Legislature(2003 - 2004)

04/30/2003 09:00 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 30, 2003                                                                                      
                              9:00 AM                                                                                         
SFC-03 # 68,  Side A                                                                                                            
SFC 03 # 68,  Side B                                                                                                            
SFC 03 # 69,  Side A                                                                                                            
CALL TO ORDER                                                                                                               
Co-Chair Gary Wilken convened  the meeting at approximately 9:00 AM.                                                            
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Lyda Green, Co-Chair                                                                                                    
Senator Con Bunde, Vice Chair                                                                                                   
Senator Robin Taylor                                                                                                            
Senator Donny Olson                                                                                                             
Senator Donny Hoffman                                                                                                           
Senator Ben Stevens                                                                                                             
Also Attending:  SENATOR  GRETCHEN GUESS;  TOM IRWIN, Commissioner,                                                           
Department  of  Natural   Resources;  CAMERSON  LEONARD,   Assistant                                                            
Attorney  General,   Natural  Resources  Section,  Civil   Division,                                                            
Department  of Law; JOE  BALASH, Staff to  Senator Gene Therriault;                                                             
ROBERT FLINT, Attorney, Hartig Rhodes Hoge & Lekisch                                                                            
Attending  via Teleconference:  From  Anchorage:  CAMERSON  LEONARD,                                                          
Assistant  Attorney   General,  Natural  Resources  Section,   Civil                                                            
Division, Department  of Law; From  an offnet site: STEVE  VAN SANT,                                                            
State Assessor, Division  of Community and Business Development; RON                                                            
MILLER, Executive  Director, Alaska Industrial Development  & Export                                                            
Authority,  Department of Community  and Economic Development;  From                                                            
Juneau:  TAMARA  COOK,  Director,  Legislative  Legal  and  Research                                                            
Services, Legislative Affairs Agency                                                                                            
SUMMARY INFORMATION                                                                                                         
SB 146-COMMEMORATIVE VETERANS LICENSE PLATE                                                                                     
The committee  heard  from the sponsor  and reported  the bill  from                                                            
SB 142-DNR LEAD RESOURCE DEVELOPMENT PROJECTS                                                                                   
The Committee  heard from the Department  of Natural Resources,  and                                                            
reported the bill from Committee.                                                                                               
SB 117-ELIMINATING LONGEVITY BONUS PROGRAM                                                                                      
The Committee  adopted a committee  substitute and held the  bill in                                                            
HB 112-AIDEA: BONDS & MUNICIPAL TAX EXEMPTION                                                                                   
The Committee heard testimony  from the State Assessor, Tech Cominco                                                            
Alaska  Incorporated,  the Alaska  Industrial Development  &  Export                                                            
Authority, and Legislative  Legal and Research Services. A committee                                                            
substitute  was considered  but failed to be  adopted, and  the bill                                                            
was held in Committee.                                                                                                          
     SENATE BILL NO. 146                                                                                                        
     "An Act relating to a commemorative veterans' license plate;                                                               
     and providing for an effective date."                                                                                      
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
SENATOR  GRETCHEN  GUESS,  the bill's  sponsor,  noted  that she  is                                                            
available  to answer questions,  and she  asked for the Committee's                                                             
support of this bill.                                                                                                           
Senator Taylor  offered a motion to  report the bill from  Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
There being  no objection, SB 146  was REPORTED from Committee  with                                                            
fiscal  note #1  in the amount  of $13,500  from  the Department  of                                                            
     SENATE BILL NO. 142                                                                                                        
     "An  Act designating  the Department  of  Natural Resources  as                                                            
     lead   agency  for   resource  development   projects;   making                                                            
     conforming  amendments; and providing  for an effective  date."                                                            
     CS FOR SENATE BILL NO. 142(RES)                                                                                            
     "An  Act designating  the Department  of  Natural Resources  as                                                            
     lead   agency  for   resource  development   projects;   making                                                            
     conforming  amendments; and providing  for an effective  date."                                                            
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-chair  Wilken informed  that the  Senate Rules  Committee at  the                                                            
request of  the Governor sponsors  this legislation. He stated  that                                                            
