  offenses   were  not                   
considered traffic violations.                                                 
                                                                               
Senator Torderson was  concerned that a person  could have a                   
4-point  violation,  then  have  a tail  light  out  and  be                   
required to go  through a course. He  wanted the requirement                   
to be for  traffic violations. Ms. Hensley  responded that a                   
person who  had a  speeding violation of  4 points  and then                   
received a citation  for a tail light would  still have only                   
4 points; an inoperative tail  light was zero points. In the                   
statute, if a  person received two citations as  a result of                   
one traffic  stop, they  would only  be assessed  points for                   
one of the violations.                                                         
                                                                               
Senator Torgerson  turned to page  2, related to  a driver's                   
course  certified  by  a  national  organization.  He  asked                   
whether  more  than one  course  would  be approved  by  the                   
department. Ms. Hensley  replied that national organizations                   
had programs  that they  developed with  extensive research.                   
For example,  the National Safety  Council had  courses that                   
were nationally  approved and designed strictly  for certain                   
age  groups. The  AAA Foundation  had nationally  recognized                   
and   approved  courses   available  that   worked.  Another                   
approved  program was  an  American  Association of  Retired                   
Persons (AARP) course. The Division  of Motor Vehicles (DMV)                   
had criteria such  as a given number of  hours spent reading                   
material, watching film,  and lectures; there was  no way of                   
showing  that  the programs  did  not  reduce recidivism  of                   
traffic offenders,  while some of  the nationally-recognized                   
programs had the information and  could show that recidivism                   
would be reduced.                                                              
                                                                               
Senator Torgerson asked whether  driver education courses in                   
schools  were nationally  recognized.  Ms. Hensley  answered                   
that  the   schools  usually  put   a  nationally-recognized                   
curriculum  together. She  stated  that  the division  would                   
evaluate  the  curriculum  and plans  for  a  correspondence                   
course  for  locations that  did  not  have National  Safety                   
Council instructors available.                                                 
                                                                               
Senator  Torgerson  questioned  whether   the  DMV  had  the                   
authority    to    reject    a    national    organization's                   
certification. He  was concerned about whether  programs put                   
together  outside Alaska  were  appropriate  for Alaska.  He                   
thought the state should have  some say. Ms. Hensley replied                   
that before  a course was approved  and put on the  list, it                   
would  have  to be  put  together  and all  the  information                   
compiled  and  submitted  to  DMV;   DMV  would  review  the                   
materials  and  make  an determination  as  to  whether  the                   
criteria was followed.                                                         
                                                                               
Senator Torgerson turned to page  2, line 9 stating that the                   
department could issue a  provisional license. He questioned                   
the use of  the word "may" rather than  "shall." Ms. Hensley                   
answered that the  DMV did not want to get  into a situation                   
where it was required ("shall")  issue a license if a person                   
failed the test.                                                               
                                                                               
Senator   Adams  thought   the   measure   would  put   more                   
restrictions and  regulations on  the public. He  pointed to                   
Section  2 and  asked how  much funding  would be  collected                   
from the  federal government to  increment the  program. Ms.                   
Hensley  replied that  the DMV  had applied  a couple  years                   
prior  and  received a  grant  for  $77,000 to  implement  a                   
driver  licensing system;  the  fiscal  note also  reflected                   
revenue of $163,000  coming in for licensing as  well as the                   
$77,000 federal grant received.                                                
                                                                               
