Legislature(2001 - 2002)

03/21/2002 09:13 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                          March 21, 2002                                                                                      
                              9:13 AM                                                                                         
SFC-02 # 38,  Side A                                                                                                            
SFC 02 # 38,  Side B                                                                                                            
SFC 02 # 39,  Side A                                                                                                            
CALL TO ORDER                                                                                                               
Co-Chair Dave  Kelly convened the meeting at approximately  9:13 AM.                                                            
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelley, Co-Chair                                                                                                   
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Loren Leman                                                                                                             
Senator Lyda Green                                                                                                              
Senator Gary Wilken                                                                                                             
Senator Alan Austerman                                                                                                          
Senator Lyman Hoffman                                                                                                           
Also Attending: REPRESENTATIVE  CARL MOSES; SENATOR GENE THERRIAULT;                                                          
KEVIN  BROOKS,  Director,   Division  of  Administrative   Services,                                                            
Department  of Fish  and  Game; JOHN  BITNEY,  Legislative  Liaison,                                                            
Alaska Housing  Finance  Corporation, Department  of Revenue;  BRETT                                                            
FRIED,  Economist,  Department   of Revenue;   KRIS  NOROSZ,  Icicle                                                            
Seafoods;  PATRICK   GALVIN,  Director,  Division  of  Governmental                                                             
Coordination, Office of the Governor;                                                                                           
Attending via  Teleconference: From Anchorage: FRANK  DILLON, Alaska                                                          
Trucking Association                                                                                                            
SUMMARY INFORMATION                                                                                                         
SB 226-HIGHWAY DESIGN & CONSTRUCTION                                                                                            
The  Committee  heard  from   the  sponsor  and  held  the  bill  in                                                            
SB 279-SPORT FISH LICENSES FOR 9/11 RESPONDERS                                                                                  
The Committee heard from  the bill's sponsor, considered and adopted                                                            
two amendments, and reported the bill from Committee.                                                                           
SB 181-SMALL COMMUNITY HOUSING LOANS                                                                                            
The  Committee  heard testimony  from  the  sponsor and  the  Alaska                                                            
Housing  Finance   Commission.  A   committee  substitute   and  one                                                            
amendment were adopted, and the bill was held in Committee.                                                                     
SB 277-DEFINITIONS OF FISHERIES BUSINESSES                                                                                      
The Committee  heard testimony from the sponsor, fisheries  business                                                            
representatives,  and the Department  of Revenue. The bill  was held                                                            
in Committee.                                                                                                                   
SB 308-COASTAL ZONE MGMT PROGRAM                                                                                                
The Committee  heard  from the  bill's  sponsor, the  Office of  the                                                            
Governor,  and took  public testimony.  A committee  substitute  was                                                            
adopted and the bill reported from Committee.                                                                                   
SB 4-MUNICIPAL PROPERTY TAX EXEMPTION                                                                                           
The Committee heard from  the bill's sponsor, considered and adopted                                                            
one amendment, and reported the bill from Committee.                                                                            
      CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 226(TRA)                                                                    
     "An Act requiring  certain highway projects to  be designed and                                                            
     constructed   so  that  the  highways  will  adequately   serve                                                            
     anticipated traffic  levels for at least the next 30 years; and                                                            
     providing for an effective date."                                                                                          
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Donley   informed  the   Committee  this  bill   addresses                                                            
designing  and constructing  Alaska's major  road infrastructure  to                                                            
provide for longer usable road life.                                                                                            
FRANK   DILLON,   Alaska   Trucking   Association,   testified   via                                                            
teleconference  from Anchorage to inform the Committee  the trucking                                                            
industry  supports legislation  that  would provide  for  long-range                                                            
infrastructure and useful road-life planning.                                                                                   
Senator Ward asked  if expanding to a 30-year useful  life road-plan                                                            
would affect federal funding.                                                                                                   
Mr. Dillon  stated  federal agencies  would support  a 30-year  plan                                                            
since the  process of planning  and building  road projects  takes a                                                            
long time.                                                                                                                      
Senator Ward  asked if measures to  address changes should  be taken                                                            
at the federal level.                                                                                                           
Co-Chair  Donley commented  now is the time  to seek procedural  and                                                            
technical changes under the Federal Highway Funding Act.                                                                        
Senator Austerman  noted that roads in other states  are constructed                                                            
with  up  to  six inches  of  asphalt  while  roads  in  Alaska  are                                                            
constructed with  two inches of asphalt and often  are not sealed to                                                            
prevent absorption of moisture.  He asked if this bill would address                                                            
these sorts of construction issues.                                                                                             
Co-Chair  Donley clarified  that design and  construction of  roads,                                                            
not regular  maintenance of  roads, is the  intent of this  bill. He                                                            
explained  current federal  law mandates  the design  life of  roads                                                            
range between  20 and 30 years, with bridge life of  up to 50 years.                                                            
He stated  Alaska's current  design practice  is 20 years;  however,                                                            
there is a question  as to whether the life of a road  begins at the                                                            
initial planning  stage, the authorization-to-proceed  stage,  or at                                                            
the  construction  stage. He  commented  this is  an  attempt to  be                                                            
consistent  with federal regulations  and design  a road to  last at                                                            
least 20 years.                                                                                                                 
Senator Austerman reiterated  that laying four inches instead of two                                                            
inches  of  asphalt would  extend  road  life.  He opined  that  the                                                            
"philosophy"   of  the  Department  of  Transportation   and  Public                                                            
Facilities  is that more  road miles  can be paved  with two  inches                                                            
than with four  inches. He asked if  these sorts of issues  could be                                                            
addressed in this bill.                                                                                                         
Co-Chair  Donley stated they  could be; however,  the real  focus of                                                            