the intent  of this  legislation is  to identify  the Department  of                                                            
Natural  Resources  as  the lead  agency  for  resource development                                                             
projects  and  to establish  an  Office of  Project  Management  and                                                            
Permitting within  the Department. He noted that "this  office would                                                            
lead and coordinate  all matters relating to the State's  review and                                                            
authorization" of these projects.                                                                                               
Senator Bunde moved to  adopt the original bill, SB 142, Version 23-                                                            
GS1070\A rather than the Senate Resources committee substitute.                                                                 
Co-Chair  Wilken  asked  that  Members  refrain  from  offering  any                                                            
motions  at  this  time. He  specified  that  the  Senate  Resources                                                            
committee substitute is before the Committee.                                                                                   
Without objection, Senator Bunde WITHDREW the motion.                                                                           
Co-Chair  Wilken  clarified  that  CS  SB  142(RES)  is  before  the                                                            
Committee for discussion.                                                                                                       
TOM   IRWIN,  Commissioner,   Department   of   Natural   Resources,                                                            
introduced  Kurt Fredriksson,  Deputy  Commissioner,  Department  of                                                            
Environmental  Conservation, Mary Siroky and Janet  Burleson Baxter,                                                            
Legislative   Liaisons   for  the   Departments   of  Environmental                                                             
Conservation  and Natural  Resources, respectfully,  and noted  that                                                            
Richard  LeFebvre,   Deputy  Commissioner,  Department   of  Natural                                                            
Resources,   and  Cameron   Leonard,  Natural   Resources   Section,                                                            
Department of Law, were available via teleconference.                                                                           
Commissioner  Irwin voiced  support  of Governor  Frank Murkowski's                                                             
efforts to develop  and utilize the State's resources.  He continued                                                            
that  this bill  would  facilitate  and expedite  the  use of  State                                                            
resources  by  providing  the  Commissioner  of  the  Department  of                                                            
Natural Resources  with statutory  authority to lead and  coordinate                                                            
all matters  relating  to the State's  review  and authorization  of                                                            
resource  development   projects.   He  stated  that  in   order  to                                                            
accomplish  this goal, the Department  must have clear and  explicit                                                            
authority. He noted that  while the Department is currently the lead                                                            
agency for mining activities,  this bill would provide "the explicit                                                            
authority" required for other resource development activities.                                                                  
Commissioner  Irwin continued that  the establishment of  the Office                                                            
of Project Management  and Permitting would allow  the Department to                                                            
efficiently  review and  authorize  large projects  and oversee  the                                                            
Alaska  Coastal  Zone  Management  Program.  He  stated  that  where                                                            
possible,  the  permitting  process  would  entail  a  project  team                                                            
approach.  He stressed  that the intent  of this  legislation  is to                                                            
coordinate  and integrate  projects and that  this change would  not                                                            
alter the decision-making  authority from other entities such as the                                                            
Department of Environmental  Conservation. He attested that the goal                                                            
of this legislation "is to get people together."                                                                                
Commissioner Irwin continued  that small, less complex projects that                                                            
require few permits  could benefit from the establishment  of a lead                                                            
agency coordination for  review. He stated that these projects might                                                            
or might not require the establishment of a project team.                                                                       
Commissioner  Irwin  specified that  resource  development  projects                                                            
that utilize  the lead coordinating  agency and project review  team                                                            
approach  would  have  a  three-phase  process  that  would  include                                                            
evaluation  of the  project  to determine  whether  the lead  agency                                                            
review project  team approach  would adequately  address the  review                                                            
and  permitting   needs  of  the   project;  would  result   in  the                                                            
establishment  of the  project team,  development  of an  integrated                                                            
review schedule,  and the dissemination of information  requirements                                                            
and completion  of  necessary agreements  amongst  the agencies  and                                                            
applicants; and  lastly the actual project review  and authorization                                                            
process  including   public  participation   that  adheres   to  the                                                            
requirements specific  to that project. Additionally,  he noted that                                                            
the  bill  would  assist  the Department's   efforts  to  streamline                                                            