Senator  Adams  voiced  concerns related  to  rural  Alaska.                   
According to  page 3, lines  11 to 13, the  department could                   
suspend, revoke,  or deny  a driver's  license for  a person                   
who   failed   to   successfully   complete   the   driver's                   
improvement course  required by  the court;  he asked  how a                   
person from Nooksack  in rural Alaska could  get the course.                   
He  wondered   whether  division   personnel  would   go  to                   
Nooksack.  Ms. Hensley  replied  that the  division had  and                   
would   be  approving   more   correspondence  courses   for                   
locations  without  the  course.  Unless a  person  went  to                   
Bethel  to  take  a behind-the-wheel  driving  course,  they                   
would be issued an "off-systems"  driving course and only be                   
allowed to  drive in  that community. A  person who  went to                   
Bethel  and  took   a  driving  test  could   be  issued  an                   
unrestricted driver's  license. The division did  not want a                   
person without training on highways  to drive in big cities.                   
Alaska did  not require  an instruction  permit and  did not                   
have driver education programs in the schools.                                 
                                                                               
Senator Adams  stated that he  was not convinced  that there                   
was need for the legislation  except for the $77,000 more in                   
federal  funds that  would  be received.  He  did not  think                   
there  was a  need  because of  safety  issues. Ms.  Hensley                   
replied that  Alaska's youth between  the ages of 16  and 20                   
comprised 6.9  percent of the state's  licensed drivers, but                   
were involved  in 28 percent  of the state's  fatal crashes.                   
She noted that the grant  was a demonstration grant, and the                   
state  could  show that  the  type  of program  would  work.                   
Statistics in  other states showed that  the program reduced                   
the number  of fatal  crashes and  the number  of violations                   
issued  in the  age group;  hopefully insurance  rates would                   
also be reduced.                                                               
                                                                               
Senator Adams noted that he had  a son who would be affected                   
by  the  legislation. Other  members  agreed  that they  had                   
children who were lobbying against the bill.                                   
                                                                               
Senator   Phillips  asked   whether  the   statistics  given                   
regarding the 16  to 20 age group were broken  down in rural                   
versus urban areas. Ms. Hensley replied in the negative.                       
                                                                               
Co-chair Sharp wished there was  a way to direct more severe                   
limitations  on   those  who  caused  crashes.   He  thought                   
preventative education was the appropriate approach.                           
                                                                               
Co-chair Sharp clarified  that the CS had  not been adopted.                   
There being no OBJECTION, it was so ordered.                                   
                                                                               
Senator Phillips MOVED to ADOPT Amendment 1:                                   
                                                                               
     Page 3, line 7:                                                           
     Delete the word "court" and insert "department"                           
                                                                               
There being no OBJECTION, Amendment 1 was adopted.                             
                                                                               
There  was discussion  regarding whether  the amendment  was                   
Amendment 1 or Amendment 2 [conclusion unclear].                               
                                                                               
Senator  Phillips MOVED  to REPORT  SCS HB  11 (FIN)  out of                   
committee with  individual recommendations and  the attached                   
fiscal notes.                                                                  
                                                                               
There  was  an OJBECTION.  A  roll  call  was taken  on  the                   
motion:                                                                        
                                                                               
IN FAVOR: Phillips, Donley, Sharp, Pearce                                      
OPPOSED: Adams, Torgerson                                                      
Senator Parnell was absent from the vote.                                      
                                                                               
The MOTION PASSED (4/2).                                                       
                                                                               
SCS  HB  11(FIN)  was  REPORTED out  of  committee  with  no                   
recommendation  and   the  attached   fiscal  note   by  the                   
Department of Administration.                                                  
                                                                               
HOUSE BILL 210                                                               
                                                                               
     "An Act relating to the extension of contracts for the                    
     sale   and   delivery   of   in-bond   merchandise   at                   
     international airports."                                                  
                                                                               
[SFC-98, Tape 147, Side B]                                                     
                                                                               