the design language addresses  "the geometry of a project," such as:                                                            
appropriate number of lanes;  feasibility of turn lanes; and merging                                                            
traffic concerns.                                                                                                               
The bill was HELD in Committee.                                                                                                 
     SENATE BILL NO. 279                                                                                                        
     "An Act authorizing  the commissioner of fish and game to issue                                                            
     complimentary  sport fishing licenses and tags  to September 11                                                            
     emergency  responders and their  spouses; and providing  for an                                                            
     effective date."                                                                                                           
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Senator Wilken,  the sponsor of the bill, explained  this bill would                                                            
authorize  issuing up to  250 complementary  sport-fishing  licenses                                                            
per  year   to  those   firemen,  police,   and  Emergency   Medical                                                            
Technicians  who  responded  to the  September  11,  2001  terrorist                                                            
attack on the  World Trade Center in New York City  and the Pentagon                                                            
in  Washington,   D.C.  as   a  token  of   appreciation  to   those                                                            
Amendment  #1: This amendment  inserts the  sunset date of  December                                                            
31, 2003 into the bill.                                                                                                         
Senator Wilken moved for adoption of Amendment #1.                                                                              
Senator Green objected.                                                                                                         
Senator Wilken explained  Amendment #1 would further define the time                                                            
frame of this  bill by inserting on page 1, line 12  the sunset date                                                            
of December 31, 2003.                                                                                                           
Senator Green withdrew her objection.                                                                                           
Amendment #1 was ADOPTED, without objection.                                                                                    
Amendment  #2:  This amendment  defines  the  service  timeframe  of                                                            
responders  by inserting on page 1,  line 10, "at some time  between                                                            
September 11,  2001, and November 11, 2001, inclusive,"  and deletes                                                            
"on September 11, 2001," on page 1, lines 11-12.                                                                                
Senator Wilken moved for adoption of Amendment #2.                                                                              
Senator  Wilken stated this  language would  assist federal,  state,                                                            
and local agencies  in identifying individuals who  qualify for this                                                            
There were no objections, and the amendment was ADOPTED.                                                                        
Senator Leman  voiced support of the bill and asked  if the language                                                            
could be expanded to include  surviving relatives of those killed in                                                            
the attack or other responders.                                                                                                 
Senator Austerman  stated family members  of the deceased  and other                                                            
responders  are not included as they  are not readily identifiable,                                                             
and the current  language in the bill  would be easy to administer.                                                             
He stated  the Department  of Fish  and Game  has determined,  using                                                            
statistical  analysis  that  approximately  100 to  150 individuals                                                             
might partake of this offer;  therefore, the number of free licenses                                                            
is capped at 250 per year.                                                                                                      
Senator Leman  remarked that the inclusion of other  individuals who                                                            
generously  donated  time,  money  and  supplies  would  be  a  nice                                                            
Senator Ward  asked if the  military police  on duty at the  time of                                                            
the attack on the Pentagon would be eligible.                                                                                   
KEVIN  BROOKS,  Director,   Division  of  Administrative   Services,                                                            
Department  of Fish and Game, responded  he is not sure if  they are                                                            
included in the three identified categories.                                                                                    
Senator Ward asked if the military police could be included.                                                                    
Senator Wilken confirmed they could be.                                                                                         
Senator Ward acknowledged the inclusion of the military police.                                                                 
Senator Wilken  offered a motion to report CS SB 279  from Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
There  were no  objections, and  CS SB  279(FIN)  was REPORTED  from                                                            
Committee  with a  new zero  fiscal note,  dated  3/19/02, from  the                                                            
Department of Fish and Game                                                                                                     
AT EASE 9:30 AM /9:33AM                                                                                                         
     SENATE BILL NO. 181                                                                                                        
     "An  Act  making  the interest  rate  for  the  Alaska  Housing                                                            
     Finance  Corporation's small  community housing mortgage  loans                                                            
     the  same as  the interest  rate  on mortgage  loans  purchased                                                            
     under the corporation's  special mortgage loan purchase program                                                            
     from  the  proceeds of  the  most recent  applicable  issue  of                                                            
     taxable bonds  before the origination or purchase  of the small                                                            
     community housing mortgage loans."                                                                                         
This was the fourth hearing for this bill in the Senate Finance                                                                 
Co-Chair Donley moved for adoption of CS SB 181, 22-LS0488\W as a                                                               
working draft.                                                                                                                  
There were no objections, and the committee substitute was ADOPTED                                                              
Amendment #2: This amendment inserts language into the bill's title                                                             
and inserts a new bill section as follows.                                                                                      
     The title is amended to read:                                                                                              
     "An Act  relating to the Alaska  Housing Finance Corporation's                                                             
     rural  assistance loan  program; relating  to the use  of money                                                            
     from  the housing assistance  loan fund  in the Alaska  Housing                                                            
     Finance  Corporation,   preventing  use  of that  money  for  a                                                            
     single-family  owner-occupied  house with a value that  exceeds                                                            
     $250,000,  adjusted for  inflation, and  repealing a  provision                                                            
     authorizing  use of that money  for nonowner-occupied  housing;                                                            
     repealing  the home  ownership assistance  fund; and  providing                                                            
     for an effective date."                                                                                                    
     Section 1. AS 18.56.420(a) is amended to read:                                                                             
        (a)There is created in the corporation, as a revolving loan                                                             
     fund,  the housing  assistance  loan fund  consisting of  money                                                            
     appropriated  to it by the legislature  and deposited  in it by                                                            
     the corporation,  and repayments  of principal and interest  on                                                            
     loans  made  or purchased  from  the assets  of  the fund.  The                                                            