project  review  and  authorization   by facilitating   the  state's                                                            
ability  to  pull together  agencies  to  address  project  specific                                                            
concerns   and  to   facilitate   and   expedite  the   review   and                                                            
authorization  process;  and  to develop  a  more  cohesive  working                                                            
relationship among  representatives of the agencies.  He stated that                                                            
this is where  the teamwork and communication develops.  Thirdly, he                                                            
stated that through better  communication, more efficient permitting                                                            
and consolidated  public  process, where possible,  would assist  in                                                            
integrating the State and federal agency process requirements.                                                                  
Commissioner Irwin  informed that the laws for resource  development                                                            
have expanded  and that more agencies with permitting  authority are                                                            
involved  in the process.  He asserted  that, "resource development                                                             
should not be  held up by the sheer complexities of  government." He                                                            
stated  that this bill  is intended  to assist  in alleviating  that                                                            
Commissioner  Irwin voiced that the  provision relating to  a repeal                                                            
of this statute  that is included in the Senate Resources  committee                                                            
substitute  is a "sound concept"  which is  being expanded  to other                                                            
State  projects.  He informed  that  rather than  this  being a  new                                                            
concept,  the Department  currently  utilizes the  provision in  its                                                            
large  mining project  permitting.  He  further announced  that  the                                                            
concern  regarding the unintended  consequences  of the termination                                                             
date clause,  or "what follows  down the road"  is a key element  in                                                            
this discussion.  He stated that by specifying that  the lead agency                                                            
authority  being  granted to  the Department  of  Natural  Resources                                                            
would be  repealed or sunset  on July 1, 2007  would send the  wrong                                                            
message  to  developers  and  investors  because  he  stressed  that                                                            
entities,  which invest millions  of dollars  in a project,  over as                                                            
much as a twenty-year  period, would interpret "the  message as that                                                            
the State will only stick  with them for four years. This is not the                                                            
intent  we want  to give  out there.  The perception  is bad  enough                                                            
already."  He avowed  that the  State is  addressing  this issue  to                                                            
verify that Alaska  "in this for the long haul… we're  going to make                                                            
a program  that works  and that  people  are going  to want to  keep                                                            
going." He stated  that this lead agency legislation  is one of many                                                            
pieces  of legislation  that  the Administration  is  furthering  to                                                            
accomplish efficient permitting.                                                                                                
Senator  Taylor voiced  concern that  other than  establishing  some                                                            
timelines and  a lead agency that  would conduct hearings,  the only                                                            
thing  accomplished by  this legislation  over  the current  process                                                            
established  by  the Office  of  Governmental  Coordination  is  the                                                            
establishment of some firm  timelines that would require entities to                                                            
state positions on projects "within a given period."                                                                            
     Sec.  46.35.071 (e)  Each state agency  having jurisdiction  to                                                            
     approve  or deny  an application  for a permit  shall have  the                                                            
     power vested in it  by law to make such determinations. Nothing                                                            
     in AS  46.35.031 - 46.35.071  lessens or reduces these  powers,                                                            
     and AS 46.35.031  - 46.35.071 modify only the  procedures to be                                                            
     followed in the carrying out of the powers.                                                                                
Senator  Taylor questioned  why Section  46.35.071(e) provides  each                                                            
agency with  the independent authority  to approve or deny  a permit                                                            
as he  attested  that "if  the Department  of Natural  Resources  is                                                            
truly going to be the lead  agency, then all other agencies in State                                                            
government  should be advisory." He  stated were this the  case, the                                                            
Department  of  Natural Resources  could  make  a decision  and  the                                                            
process  could move  forward. However,  he asserted  that "if  every                                                            
agency  is  allowed  to  have  the veto  power  that  we  have  seen                                                            
exercised  other the  last several  years,  then I'm  not sure  that                                                            
we're really accomplishing  much other than electing the cheerleader                                                            
for the committee  and setting the  timeframe for how long  it would                                                            
take them to kill the project for you."                                                                                         