REPRESENTATIVE  NORMAN   ROKEBERG,  SPONSOR,   informed  the                   
committee  that his  district was  the  airport district  in                   
Anchorage.  He  explained that  HB  210  would counteract  a                   
problem  with a  bill passed  two years  prior, HB  543, the                   
Airport  Leasing bill.  The measure  had language  regarding                   
duty-free  contracts.  He  referred  to  a  March  19  legal                   
opinion  by   legislative  counsel  included   in  committee                   
handouts. The opinion addressed  an ambiguity in the statute                   
passed in  HB 543  that had contributed  to problems  in the                   
release  of the  airport  regulations.  The regulations  had                   
been in the  drafting stage for two years, since  HB 543 was                   
passed.  The department  [Department  of Transportation  and                   
Public Facilities  (DOT/PF)] had  created some 185  pages of                   
regulations. He  wanted the regulations  issued and  the law                   
clarified  so that  business  activities  could continue  in                   
airports throughout the state.                                                 
                                                                               
Representative Rokeberg  detailed that  Section 1 of  HB 210                   
was a technical  correction or explanation of  the intent of                   
HB 543 when  it was passed during the  previous session. The                   
section would  provide very clearly  that the duration  of a                   
new  lease  under the  section  could  not exceed  55  years                   
(existing in  previous law)  and also  that the  duration of                   
the extension of a lease could not exceed 55 years.                            
                                                                               
Representative Rokeberg directed attention  to page 2, lines                   
1  and  2,  which  indicated  that  the  commissioner  would                   
approve  application of  a new  land lease  for an  extended                   
term under  the section without  offering the land  to lease                   
to  another  person and  without  regard  to the  number  of                   
lessees,  prior leases,  or lease  extensions  for the  same                   
land.  He noted  that  the  language went  on  to cover  the                   
airport's basic  plan, long-range plan,  and the need  for a                   
best-interest finding (BIF)  on the part of the  state if it                   
did not to approve a new lease.                                                
                                                                               
Representative Rokeberg explained  that the problem occurred                   
when the  existing law was  interpreted; another  portion of                   
statute indicated  that there was a  55-year maximum period.                   
The intent  of the legislature  in HB  543 was to  allow for                   
the extension  of an existing  leasehold, but also  to allow                   
the existing leaseholder to step  out of the lease and enter                   
into a new  one when the old lease expired.  He provided the                   
example  of  a family  in  Anchorage  who  had been  at  the                   
Anchorage International Airport since  1953; their lease was                   
almost 40  years old. Given  that there were only  around 15                   
years left  on the lease,  the necessity to  have continuity                   
required the ability to step out  of the old lease and enter                   
into a new  one. The language in HB 210  would allow that by                   
clarifying the intent of HB 543.                                               
                                                                               
Representative  Rokeberg   relayed  history   pertaining  to                   
Section 2. The bill had  been brought before the legislature                   
the  previous year  and Senator  Parnell had  indicated that                   
there could be constitutional  concerns about the ability to                   
extend  a  contract that  had  been  bid out.  In  response,                   
Section  2 had  been  redrafted to  stipulate  that a  lease                   
could  be extended  if  provided for  in  the contract;  the                   
extension would be no longer than the original lease term.                     
                                                                               
Representative Rokeberg referred to  an amendment that would                   
be offered.                                                                    
                                                                               
Senator Adams  pointed to  language on page  1, line  13; he                   
believed the  word "shall"  should be  changed to  "may." He                   
opined that  unless the  language was  changed, it  could be                   
interpreted  that  a  person  with  a  55-year  lease  could                   
continue on endlessly and there  would be no competition. He                   
thought  there might  be a  combination  of land-leases  and                   
wanted language  to be specific  to each one. He  thought it                   
was a policy  question that the committee  needed to closely                   
consider;  the  issue was  the  state's  ability to  compete                   
after each of the leases was up.                                               
                                                                               
Representative Rokenberg  replied that  the word  "shall" on                   
page 1, line 13 was the heart  of HB 543. He referred to the                   
problem of the inability or  failure of [DOT/PF] to re-offer                   
to two  existing tenants.  He pointed  out that  the section                   
being questioned did  not relate to extending  the leases of                   
duty-free  spaces;  there  was   a  distinction  in  statute                   
between the land and space leases.                                             
                                                                               