     corporation shall                                                                                                          
         (1) adopt regulations to administer the housing                                                                        
     assistance loan fund under AS 18.56.400 - 18.56.600; and                                                                   
         (2) subject to appropriation, provide money for a rural                                                                
     assistance   loan   program   to  originate,   purchase,   [OR]                                                            
     participate in the purchase of, or refinance                                                                               
                (A) small community housing mortgage loans;                                                                     
                (B) loans made for building materials for small                                                                 
                     community housing;                                                                                         
                (C) loans made for renovations or improvements to                                                               
                     small community housing;                                                                                   
                (D) loans made for the construction of own-                                                                     
                     occupied  small community  housing  other  than                                                            
                     loans to builders or  contractors or loans that                                                            
                     compensate  an owner for  the owner's labor  or                                                            
                     services  in   constructing  the  owner's   own                                                            
Co-Chair Donley moved for adoption of Amendment #2.                                                                             
There being no objection, Amendment #2 was ADOPTED.                                                                             
AT EASE 9:35 AM /9:36 AM                                                                                                        
JOHN   BITNEY,   Legislative   Liaison,   Alaska   Housing   Finance                                                            
Corporation, Department  of Revenue, explained that Amendment #2 was                                                            
offered at  the request  of the Alaska  Housing Finance Corporation                                                             
(AHFC)  and   stated  current  state   law  regarding  the   Housing                                                            
Assistance  Loan Fund (HALF) Program,  does not allow a borrower  to                                                            
refinance  their loan. He  stated refinancing  "is a very  standard"                                                            
provision  under most conventional  loan programs,  and is  "also an                                                            
issue  of fairness  for the borrowers."  He  informed the  Committee                                                            
that AHFC's  income would be affected  by the refinancing  component                                                            
because when  loans are refinanced  at lower interest rates,  income                                                            
into the  fund is  also reduced;  however, he  noted AHFC  currently                                                            
loses  borrowers   who  want   to  refinance   to  other   financial                                                            
Senator  Hoffman asked  for  clarification  on how  this bill  would                                                            
affect AHFC's "bottom line".                                                                                                    
Mr.  Bitney   responded  AHFC's  largest   concern  is  the   income                                                            
restriction  on persons whose income  must be less than 400%  of the                                                            
United  States Department  of  Health  and Social  Services  poverty                                                            
level  guidelines.  He  stressed this  limitation,  based  on  prior                                                            
history of  the program,  would exempt "close  to 50 percent  of the                                                            
borrowers."  He stated recent  analysis indicates  that most  of the                                                            
current loans  are for household sizes  of one or two persons  whose                                                            
income  is slightly  over the 400  percent level,  or approximately                                                             
$44,000 for a one-person household.                                                                                             
Co-Chair  Kelly distributed  an  AHFC chart  [copy  on file],  dated                                                            
March 20, 2002,  reflecting current  loans and the affect  this bill                                                            
would have on them.                                                                                                             
Senator  Hoffman summarized  this  bill would  result  in a loss  of                                                            
income to the State.                                                                                                            
Mr. Bittner  concurred that this bill,  as currently drafted,  would                                                            
reduce revenue to the State.                                                                                                    
Co-Chair  Donley stated  Mr. Bittner's  response  "was based on  the                                                            
assumption"  that AHFC  would lose  money by the  introduction  of a                                                            
refinancing  program.  Co-Chair  Donley  questioned  if  AHFC  could                                                            
expand  its business  in  other areas  such  as providing  loans  to                                                            
communities that are ineligible for the HALF program.                                                                           
Mr. Bitney responded  the committee substitute does  not delete size                                                            
restrictions  or  clarify  small community  population  parameters;                                                             
therefore  the HALF  program is  restricted from  being expanded  to                                                            
some communities.                                                                                                               
AT EASE 9:41 AM/ 9:42 AM                                                                                                        
Co-Chair  Donley  asked  Mr.  Bitney  to  work  with  his  staff  to                                                            
formulate   appropriate   language   regarding   small  communities                                                             
Co-Chair  Kelly stressed the  intent of this  bill is to offer  AHFC                                                            
more  lending  possibilities,  and  not  to  harm  the  program.  He                                                            
supported Co-Chair  Donley's request for AHFC to work  with staff to                                                            
establish the appropriate  language in the bill to provide AHFC with                                                            
further lending opportunities.                                                                                                  
The bill was HELD in Committee.                                                                                                 
     CS FOR SENATE BILL NO. 277(RES)                                                                                            
     "An Act relating to the tax levied on pollock processed by a                                                               
     floating fisheries business; and providing for an effective                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Senator  Austerman, the  bill's sponsor,  explained  that this  bill                                                            
addresses inequitable taxes  on the fish processing industry whereby                                                            
some processors  pay  more tax than  others. He  stated the  federal                                                            
American Fisheries Act (AFA) created this situation.                                                                            
Senator Ward asked what  entities would lose money if this bill were                                                            
BRETT  FRIED,   Economist,   Department  of   Revenue,  stated   the                                                            
Department's  fiscal  note,  dated 3/20/02,  anticipates  the  State                                                            
losing  between $333,000  and $400,000  in revenue.  He stated  this                                                            
"range" presentation is the result of confidentially concerns.                                                                  
Senator  Ward  questioned  if other  entities,  in addition  to  the                                                            
State, would loose money under this legislation.                                                                                
Co-Chair Kelly  clarified that communities would also  lose revenue,                                                            
as half of any revenue the State collects from these taxes is re-                                                               
appropriated to them.                                                                                                           
Senator Ward theorized  that if the State received $300,000 from the                                                            
fish processors'  tax, communities  would  receive $150,000  of that                                                            
amount; therefore, if the  State collected $300,000, the net loss to                                                            
the State is actually $150,000.                                                                                                 