Commissioner  Irwin responded  that,  while he  understands  Senator                                                            
Taylor's concern,  the large project  team approach "does  work." He                                                            
stated that having a designated  lead agency provides "the authority                                                            
to  get  individual   agencies  to  the  table  and  that's   what's                                                            
critical."   He  stated  efficiency   is  created  by  establishing                                                             
communication  at the  onset  of a project  as opposed  to  affected                                                            
agencies  becoming involved  as the project  progresses and  thereby                                                            
causing project  delays. He  stated that,  in addition to  involving                                                            
all agencies  at the beginning of  a project, the permittee  is made                                                            
aware  of the flow  of communication  and project  requirements  and                                                            
timelines.  He  stated that  upon  completion  of the  project  team                                                            
meeting,  the   Department  of  Natural   Resources,  as   the  lead                                                            
authority, would establish  timelines and the schedule of events and                                                            
responsibilities. He reiterated that the process would work.                                                                    
Co-Chair Wilken  questioned why the adoption of the  sunset language                                                            
amendment  enlarged the original  two-page  bill to a fourteen-page                                                             
bill as reflected in CS SB 142(RES), Version 23-GS1070\D.                                                                       
CAMERSON  LEONARD,  Assistant Attorney  General,  Natural  Resources                                                            
Section,   Civil  Division,   Department  of   Law,  testified   via                                                            
teleconference from Anchorage  to confirm that the bill was expanded                                                            
"purely"  because of  the  sunset provision  adopted  by the  Senate                                                            
Resources Committee.  He informed  the Committee that the  Murkowski                                                            
Administration  requests  that  the original  version  of the  bill,                                                            
which does not contain the sunset provision, be adopted.                                                                        
Co-Chair Wilken  asked whether the  Department of Natural  Resources                                                            
is unable to support  the sunset clause because "it  sends the wrong                                                            
message to developers."                                                                                                         
Commissioner Irwin  responded that the four-year sunset  clause does                                                            
send the wrong  message to developers  and that, instead,  the State                                                            
should  send a message  to developers  conveying  that the State  is                                                            
committed "to  making this work." He expressed that  the Legislature                                                            
could  conduct an  annual  review  of the  process and  require  the                                                            
Department to be accountable for moving the process forward.                                                                    
Co-Chair Wilken surmised  that a future administration might possess                                                            
a different  approach to the purpose  of this legislation,  and that                                                            
the  approach might  "be  an automatic  retreat  from  this type  of                                                            
development in the State."                                                                                                      
Commissioner  Irwin noted that the  "power of an Administration  can                                                            
speed up or close down  any process." He stated that the omission of                                                            
the sunset  clause would assist this  Administration's efforts;  but                                                            
he  voiced  that,  "it doesn't  cure  the  problem  of  what  future                                                            
administrations might do."                                                                                                      
Amendment #1:  This conceptual amendment transfers  $36,200 from the                                                            
Department  of Environmental Conservation  personal services  budget                                                            
to provide  funding  for Department  of Natural  Resources  expenses                                                            
that would be generated by this bill.                                                                                           
Senator  Olson offered  a motion to  adopt Amendment  #1. He  stated                                                            
that this bill appears  to reduce the demand on services provided by                                                            
the Department  of Environmental Conservation  while increasing  the                                                            
demand for services in the Department of Natural Resources.                                                                     
Co-chair  Wilken objected.  He asked which  of the two accompanying                                                             
fiscal notes would be affected.                                                                                                 
Senator Olson identified  the affected fiscal note as the Department                                                            
of Environmental Conservation fiscal note #1.                                                                                   
A roll call was taken on the motion.                                                                                            
IN FAVOR: Senator Hoffman and Senator Olson                                                                                     
OPPOSED: Senator Bunde, Senator B. Stevens, Senator Taylor, Co-                                                                 
chair Green, and Co-chair Wilken                                                                                                
The motion FAILED (2-5)                                                                                                         
Amendment #1 FAILED to be adopted.                                                                                              