Senator Adams questioned whether there  was a lease for each                   
separate  airport or  land  lease. Representative  Rokenberg                   
responded  that  the policy  had  to  be clarified  for  new                   
leases and the technical change was needed to do that.                         
                                                                               
Representative  Rokenberg  directed  attention  to  handouts                   
related to  HB 476,  a bill in  process for  which testimony                   
had been given by the  department. The department could live                   
with  the language  in Section  1; the  language in  the "K"                   
version  of  the   CS  was  language  that   came  from  the                   
department. The department understood  the need to issue the                   
regulations in order  for airports to get  on with business.                   
He   added  that   the   department   understood  that   the                   
legislature's  policy (mentioned  by Senator  Adams) was  to                   
allow leases to  be extended and/or new  leases entered into                   
without the leases  going back on the market as  long as (as                   
provided in  HB 543) they met  the BIF of the  state and did                   
not  collide  with the  long-range  plan  of the  particular                   
airport.                                                                       
                                                                               
Senator Torgerson questioned  the competitive-bid portion of                   
the bill.  He also wondered  whether the bill  addressed the                   
ability of  a lessee to sub-lease.  Representative Rokenberg                   
replied that there  was nothing in the bill  related to sub-                   
letting,  though  he  had recommended  that  the  department                   
implement a policy  that the leases stipulate  that a lessee                   
should not be able to  profit from a sub-lease situation and                   
that in  such a  situation, the profit  would revert  to the                   
state (the landlord).                                                          
                                                                               
Representative Rokenberg  continued that it was  in the best                   
interest of the  state to allow existing tenants  to be able                   
to renew  leases without going  out to competitive  bid. The                   
bill would  ensure that was implemented  in the regulations.                   
He reported that he had  been in communication with lessees;                   
unfortunately the  department was  still unable to  make the                   
extensions.                                                                    
                                                                               
Senator  Torgerson asked  whether a  determination would  be                   
made   through  the   BIF  about   the   new  rental   rate.                   
Representative Rokenberg  responded that  rates were  set in                   
regulation  and  there  was rate  differentiation  for  land                   
leases;  everyone  paid the  same.  For  airports, the  only                   
differential was "aviation user"  or "non-aviation user." He                   
thought the  state should change  its policy and  get closer                   
to fair-market value for the land.                                             
                                                                               
In   response   to   a  question   by   Senator   Torgerson,                   
Representative   Rokenberg   answered   that   all   airport                   
regulations were  affected for both international  and rural                   
airports, which had two separate sets of regulations.                          
                                                                               
Co-chair Sharp reported that the  advocates had been working                   
for years  to get the issue  cleaned up because some  of the                   
small   users  on   the  "East   Ramp"   of  the   Fairbanks                   
International  Airport had  leases  that were  less than  55                   
years,  short-term leases,  or  expired  leases. Before  [HB
543]  was  passed  (which they  thought  would  address  the                   
issue), the department  was going to insist  that the leases                   
went to public  bid; this meant that anyone  else could come                   
in a get a hangar a  lot cheaper and leaseholders would have                   
to  compete against  someone who  had no  investment in  the                   
property. He maintained  that that had been one  of the main                   
motivators  behind  HB 543,  but  the  issue was  still  not                   
resolved  because  of  the complexity  of  the  regulations,                   
especially  not  being  able  to  allow  extensions  without                   
public bid.  He thought one  of the reasons the  prices were                   
not market driven  was that one of the purposes  of the land                   
was to stimulate business and  airport activity. It was very                   
difficult  for someone  to sell  a  piece of  property on  a                   
lease with  four or five years  left because no one  knew if                   
the  lease  could  be  extended  to  amortize  the  cost  of                   
additional improvements.                                                       
                                                                               