Mr.  Fried   concurred  with   Senator  Ward's   comment  that   the                                                            
legislation would incur  a net loss to the State and also reduce the                                                            
rebate amount available to communities.                                                                                         
AT EASE 9:50 AM / 9:54 AM                                                                                                       
KRIS NOROSZ,  Icicle Seafoods,  informed the  Committee that  Icicle                                                            
Seafoods is  a Petersburg, Alaska  corporation established  in 1965.                                                            
She stated  Icicle Seafoods  supports the  committee substitute  for                                                            
this  bill, as  "the  purpose of  the  bill is  to ensure  that  all                                                            
pollock processors  pay the same tax  rate to the State of  Alaska."                                                            
She noted  that in 1998  the AFA, passed  by Congress, "changed  the                                                            
complexion  of the  pollock industry."  She reminded  the  Committee                                                            
that the State of Alaska  has a three percent Fisheries Business Tax                                                            
on shore-based  processing facilities,  and in the 1990's  the State                                                            
passed a  Fishing Resource  Landing Tax which  placed an  additional                                                            
three percent  tax on all fisheries resources "processed  by an off-                                                            
shore floating facility and landed in the State."                                                                               
Ms.  Norosz continued  that  the  AFA, sponsored  by  Alaska's  U.S.                                                            
Senator  Ted Stevens,  was enacted  to: "Americanize  the  fishery";                                                            
"rationalize"  the industry; settle  long-standing disputes  on fish                                                            
allocations  for   off-shore  and  on-shore  fishery   sectors;  and                                                            
restrict  the number  of "players"  that could  participate" in  the                                                            
fisheries.  She stated the AFA also  allowed the State of  Alaska to                                                            
tax  all Pollock  industry  participants.  She stated  this  allowed                                                            
Alaska to impose  a three percent Fisheries Resource  Landing Tax on                                                            
the entire  Pollock  industry even  though they  "never operated  or                                                            
brought  product" into  State  waters. She  noted  this resulted  in                                                            
increased revenues to the State.                                                                                                
Ms.  Norosz  stressed  only  two  floating  pollock  processors  are                                                            
qualified under the AFA  to process Pollock, and they are subject to                                                            
a  five percent  Fisheries  Business  Tax (FBT)  by  the State.  She                                                            
explained to the Committee  the FBT has a differential tax allocated                                                            
to processing  plants on-shore  or floating  offshore plants  within                                                            
three miles of Alaska's shores.                                                                                                 
Ms. Norosz stated this  bill seeks "to create a level playing field"                                                            
of three  percent  for all  pollock processors  under  the AFA.  She                                                            
stated Icicle  Seafoods is currently  paying a five percent  tax and                                                            
the additional  percentage  makes "it  very difficult  to start  out                                                            
your season knowing that  your costs are going to be higher than any                                                            
of your competitors  when you are  competing in same market  to sell                                                            
that product in."                                                                                                               
Co-Chair Kelly  asked for confirmation that if a processor  "is tied                                                            
up at the same  location for one year,"  they would qualify  for the                                                            
three percent level.                                                                                                            
Ms.  Norosz responded  that  under  the Fisheries  Business  Tax,  a                                                            
floating processor  could quality  as an on-shore facility  with the                                                            
three percent  tax if they are "permanently  affixed to the  land or                                                            
they  can  stay in  one  location  for  the entire  tax  year."  She                                                            
elaborated these  definitions make it difficult to  perform required                                                            
maintenance, repairs  and inspections to the vessels  for safety and                                                            
environmental considerations.                                                                                                   
Co-Chair Kelly  inquired as to why  a vessel could not operate  as a                                                            
stationary processing vessel in Dutch Harbor.                                                                                   
Ms. Norosz explained  that Icicle Seafood's processor,  the Northern                                                            
Victor, has  a site-specific  waste discharge  permit from  the U.S.                                                            
Environmental  Protection Agency (EPA) that restricts  its operating                                                            
locations. She  stated there is no available space  for the Northern                                                            
Victor in Dutch  Harbor, and it is  "highly unlikely" they  would be                                                            
able to  get a permit for  Dutch Harbor as  the harbor is  suffering                                                            
from air quality standard problems.                                                                                             
Co-Chair Kelly  inquired if the five  percent State tax issue  could                                                            
be amended in  this bill to allow a vessel to qualify  for the three                                                            
percent one-year stationery  tax status with provisions to allow for                                                            
movement for routine maintenance and inspection.                                                                                
Ms. Norosz clarified that  Co-Chair Kelly is addressing changing the                                                            
definition   to   "allow   movement   for   periodic   repairs   and                                                            
maintenance,"  and inspection,  but not to  allow for processing  in                                                            
other locations.                                                                                                                
Co-Chair Kelly confirmed that is the intent.                                                                                    
Ms. Norosz  stated changing the definition  in this manner  would be                                                            
acceptable to Icicle Seafoods.                                                                                                  
Senator  Austerman,  referring  to the  AFA provision  allowing  the                                                            
State of Alaska to implement  a Resource Landing Tax, asked how much                                                            
money this tax has raised for the State.                                                                                        
Mr. Fried did not have that information.                                                                                        
Senator Austerman  asked the  Department of  Revenue to provide  the                                                            
amount to the Committee.                                                                                                        
Senator  Ward  asked if  the  AFA  limits the  number  of  operating                                                            
pollock processors.                                                                                                             
Ms.  Norosz  responded  the  AFA restricts  the  number  of  pollack                                                            
processing facilities  and identifies qualifications.  She continued                                                            
the  AFA  specified  a  fixed  number  of  on-shore  processors  and                                                            
identified the factory trawlers and their "mother ships."                                                                       
Senator  Ward asked  if the  number  of permitted  factory  trawlers                                                            
could be increased from two to three.                                                                                           
Ms. Norosz stated the AFA  limits the number to the current two, and                                                            
the only way for  a new entity to enter the pollock  market would be                                                            
to purchase one of the  current two floating facilities, purchase an                                                            