Senator Bunde moved to  adopt the original bill, SB 142, Version 23-                                                            
GS1070\A as the working document.                                                                                               
[Note:  Co-chair  Wilken  identified  this motion  as  Amendment  #2                                                            
during discussion on the bill.]                                                                                                 
There  being  no  objection,  SB 142  was  ADOPTED  as  the  working                                                            
Co-chair  Wilken  asked for  confirmation  that  the Administration                                                             
supports this action.                                                                                                           
Commissioner Irwin concurred.                                                                                                   
AT EASE 9:22 AM / 9:24 AM                                                                                                       
Senator  Taylor moved  to report  the original  bill from  Committee                                                            
with individual recommendations and accompanying fiscal notes.                                                                  
There being  no objection, SB 142  was REPORTED from Committee  with                                                            
zero  fiscal   note  #1   from  the  Department   of  Environmental                                                             
Conservation and zero fiscal  note #2 from the Department of Natural                                                            
AT EASE 9:26 AM / 9:27 AM                                                                                                       
     SENATE BILL NO. 117                                                                                                        
     "An Act eliminating the longevity bonus program and making                                                                 
     related conforming changes; and providing for an effective                                                                 
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-chair  Wilken  explained  that  the  elimination  of  the  Alaska                                                            
Longevity   Bonus  Program  would   save  the  State  approximately                                                             
$47,500,000.  He stated that  the committee  substitute, CS  SB 117,                                                            
Version  23-GS1100\I  would  provide  for the  continuation  of  the                                                            
program as a needs-based  program for Alaskan seniors with a monthly                                                            
income of 150 percent over the Alaska federal poverty level.                                                                    
Senator Bunde  moved to adopt CS SB 117, Version 23-GS1100\I  as the                                                            
working document.                                                                                                               
Senator  Taylor  objected.  He voiced  the  concern that  while  the                                                            
original  version  of the  bill  would terminate  the  program,  the                                                            
committee  substitute  would "convert  the  program  basically to  a                                                            
welfare program"  based on specific standards. He  announced that he                                                            
opposes both of  these options, "but if in fact the  final result of                                                            
the Committee  or legislative action is: rather than  destroying the                                                            
program we end  up with a program that still exists  in part for the                                                            
most needy  Alaskans, then  that is the  preferred alternative."  He                                                            
opined  that, "it is  preferable to  save a portion  of the  program                                                            
rather than destroying the whole program."                                                                                      
Senator Taylor withdrew his objection.                                                                                          
Senator  Hoffman  objected. He  stated  that while  the opportunity                                                             
exists  to make  the longevity  program  a needs-based  program;  he                                                            
asserted,  "that the problem  is that  this bill  goes too far."  He                                                            
stated; therefore,  that while he supports the concept  of providing                                                            
the State "with  some savings," he  could not support the  committee                                                            
Senator Hoffman withdrew his objection.                                                                                         
There being no further objection, Version "I" was adopted as the                                                                
working document.                                                                                                               
JOE BALASH, Staff to Senator Therriault, presented testimony as                                                                 
          The  Governor's proposal - the original  version of SB 117                                                            
     - eliminated the Longevity Bonus program in its entirety.                                                                  
          In  public  testimony  before  the  Senate  State  Affairs                                                            
     Committee  - and its counterpart  in the House - recipients  of                                                            
     the Bonus made it  clear that they depend on the monthly checks                                                            
     they receive to make ends meet.                                                                                            
          The  Committee Substitute  in front  of you preserves  the                                                            
     program,  but applies  a two-part means  test in order  to make                                                            
     sure those  recipients that need the Bonus continue  to receive                                                            
          The first test is on income                                                                                           
          The second test is on assets                                                                                          
          In   order  to   make  the  revised   program  easier   to                                                            
     administer, the CS  adopts the same definitions for calculating                                                            
     income  and  assets  as the  current  Adult  Public  Assistance                                                            