Representative Rokenberg agreed with  the analysis and added                   
that the  original bill  also affected  major, multi-million                   
dollar  investments in  the Anchorage  International Airport                   
air cargo business  because of the lack of  comfort with the                   
department's policies. He wanted the  policy to be clear and                   
implemented properly  in regulations, which was  the purpose                   
of  HB  210.  He  pointed to  three  pages  of  "convoluted"                   
regulations  in  the  committee packet  related  to  leasing                   
schedules. He emphasized that the  policy articulated by the                   
legislature [in  HB 543] should  be re-affirmed  and cleared                   
up  [in  HB  210]  so  that  the  state  could  conduct  its                   
business.                                                                      
                                                                               
PAUL  BOWERS, DIRECTOR,  STATEWIDE  AVIATION, DEPARTMENT  OF                   
TRANSPORTATION AND  PUBLIC FACILITIES  (via teleconference),                   
testified that  the department was  not formally  opposed to                   
the  bill. However,  he had  been  asked to  expound on  the                   
department's  viewpoint  that the  bill  would  not be  good                   
policy. He  listed reasons,  explaining that  the department                   
owned and operated  some 265 of the  287 public-use airports                   
in the  state and clearly  had an interest in  fostering and                   
promoting a  strong aviation  transportation infrastructure.                   
Providing the  infrastructure cost  around $19  million each                   
year for  the rural airport system  alone; revenues amounted                   
to less  than half that  amount. The difference  between the                   
operating  costs  and  the  revenues  was  made  up  through                   
general fund  money, which  had been cut  every year  by the                   
legislature.  The only  way to  make up  the difference  was                   
from  market-value  pricing   of  land-lease  revenues.  The                   
department believed that  the perpetual-lease extension that                   
HB 210 would create would exacerbate the situation.                            
                                                                               
Mr.  Bowers  stated  that the  department  agreed  that  the                   
lessee should  be compensated  for improvements;  that would                   
happen   under  both   existing   and   proposed  Title   17                   
regulations.  However, the  monetary value  of the  right to                   
the underlying  property should accrue to  the land's owner,                   
not the  lessee, and  the revenue gained  should be  used to                   
help the  state operate  its airport infrastructure.  From a                   
public-policy  perspective,  the  department  believed  that                   
leasing regulation should foster  and promote public airport                   
aviation   infrastructure   and   not  create   what   would                   
effectively  become "leasehold  heirlooms."  The bill  would                   
preclude  competition  from  limiting space,  which  from  a                   
long-term perspective would lock up innovation.                                
                                                                               
Mr.   Bowers  emphasized   that  competition   in  an   open                   
marketplace was  good; without it,  many advances  would not                   
exist,  including  jet  engines, pressurized  aircraft,  and                   
telecommunications.  He argued  that  perpetual leases  were                   
bad  policy; 55  years  was a  long time  in  any case,  but                   
especially  in aviation.  In  just the  past  50 years,  the                   
industry  has  progressed from  World  War  II B-24s  to  BI                   
Stealth Bombers, DC-3s, and so  on. He claimed that the rate                   
of  innovation was  exponential  and  that long-term  leases                   
would effectively preclude economic development.                               
                                                                               
Co-chair  Sharp asked  whether all  the leases  were 55-year                   
leases. Mr. Bowers answered that  HB 543 had stipulated that                   
the  term maximum  was 55  years;  many of  the leases  were                   
shorter than that. Generally, a  lease was entered into that                   
was long  enough to capitalize any  improvements made. Under                   
those terms, putting in a  hot-dog stand would not warrant a                   
55-year lease.                                                                 
                                                                               
Co-chair   Sharp  asked   whether   the  regulations   being                   
developed  over  the past  two  years  would allow  for  the                   
current value  of improvements on  a particular lease  to be                   
returned to the  leaseholder who was losing the  lease if it                   
went to public  bid and someone else got it,  or whether the                   
value go to the state. Mr.  Bowers answered that there was a                   
transition  provision  in  the proposed  regulations  (Title                   
17).                                                                           
                                                                               