existing on-shore  plant, or purchase  an eligible existing  factory                                                            
Senator Ward asked if there is a value placed on these permits.                                                                 
Ms. Norosz expressed  the difficulty in establishing  values as each                                                            
facility has different capacities, equipment, and the like.                                                                     
Ms. Norosz  described the transaction  process involved when  Icicle                                                            
Seafoods bought  into the pollock  fishery in December of  1999, the                                                            
year following the enacting of the AFA.                                                                                         
Senator  Ward asserted  that when  Icicle Seafoods  bought into  the                                                            
pollock fishery the tax was five percent.                                                                                       
Ms. Norosz stated that is correct.                                                                                              
Senator  Wilken  characterized  the  AFA  as  dividing  the  pollock                                                            
fishing  industry  into  three  sectors:  "the  off-shore   catcher-                                                            
processor,  the mother  ship  processing at  sea,  and the  on-shore                                                            
plant."  He asked  which tax  level the  offshore catcher-processor                                                             
sector pays to the State.                                                                                                       
Ms. Norosz  replied  that sector pays  a three  percent tax  because                                                            
there is an additional fisheries resource landing tax.                                                                          
Mr. Fried stated these taxes are not cumulative.                                                                                
Senator Wilken asked what tax is placed on the "mother ship."                                                                   
Ms. Norosz responded the "mother ship" pays three percent.                                                                      
Senator Wilken, noting  the on-shore sector also pays three percent,                                                            
questioned how  the five percent tax is levied if  all three defined                                                            
sectors pay a three percent tax.                                                                                                
Ms. Norosz  clarified that the two  floating Pollock processors  are                                                            
assessed the fisheries  business tax as they are considered  part of                                                            
the on-shore sector,  and they pay five percent because  of existing                                                            
state law.                                                                                                                      
Senator  Wilken  asked  in  which  of  the  three  sectors  the  two                                                            
aforementioned vessels are classified.                                                                                          
Ms. Norosz replied  the vessels are considered part  of the on-shore                                                            
Senator  Wilken verified  they are not  considered offshore  catcher                                                            
processors  or mother ships,  but are rather  "sub-sets" of  the on-                                                            
shore processors.                                                                                                               
Senator Wilken  inquired about the  process used to determine  which                                                            
tax is levied.                                                                                                                  
Ms. Norosz  stated that floating pollock  processors are  defined as                                                            
vessels  "that are  not  permanently  affixed to  the  land or  that                                                            
doesn't stay in one location for the entire tax year."                                                                          
Senator  Wilken  inquired  if this  definition  applies  to the  two                                                            
vessels holding the permits.                                                                                                    
Ms. Norosz confirmed it does.                                                                                                   
Senator Wilken asked if  a facility affixed to the shore is required                                                            
to pay local taxes.                                                                                                             
Ms. Norosz stated they would be if a local tax were in effect.                                                                  
Senator  Wilken asked  if an offshore  facility  that is limited  to                                                            
staying in one place for one year would have to pay a local tax.                                                                
Ms. Norosz replied  it would be if the vessel were  located within a                                                            
local  taxing  district.  She  continued  that  municipalities   and                                                            
boroughs have differing local tax structures.                                                                                   
SFC 02 # 38, Side B 10:09 AM                                                                                                    
Senator Wilken  asked if the two permitted vessels  operate within a                                                            
local taxation area.                                                                                                            
Ms.  Norosz  responded  that  Icicle  Seafoods'  vessel  is  located                                                            
outside  of a  local taxing  district;  however,  Trident  Seafoods'                                                            
vessel does pay a local tax.                                                                                                    
Senator Wilken  clarified that Trident would pay the  State-mandated                                                            
three percent tax as well  as the local tax. He furthered that under                                                            
this bill, Trident  would only be required to pay  the three percent                                                            
"so haven't we just flip-flopped that inequity."                                                                                
Ms.  Norosz responded  that  those who  are operating  on-shore  and                                                            
paying local  taxes also  receive benefits  such as fire and  police                                                            
protection,  access  to utilities  and  garbage service  from  those                                                            
communities. She  continued that dock and harbor space  is also made                                                            
available to them.                                                                                                              
Ms. Norosz informed  the Committee that Icicle Seafoods  is required                                                            
to pay $300,000  for a moorage  system in  addition to paying  for a                                                            
water line to the ship.  She stated that Trident Seafoods pays a one                                                            
percent  local tax.  She  reiterated  that Dutch  Harbor  has a  two                                                            
percent local tax and since  taxes vary from community to community,                                                            
there could  not be equity.  She opined  that to create equity,  the                                                            
State could regulate the local taxation rates.                                                                                  
Ms. Norosz  summarized this bill as  requesting the State  charge an                                                            
equal rate to all Pollock processors.                                                                                           
Senator Wilken  understood Ms. Norris to be requesting  leveling out                                                            
the vessel  tax at  three percent,  whereby the  monies that  Icicle                                                            
Seafoods  pays for  services  at its location  would  equate to  the                                                            
monies  an  on-shore  processor  pays in  local  taxes  for  similar                                                            
Ms. Norosz replied yes,  on-shore processors are paying for services                                                            
that Icicle Seafoods is not receiving.                                                                                          
Senator Austerman stated  "mother ships" pay the three percent state                                                            
tax and do not pay local taxes.                                                                                                 
Co-Chair Donley commented  that the different rates being charged by                                                            
communities  do  not appear  to  be the  problem  because  different                                                            
services are provided.  He continued that ships operating outside of                                                            
a  taxation  district  would  likely use  services  at  the  nearest                                                            
facility or community.                                                                                                          
DAVE BENSON,  representing Trident  Seafoods Corporation,  testified                                                            
offnet to voice  the Corporation's support for this  bill. He stated                                                            