     program.  That means there are items that are  disregarded when                                                            
     the respective calculations are made.                                                                                      
          For  income purposes, the  PFD, 50% of earned income,  the                                                            
     first  $2000 of an  ANCSA dividend,  and any other needs-based                                                             
     state assistance received by the person are all excluded.                                                                  
          For  assets purposes, one home, one car, personal property                                                            
     (clothes,  furniture, etc.),  funds set aside for burial,  non-                                                            
     cash    ANCSA    distributions,    Native    allotments,    and                                                            
     reparations/settlements are all excluded.                                                                                  
          The  reason for an  asset test is  that people have  large                                                          
     assets  available  to  them and  are  able to  structure  their                                                            
      finances so they have relatively lower monthly income.                                                                    
          When  we began looking into how to apply  a means test, we                                                            
     first looked  at the requirements for Adult Public  Assistance.                                                            
     However,  those income  and asset  levels appeared  to be  very                                                            
     modest…just  over $1,000 in monthly income for  a single person                                                            
     and just over $1500 for a couple.                                                                                          
          This  CS sets  each of  those figures  approximately  $400                                                            
     higher and also doubles  the assets test threshold to $4000 per                                                            
     person and $6800 per couple.                                                                                               
          In  order to qualify for the revised program,  individuals                                                            
     and couples will need  to go through an annual review to verify                                                            
     their  eligibility. It  is projected  that roughly 4300  people                                                            
     will qualify under these conditions.                                                                                       
          So  that we can cut down on the administrative  expense of                                                            
     this review,  eligibility for  APA constitutes eligibility  for                                                            
     the  Longevity Bonus.  That should eliminate  the necessity  to                                                            
     review  approximately 2/3  of the recipients.  That leaves  the                                                            
     cohort of people who  exceed the APA thresholds, but fall under                                                            
     the  ALB  thresholds   (approximately  1600   people)  who  the                                                            
     departments will need to review.                                                                                           
          After  the initial  review, recipients  will only  need to                                                            
     check off  on their monthly residency forms that  they continue                                                            
     to meet the income/asset requirements.                                                                                     
          Now,  when the program goes  into effect later  this year,                                                            
     there will be some implementation issues.                                                                                  
          Currently,  when a check arrives in the mail for the month                                                            
     of May, it is based  on residency two months prior (March). So,                                                            
     if the  new edibility  requirements go  into effect on  July 1,                                                            
     current  recipients will continue  to receive checks  into July                                                            
     and  August of this  year due to their  eligibility in  May and                                                            
          Which  brings me  to a technical  amendment to this  draft                                                            
     that's  necessary for implementation.  On page 2, line  17, the                                                            
      language needs to read September 1 rather than July 1.                                                                    
          Once  we  get  to  implementation,   there  will  be  some                                                            
     Longevity  Bonus recipients who  do not qualify under  this set                                                            
     of  tests.  However,  if  at  some point  down  the  line  that                                                            
     person's circumstances  change and they do meet the thresholds,                                                            
     they will be able to resume their participation.                                                                           
          Finally  mister chairman,  we get  to the fiscal  note and                                                            
     costs of the new program.                                                                                                  
          Due  to the two-month  lag in payments,  we will  have two                                                            
     months worth  of status quo payments - $4.1 million  each month                                                            
     for  a total of  $8.2 million.  For the balance  of the  fiscal                                                            
     year,  monthly costs  for the  payments will  be just under  $1                                                            
     million  per  month  for a  total  of $9.5  million.  With  the                                                            
     additional  administrative costs  added in, the total  costs of                                                            
     the ALB for FY 04 will be around $18 million.                                                                              
          Based  on the $44.8 million  in both the House  and Senate                                                            
     approved operating  budgets, this amounts to an overall savings                                                            