Co-chair  Sharp clarified  that anything  over-and-above the                   
lease amount of the re-bid  lease with improvements would go                   
back  to the  original lease  owner. He  wanted to  get away                   
from  the  state  confiscating improvements  because  of  an                   
expired lease.  Mr. Bowers answered that  there were clearly                   
provisions in  existing and proposed regulations  that would                   
enable compensation; there  was no way the  state would take                   
over the property unless it  was absolutely abandoned by the                   
leaseholder.                                                                   
                                                                               
Co-chair  Sharp described  a possible  scenario  in which  a                   
present  occupant  of  a  lease with  $2  million  worth  of                   
improvements wanted  to continue with  the lease and  had to                   
go to a public bid.  He asked whether the lease-holder would                   
basically get  $2 million worth  of "free chips" on  the bid                   
and would only  be bidding against the  actual lease amount.                   
Mr. Bowers replied in the affirmative.                                         
                                                                               
Co-chair   Sharp  asked   whether  the   described  scenario                   
represented a change from the  previous proposal three years                   
prior. Mr.  Bowers responded that  Title 17  regulations had                   
gone through  a dramatic metamorphosis and  had been through                   
the public process.                                                            
                                                                               
Senator Adams  queried language. He  wanted to find  a piece                   
of legislation  that would be  more acceptable  to Alaskans.                   
He  reiterated his  earlier question  regarding language  on                   
page 1, line 13 related to  the 55 years for each land lease                   
and changing the  word "shall" to "may"  (resulting in: "the                   
commissioner may  approve the application").  The department                   
would then have a chance to  review the leases so that other                   
Alaskans  could  compete  fairly  after  capitalizing  their                   
present  leases. Mr.  Bowers responded  that the  department                   
agreed  with Senator  Adams' proposed  language and  thought                   
changing  "shall" to  "may"  would be  the  best policy.  He                   
thought that  reviewing exceptions to the  limitations would                   
make more  sense than  automatically extending  every lease;                   
there would  be a  public-review process for  exceptions. He                   
suggested making  the lease  extension one-time  rather than                   
perpetual if the proposed language was not acceptable.                         
                                                                               
Senator Adams  emphasized that airport leases  in particular                   
in  rural Alaska  could take  a long  time to  get approval,                   
which made it  difficult for a small air  carrier to expand.                   
He was not sure the issue could be dealt with in HB 210.                       
                                                                               
JOHN  STEINER, ATTORNEY  GENERAL OFFICE,  DEPARTMENT OF  LAW                   
(via teleconference),  agreed that on the  surface, the idea                   
may  be  to  extend  the right  to  preferential  leases  in                   
perpetuity  to  the extent  that  the  extension or  reputed                   
lease could re-occur  regardless of how many  there had been                   
before.  He stated  that  the Department  of  Law (DOL)  had                   
noted, however,  that there were also  two pre-conditions to                   
an extension, noted in subsections (1)  and (2) on page 2 of                   
the CS (lines  3 and 5), indicating that the  lessee must be                   
found  in compliance  with the  terms of  the lease  and the                   
continuation  of  the  leasehold  must  be  consistent  with                   
written airport  operation policies and the  state's BIF. He                   
emphasized  that  the  two  subsections  contained  critical                   
pieces  of  language,  which   would  not  entirely  resolve                   
concerns by  DOL related  to general  constitutional policy,                   
but went far  towards doing so. The shell  under the certain                   
situation  was  somewhat  limited  to the  extent  that  the                   
findings  had  to  be  found before  the  shell  kicked  in;                   
however,  were  the  language  to be  changed  to  "may"  as                   
suggested by Senator Adams, the  following concerns would be                   
resolved:                                                                      
                                                                               