this  legislation  would  correct  the  situation   whereby  Trident                                                            
Seafood's  vessel,  the  Arctic  Enterprise,  and  Icicle  Seafoods'                                                            
vessel,  the Northern  Victor, "pay  a two percent  higher tax  rate                                                            
than other Pollock processors in the State."                                                                                    
Mr. Benson  stated that  the current  State Raw  Fish Tax for  shore                                                            
based pollock processors  and factory trawlers is three percent, and                                                            
shore-based  Pollock processors additionally  pay local taxes  where                                                            
applicable.  He stated the Arctic  Enterprise pays the five  percent                                                            
state tax and  a one percent local  tax for a total of six  percent.                                                            
Mr. Benson  stated Trident  Seafoods  has "no issue  with the  local                                                            
community  taxes;" however  requests the State  "to offer parity  on                                                            
the State fish  tax." He continued  this legislation "is  a surgical                                                            
fix affecting only two processors."                                                                                             
Mr.  Benson  stated the  AFA  identified  the  three aforementioned                                                             
sectors  and  allocated  fish  harvesting  rights  to those  with  a                                                            
history in the  pollock fishing industry. He noted  the AFA provided                                                            
the State of Alaska the  authority to tax pollock harvesters fishing                                                            
in federal waters.                                                                                                              
Mr.  Benson  commented  earlier State  legislation  placed  a  three                                                            
percent  landing  tax  on  offshore  processors;  however,  the  AFA                                                            
mandates  that all pollock  offshore processors  are subject  to the                                                            
three percent State tax.                                                                                                        
Mr.  Benson  stated  this mandate  brought  equity  to  all  Pollock                                                            
processor  sectors except  the  two stationary  floating  processors                                                            
considered part  of the on-shore sector under the  AFA.  He stressed                                                            
this bill "simply  brings the overdue  parity to include  the Arctic                                                            
Enterprise  and  the Northern  Victor  at  the three  percent  state                                                            
fisheries business tax that the other sectors are now paying."                                                                  
Mr. Benson informed  the Committee that floating processing  vessels                                                            
have  the  advantage  of  being able  to  process  fish  in  various                                                            
locations  throughout  Alaska, and  during  a year  move to  various                                                            
locations  and  process  pollock,   cod,  crab,  herring  and  other                                                            
Mr.  Benson  clarified  the two  mobile  floating  processors  would                                                            
continue to pay  a five percent tax on all non-pollock  species they                                                            
process.  He commented the  distinction between  these two  floating                                                            
processors  and others is  that these two  vessels, by federal  law,                                                            
process  pollock  in a  single geographic  location  throughout  the                                                            
entire  year and  cannot take  advantage  of the  ability to  change                                                            
locations when  it would be more efficient to do so.  He stated that                                                            
if the State reasons  that mobility is an asset and  levies a higher                                                            
tax based on that, Trident  Seafoods would concur; however currently                                                            
the Arctic  Enterprise  and the  Northern  Victor do  not have  that                                                            
advantage  since they are  required to process  pollock in  a single                                                            
location.  He  concluded  this  legislation  "simply  equalizes  the                                                            
Fisheries  Business Tax rate  with the other  shore side  processors                                                            
and the Landing  Tax" that shore side  processors are subject  to in                                                            
the pollock industry.                                                                                                           
Mr. Benson  clarified that  an earlier question  asking if  changing                                                            
the definition  of factory trawlers to "allow movement  for periodic                                                            
repairs  and maintenance,"  and  inspection,  but not  to allow  for                                                            
processing  in other locations, would  not benefit Trident  Seafoods                                                            
situation  because   their  vessel,  the  Arctic  Enterprise,   also                                                            
processes salmon in another location during the year.                                                                           
Senator Ward asked if Trident  Seafoods owned the vessel, the Arctic                                                            
Enterprise, in 1998 when the AFA was enacted.                                                                                   
Mr.  Benson  stated  that  Trident  Seafoods  purchased  the  Arctic                                                            
Enterprise in July 1999.                                                                                                        
REPRESENTATIVE  CARL  MOSES  informed  the  Committee  the  Northern                                                            
Victor  processing vessel's  original  owners purchased  the  vessel                                                            
with the  intent to  avoid paying  property and  sales taxes  to the                                                            
Municipality  of Unalaska.  He opined  the Northern  Victor and  the                                                            
Arctic  Enterprise's  current  owners  purchased  the vessels  at  a                                                            
purchase price that factored  in the five percent floating processor                                                            
tax as both vessels  were purchased after the five  percent tax went                                                            
into effect.                                                                                                                    
Representative  Moses  stated;  however, he  is sympathetic  to  the                                                            
inequity in these  and other fisheries taxes and voiced  support for                                                            
levying an  across-the-board five  percent tax with credits  allowed                                                            
for any municipality property taxes that are levied.                                                                            
Representative  Moses commented that the State's current  ability to                                                            
collect  a landing tax  from all  processors is  questionable  as it                                                            
pertains to fish  caught outside the three-mile limit;  however, the                                                            
fishing  industry has  agreed  to pay the  tax without  requiring  a                                                            
court  decision.  He stated  it  might  be difficult  to  raise  the                                                            
landing  tax to  five percent  because  of the  question  as to  the                                                            
State's jurisdiction.                                                                                                           
Representative   Moses  noted   the  State   taxes  salmon   cannery                                                            
processing activities at 4.5 percent.                                                                                           
Representative   Moses  stated  numerous   communities  within   his                                                            
District would lose the rebate money if this bill were enacted.                                                                 
Senator Leman asked how  communities receive the rebate money if the                                                            
processor is not located within their boundaries.                                                                               
Representative   Moses  informed  the  Committee   the  tax  portion                                                            
identified  for the rebate  program "is pooled"  and distributed  to                                                            
communities involved.                                                                                                           
Senator Leman  asked for  clarification whether  the pool of  rebate                                                            
money  is  divided  amongst  the affected  communities  or  all  the                                                            
communities in the program.                                                                                                     