     of nearly $27 million for FY 04.                                                                                           
          Due   to  the  2-month  lag  factor,  there   will  be  an                                                            
     additional savings  of $4 million in FY 05 and then the program                                                            
     will resume its gradual erosion over time.                                                                                 
          That concludes my testimony Mr. Chairman.                                                                             
Senator  Bunde asked  for  an explanation  regarding  the  disparity                                                            
between  the Department  of  Administration  fiscal  note #1,  dated                                                            
March 5, 2003,  which reflects a $47.5 million savings  reduction as                                                            
opposed  to Mr.  Balash's  testimony referencing  a  savings of  $44                                                            
Mr. Balash  clarified that the $47  million fiscal note is  based on                                                            
the  FY 03  cost of  the Longevity  Bonus  program  while the  $44.8                                                            
million is  the amount approved  for the FY  04 operating budget  by                                                            
both the House of Representatives and the Senate.                                                                               
Senator  Bunde asked  for  confirmation  that, were  this  committee                                                            
substitute approved, the  cost of the program would be $11.3 million                                                            
in FY 04.                                                                                                                       
Mr. Balash  responded that the $11.3  million would support  "twelve                                                            
months worth of the revised program's costs."                                                                                   
Senator  Bunde  surmised  that  the  twelve-month   timeframe  would                                                            
commence in September 2003.                                                                                                     
Mr. Balash concurred.                                                                                                           
Senator Olson  noted that many Native elders who reside  in the Bush                                                            
areas  of the  State  have  such things  as  snowmobiles  and  four-                                                            
wheelers   rather  than   a  licensed  automobile.   Therefore,   he                                                            
questioned   whether  these   items   would  be   included  in   the                                                            
determination of the asset list language that reads as follows.                                                                 
     Sec. 5 AS 47.08.060(c) is amended to read:                                                                                 
          (c) In applying the formula to determine the applicant's                                                              
     share,  the total  gross  income and  the total  assets of  the                                                            
     family  of the applicant  may be taken  into account,  with the                                                            
     following exceptions:                                                                                                      
                (1) the applicant's permanent place of abode;                                                                   
                (2) one noncommercial vehicle;                                                                                  
                (3) tools, equipment, vehicles, and other assets                                                                
                     required in a trade or business;                                                                           
                (4) ordinary household and personal effects;                                                                    
                (5) (5) $1,000 of liquid assets;                                                                                
                (6) all nonliquid assets unless this exclusion                                                                  
                     would  bring   about  an  inequitable   result;                                                            
                     however, all income derived  from this property                                                            
                     shall   be   taken   into   consideration    in                                                            
                     determining the recipient's gross income;                                                                  
                (7) inalienable shared in a Native corporation                                                                  
                     created  under  43  U.S.C.  1601-1628   (Alaska                                                            
                     Native Claims  Settlement Act), for  the period                                                            
                     of their  inalienability  as  specified in  the                                                            
                (8) Alaska longevity bonus payments under former                                                                
                     AS 47.45                                                                                                   
                (9) any other assets specifically restricted for                                                                
                     the use  of the recipient  by state or  federal                                                            
Mr.  Balash clarified  that  were  the mode  of  transportation  not                                                            
factored against someone  qualifying for the adult public assistance                                                            
program, then  that same exemption  would apply in this program.  He                                                            
stated that  the adult public assistance  program's definitions  and                                                            
regulations are being applied  to this program for "simplicity sake"                                                            
rather than creating a whole new set of exemptions.                                                                             
Senator Olson clarified  that the adult public assistance guidelines                                                            
would be used in this program.                                                                                                  
Mr. Balash confirmed.                                                                                                           
Co-chair Wilken informed  the Committee that copies of the committee                                                            