   1. The state constitution, in Article IX, Section 6,                        
     forbids  the transfer  of public  property, except  for                   
     public  purpose.   The  concern   was  that   a  nearly                   
     automatic  extension   without  a  review   for  public                   
     purpose  or   the  possibility  of   competition  could                   
     essentially  be  a transfer  of  fee  without a  public                   
     purpose finding.                                                          
   2. Concerns related to Article VIII, Section 2 of the                       
     state constitution,  which stipulates that land  in the                   
     public hands must be used  to the maximum extent of the                   
     people  not  to  the  maximum extent  of  a  particular                   
     private leaseholder.                                                      
   3. Article VIII, Section 10 requires that land owned by                     
     the  public be  offered  or disposed  with leases  that                   
     include safeguards  of the  public interest,  which are                   
     found  for  example  in the  land-leasing  statutes  in                   
     Title  38.05.102.073,  allowing   (similar  to  Senator                   
     Adams'   suggestion)   for   the   possibility   of   a                   
     preferential  extension in  the  public's interest  but                   
     not  a   mandatory  extension   and  limited   with  an                   
     extensive public  process to determine whether  in fact                   
     an extension would be in the public interest.                             
   4. The Federal Aviation Administration (FAA) had grant                      
     assurances  which airports  had to  follow as  part and                   
     parcel  of  receiving  federal  assistance  in  certain                   
     capital improvements.  Among the grant  assurances were                   
     some  requiring  that  the   land  of  the  airport  be                   
     available   under    terms   which   had    no   unjust                   
     discrimination  to all  types,  kinds,  and classes  of                   
     aeronautical use.  There was concern  that preferential                   
     extensions could  wind up foreclosing certain  kinds of                   
     uses. There  was also a grant  assurance requiring that                   
     no  exclusive right  of use  to the  airport by  anyone                   
     providing aeronautical services  be allowed. Similarly,                   
     at rural airports where there  could be limited land on                   
     the  airport that  would be  suitable for  aeronautical                   
     use, if it  happened to be locked up, there  could be a                   
     problem under  that grant  assurance. The  statement of                   
     interest  finding in  the statute  could resolve  that;                   
     nevertheless, in a  perpetual-type situation, there was                   
     the  risk  of  running  closer  to  the  constitutional                   
     limits and the FAA line.                                                  
   5. The FAA grant assurances say that a sponsor (the state                   
     of  Alaska) may  not take  or permit  any action  which                   
     would  operate to  deprive that  sponsor of  the rights                   
     and  powers necessary  to  perform  the assurances;  in                   
     other  words,  to  make sure  there  are  no  exclusive                   
     rights and no unjust discrimination.                                      
                                                                               
Mr. Steiner  continued that the  effort to clarify  that the                   
preference right  was without limit rather  than limited was                   
somewhat   troubling  as   a  constitutional   legal  policy                   
judgment,  although  it  did  appear  that  the  conditional                   
clauses in  the existing legislation could  actually save it                   
from a finding of  unconstitutionality. For that reason, DOL                   
had  not expressly  come out  and suggested  rejection as  a                   
matter  of constitutional  law,  but wanted  to apprise  the                   
committee of the troubling nature  of skating somewhat close                   
to  some  of  the  constitutional lines  in  the  FAA  grant                   
assurances.                                                                    
                                                                               
Mr. Steiner  noted that a  difference would be  made between                   
public  and private  land-leasing. In  a private  land-lease                   
situation,  a  private  owner  may (but  need  not)  give  a                   
preference to an existing lessee  or existing tenant with or                   
without  improvements  on  the property.  Under  the  Alaska                   
Constitution, a public land-owner  in Alaska typically would                   
not give  a preference. House Bill  210 (as well as  HB 543)                   
tended to  suggest that the  state was even more  limited in                   
its public options  than a private land-owner  would be, and                   
should follow  an exclusive-rights model rather  than a more                   
competitive model. He reiterated  that the state's BIF would                   
protect it from ultimate unconstitutionality.                                  
                                                                               