Representative Moses stated  it is distributed to all communities in                                                            
the affected area.                                                                                                              
Senator  Leman,   referring  to  the  credit  Representative   Moses                                                            
suggested for municipality  levied taxes, asked how payments in lieu                                                            
of taxes for water, garbage and the like, might be addressed.                                                                   
Representative  Moses  opined  that numerous  fishermen  attempt  to                                                            
avoid paying taxes,  but still use a community's facilities  such as                                                            
the  landfill.  He   continued  that  processing  vessels   generate                                                            
significant waste that is deposited in these landfills.                                                                         
Senator Leman  ascertained that most landfills have  a fee structure                                                            
in place to recoup costs of providing services.                                                                                 
Representative   Moses  responded  the  rates  are  not   adequately                                                            
charged. He informed  that federal law mandates that  any place with                                                            
a dock is required  to receive waste  from any vessel that  uses the                                                            
dock, and it may be provided at no charge to the vessel.                                                                        
Senator  Ward suggested  that  if taxes  were reduced,  the  fishing                                                            
industry would  have more disposable  income to benefit communities                                                             
and employees.                                                                                                                  
Senator  Austerman confirmed  that  the State  tax monies  collected                                                            
from  vessels operating  outside  of a  defined local  district  are                                                            
pooled and  rebated to communities  in the common area. He  informed                                                            
the Committee  that  if this bill  were enacted,  Kodiak would  lose                                                            
approximately $10,000 and  Unalaska would lose approximately $60,000                                                            
in rebate monies from that pool.                                                                                                
Senator  Austerman reminded  the Committee  this bill addresses  the                                                            
State tax on  fisheries and that a  vessel's location is  a separate                                                            
issue.  He  stated  the  Unalaska  City  Council  voiced  a  neutral                                                            
position on this bill.                                                                                                          
Representative  Moses stated  the Aleutian  East Borough could  lose                                                            
approximately $170,000 in rebate monies.                                                                                        
Co-Chair Kelly ordered the Bill to be HELD in Committee.                                                                        
     CS FOR SENATE BILL NO. 308(RES)                                                                                            
     "An Act relating to the Alaska coastal management program and                                                              
     the responsibilities of the Alaska Coastal Policy Council; and                                                             
     providing for an effective date."                                                                                          
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair Donley  moved to adopt CS SB 308, 22-LS1516\J  as a working                                                            
SENATOR  GENE  THERRIAULT,  sponsor  of  the  bill,  explained  this                                                            
committee  substitute  eliminates  the  petition  process  that  was                                                            
included  in  the  original   bill  as  it  is addressed   in  other                                                            
legislation; "prohibits  the adoption by reference of state statutes                                                            
and  regulations   by  coastal  district;"  and  allows   permitting                                                            
agencies to make  consistency determinations in separate  phases for                                                            
a North  Slope natural  gas pipeline project  paralleling the  Trans                                                            
Alaska Pipeline  System and the Alaska Highway or  a route that runs                                                            
to Alaska tidewater."                                                                                                           
There being no objections, the committee substitute was ADOPTED.                                                                
Senator  Therriault noted  the bill  title is  purposefully  "rather                                                            
broad" because a title  change is anticipated as a result of related                                                            
legislation under consideration.                                                                                                
JOHN SHIVELY, Representative,  Foothills Pipeline Company, testified                                                            
via teleconference  from Anchorage  to voice support for  this bill.                                                            
He stressed that improving  the consistency determination permitting                                                            
process  to  allow   agencies  to  phase  projects  "makes   sense,"                                                            
especially when dealing with large projects.                                                                                    
DANA OLSON,  testified via  teleconference  from Mat Su, and  voiced                                                            
concern that  this bill is moving  through the process too  quickly.                                                            
She suggested  the formation of a  subcommittee to include  citizens                                                            
to address concerns  and frustrations on the current  Alaska Coastal                                                            
Management Program (ACMP)  and subsequently offer recommendations to                                                            
the Committee.  She opined  that the Committee  is not aware  of all                                                            
the issues  involved, and she voiced  opposition to the elimination                                                             
of the petition process.                                                                                                        
Senator Therriault,  in response  to a question  from Senator  Ward,                                                            
stated that concerns  of people in South Anchorage  are addressed in                                                            
the committee substitute  by the elimination of the petition process                                                            
language. He  reiterated that other  legislation would address  this                                                            
Senator Austerman  asked if  the gas pipeline  language included  in                                                            
the bill weakens the State's position in the permitting process.                                                                
Senator  Therriault  stated the  language  "is project  neutral  but                                                            
route  specific,"  and  eliminates  the  concern  that  the  State's                                                            
current  permitting  process  is too  rigid  and  a deterrent  to  a                                                            
project's forward movement.                                                                                                     
PATRICK  GALVIN, Director,  Division of  Governmental Coordination,                                                             
Office of the  Governor, informed  the Committee the Department  has                                                            
no objections to the bill.                                                                                                      
Senator Leman  offered a motion to  report the committee  substitute                                                            
from Committee with accompanying fiscal note.                                                                                   
There  being  no objections,   CS SB  308  (FIN)  was MOVED  out  of                                                            
Committee with the accompanying  zero fiscal note from the Office of                                                            
the Governor, dated 3/05/02.                                                                                                    
     CS FOR SENATE BILL NO. 4(FIN)                                                                                              
     "An  Act  relating  to a  mandatory  exemption  from  municipal                                                            
     property  taxes  for  certain  residences  and to  an  optional                                                            
     exemption  from municipal taxes  for residential property;  and                                                            
     providing for an effective date."                                                                                          
This was  the fourth  hearing for  this bill in  the Senate  Finance                                                            
Committee. [Note:  The bill was previously reported  from Committee;                                                            
