Legislature(1997 - 1998)
04/30/1998 09:27 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.