Co-chair Sharp asked whether the  wording of the proposed CS                   
would limit the  state's ability to raise the  lease fees at                   
the time of  renewal or extension. Mr.  Steiner replied that                   
the  language  did not  appear  to  have any  limitation  on                   
raising the actual per-square-foot lease fee.                                  
                                                                               
Co-chair Sharp  asked whether the option  would be available                   
to the state  to at least get the lease  fees up to whatever                   
the  current  value  was  at  the time  of  any  renewal  or                   
extension. Mr.  Steiner answered  that it would  be possible                   
under HB 210  to the extent that the department  was able to                   
identify  the fair-market  value; the  distinction would  be                   
that   a  competitive   offering  might   discover  that   a                   
particular  property  actually  had a  higher  market  value                   
because of its specific location.  He referred to an earlier                   
question  about  the  transfer  of a  building  on  a  state                   
airport  lease and  whether the  state or  the owner  of the                   
building would get the advantage.  He asserted that the idea                   
was that  the owner  of the improvements  would be  paid the                   
value of  the improvements in the  situation. The difficulty                   
was  distinguishing the  premium for  the building  from the                   
premium for the  real estate; it appeared  very difficult to                   
separate  the  two  such  that   the  state  would  get  any                   
advantage  from the  premium  for the  real  estate. In  the                   
existing situation, it  would be very hard to  break out the                   
premium for the  real estate if there was a  assignment or a                   
sublease,  especially  if it  were  improved  and were  done                   
through a sublease  of a building rather than  just the land                   
or  through  an  assignment  of  the  lease,  in  which  the                   
building  and the  land  went together.  He  stated that  it                   
would be nearly  impossible to break out the  premium of the                   
real estate.                                                                   
                                                                               
Co-chair Sharp  asked whether he  had reviewed  the proposed                   
amendment.  Mr. Steiner  replied  that he  had the  proposed                   
amendment to the second section.                                               
                                                                               
Senator Adams read the language  in Section 2: "An extension                   
under  this subsection  may  not extend  a  contract for  an                   
additional  period  longer  than  the  original  term  of  a                   
contract,  except for  the holdover  for the  convenience of                   
the department."  He pointed  to a  new subsection  with the                   
language: "if the contractor  makes a substantial investment                   
in  leasehold  improvements subsequent  to  the  award of  a                   
contract  under this  section, the  commissioner may  modify                   
any contract  provisions that would increase  the contract's                   
payment because  of an  increase in  contract income  due to                   
leasehold  improvements." He  wondered whether  the language                   
[in the  amendment] was in  the state's best interest  or in                   
the  leaseholder's best  interest.  He  asked whether  there                   
were legal  issues in regards  to the way the  amendment was                   
drafted.                                                                       
                                                                               
Co-chair  Sharp  asked whether  Mr.  Steiner  had the  "K.1"                   
version  of Amendment  2. Mr.  Steiner replied  that he  did                   
not. He stated  that in the first portion  of the amendment,                   
he  had  the   language  (except  for  a   holdover  at  the                   
convenience of  the department). He  had a prior  version of                   
the subsection  (h) proposal; he  did not have  the specific                   
language read by Senator Adams.                                                
                                                                               
Co-chair Sharp stated that the  bill would be heard the next                   
day after sending the amendments to DOL.                                       
                                                                               
Mr. Rokeberg  commented that  the debate  had been  about HB
543. He  believed the  bill had been  passed because  of the                   
"complete distemper"  among the  aviation community  and the                   
legislature  with the  policies  and  implementation of  the                   
department;  he did  not think  any  further discretion  was                   
warranted.                                                                     
                                                                               
HB  210 was  HEARD and  HELD  by the  committee for  further                   
consideration.                                                                 
                                                                               
ADJOURNMENT                                                                
                                                                               
Co-chair Sharp adjourned the meeting at 10:55 a.m.                             
                                                                               
                                                                               

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