on 3/27/01 and returned on 3/01/02.]                                                                                            
Senator  Therriault, the  sponsor of  the bill,  explained that  the                                                            
committee  substitute for CS  SB 4 (FIN)  specifies a maximum  local                                                            
residential  property tax  exemption of $15,000,  and disallows  the                                                            
partial  year  property  tax exemptions  approved  in  the  original                                                            
Finance Committee bill.  He stated that municipalities have reported                                                            
the partial  year property tax provision  cumbersome to administer.                                                             
Senator  Therriault  also  noted the  addition  of a  new  provision                                                            
allowing  local  governments  the  ability  to  provide individuals                                                             
participating  in local  volunteer organizations  such as  volunteer                                                            
fire  departments and  Emergency  Medical  Services up  to a  $5,000                                                            
assessed  value property  tax exemption. He  mentioned that  several                                                            
communities are  having difficulty recruiting sufficient  numbers of                                                            
volunteer fire fighters,  and the hope is this exemption would serve                                                            
as an incentive  to entice more individuals to volunteer.  He stated                                                            
this provision  would only result in an approximate  $11,000 loss of                                                            
property  tax revenue  to the Fairbanks/North  Star  Borough if  all                                                            
volunteer fire fighters took advantage of the exemption.                                                                        
Senator Green  inquired if the volunteer exemption  would affect the                                                            
State's Foundation Funding Formula to communities.                                                                              
Senator Therriault  responded the  Foundation Formula is  applicable                                                            
to the total taxable  value of property in a borough,  and would not                                                            
be impacted by the exemptions.                                                                                                  
SFC 02 # 39, Side A 10:57 AM                                                                                                    
Senator  Green commented  there is  a possibility  that communities                                                             
might want  to add other individuals  to the exemption specified  in                                                            
Section 2.                                                                                                                      
Co-Chair   Kelly   reported   municipalities   have   been   seeking                                                            
inexpensive   methods   to   increase   volunteer    fire   fighters                                                            
compensation.   He  commented  the  demand  for  further   training,                                                            
liability  issues  and  responsibility  that  volunteers  experience                                                            
would continue to increase.                                                                                                     
Senator Green  asserted there are other sectors of  individuals that                                                            
municipalities might want considered for an incentive exemption.                                                                
Senator Therriault qualified  that Section 2 specifically identifies                                                            
who is eligible for the exemption.                                                                                              
DANA  OLSON testified  via  teleconference  from Mat-Su  to ask  the                                                            
State  to  consider  instituting  a  joint  administration   process                                                            
whereby different agencies could access other agency records.                                                                   
Co-Chair  Kelly acknowledged  Ms.  Olson's concern;  however,  noted                                                            
this bill does not address that issue.                                                                                          
Senator  Ward inquired  how this bill  would affect  a private  fire                                                            
service area that has been formed for taxation services.                                                                        
Senator Therriault  responded  the property  tax levy for this  bill                                                            
would not affect that area.                                                                                                     
Senator Ward  asked if residents  of that  area who volunteer  would                                                            
qualify for the Section 2 exemption.                                                                                            
Senator  Therriault stated  that local  governments  would have  the                                                            
authority to craft the volunteer exemptions.                                                                                    
Senator  Therriault noted  a new fiscal  note would  be required  to                                                            
address the changes in the proposed committee substitute.                                                                       
AT EASE 11:04 AM / 11:06                                                                                                        
Senator Green  inquired how  a community would  replace the  loss of                                                            
income incurred if both Section 1 and Section 2 were enacted.                                                                   
Senator Therriault  commented a community  could choose not  to make                                                            
up the lost revenue or  could replace it by levying or raising other                                                            
taxes or fees.                                                                                                                  
Senator  Green  remarked   that  communities  could   also  ask  the                                                            
Legislature for more revenue sharing funds.                                                                                     
Senator Therriault concurred.                                                                                                   
Senator Green  asked if this bill would benefit certain  communities                                                            
more than others.                                                                                                               
Senator  Therriault  responded  he  was  not aware  that  it  would;                                                            
however, communities  with a residential real property  exemption in                                                            
place would not  lose as much revenue as a community  that does not,                                                            
but chooses to enact the exemptions specified in this bill.                                                                     
Senator  Green  inquired how  a  community  would qualify  for  more                                                            
funding from the State.                                                                                                         
Senator Therriault  reiterated that any community  could enact local                                                            
taxes or fees to fill the void.                                                                                                 
Senator  Green  opined this  would  then  be more  like  a shift  in                                                            
funding sources within the community.                                                                                           
Senator Therriault concurred,  and exampled it could be a shift from                                                            
residential homeowners to other properties in a borough.                                                                        
Amendment  #5: (Note: Referred  to as Amendment  #1) This  amendment                                                            
would  incorporate   the  non-applicability   of  the  new   greater                                                            
exemption levels to communities  with a per-capita debt in excess of                                                            
$15,000 into the title of the bill.                                                                                             
AT EASE: 11:20 AM / 11:23 AM                                                                                                    
Co-Chair Donley moved for adoption of Amendment #1.                                                                             
There being no objections, the Amendment was ADOPTED.                                                                           
Senator Wilken  offered a  motion to report  CS SB 4 from  Committee                                                            
with accompanying fiscal note.                                                                                                  
There  being  no objections,  CS  SB  4 (2dFIN)  was  REPORTED  from                                                            
Committee  with  a new  zero  fiscal  note from  the  Department  of                                                            
Revenue, dated 4/03/02.                                                                                                         
Co-Chair Dave Kelly adjourned the meeting at 11:23 AM                                                                           

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