substitute  have been distributed  to Pioneer Homes, the  Commission                                                            
on Aging,  and to  the Legislative  Information  Offices. He  stated                                                            
that public testimony on the bill would commence this evening.                                                                  
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
AT EASE 9:36 AM / 9:38 AM                                                                                                       
     CS FOR HOUSE BILL NO. 112(FIN)                                                                                             
     "An  Act relating  to the  authority of  the Alaska  Industrial                                                            
     Development  and  Export  Authority  to issue  bonds  and to  a                                                            
     municipal tax exemption  for certain assets and projects of the                                                            
     Alaska  Industrial   Development  and  Export  Authority;   and                                                            
     providing for an effective date."                                                                                          
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Senator Bunde  moved to adopt CS HB 112, Version 23-GH1018\I  as the                                                            
working document.                                                                                                               
Senator Olson objected  to the committee substitute, Version "I," as                                                            
it would have  "a major impact on  the viability of the mine  in his                                                            
AT EASE 9:39 AM / 9:40 AM                                                                                                       
Senator Olson asked for  an explanation of the committee substitute.                                                            
Senator  Taylor  also objected  to  the adoption  of  the  committee                                                            
substitute in order to  hear an explanation regarding the changes to                                                            
the bill imposed in the committee substitute.                                                                                   
Co-Chair Wilken  explained that the  committee substitute  addresses                                                            
the road, ore  handling facilities,  and dock assets at the  Red Dog                                                            
Mine operated  by  Tech Cominco  Alaska Incorporated  (Cominco).  He                                                            
stated that  the State Assessor has  determined that these  entities                                                            
should be taxed  at full value determination  because Cominco  has a                                                            
possessory  interest  in them.  He continued  that,  "the  committee                                                            
substitute  recognizes the  possessory interest  but allows  the tax                                                            
exemption to  continue on the roadway  part." He stated that,  "this                                                            
is more a public policy issue more than anything."                                                                              
Co-chair  Wilken  stated that  the  committee  substitute  specifies                                                            
that,  in   a  possessory  interest   situation,  when  the   Alaska                                                            
Industrial Development  & Export Authority (AIDEA) and a user have a                                                            
non-exclusive  use agreement  regarding a road  that the road  would                                                            
not be subject to taxation.  He stated that, "it would apply to this                                                            
road  and all other  roads  to come."  He noted  that the  committee                                                            
substitute  does not  exempt the  dock, the  warehouse, or  material                                                            
handling facilities.  He stated that, "this is a public  policy call                                                            
to recognize the roads in our State as non-taxable."                                                                            
Senator B. Stevens  asked whether the omission of  the University of                                                            
Alaska in Section  2 (a) of the bill  that specifies which  property                                                            
in the State  is exempt from taxation,  is the result of  a drafting                                                            
error. He conveyed  that the existing Statute language  includes the                                                            
property of the  University of Alaska, however, he  pointed out that                                                            
the   proposed  committee   substitute   language   eliminates   the                                                            
Discussion  ensued among Committee  members attempting to  establish                                                            
the reason for the omittance of the University of Alaska.                                                                       
STEVE VAN SANT,  State Assessor, Division of Community  and Business                                                            
Development,  Department  of  Community  and  Economic Development,                                                             
testified via  teleconference from  an offnet site in Anchorage  and                                                            
confirmed that the committee  substitute does omit the University of                                                            
Alaska; however, he specified  that this is the result of a drafting                                                            
error and  that the  University should  be included  in "the  exempt                                                            
from general taxation language."                                                                                                
Senator  B.  Stevens  pointed  out  an  additional   drafting  error                                                            
regarding the  exemption status of the University  occurs on page 2,                                                            
line 19 of the committee substitute, Version "I."                                                                               
Mr.  Van  Sant reiterated  that  the  omissions  pertaining  to  the                                                            
taxation exemption of the University appear to be unintentional.                                                                
Mr.  Van Sant  responded  to  a question  from  Co-chair  Wilken  by                                                            
stating that,  other than the University of Alaska  discrepancy, Co-                                                            
chair Wilken's explanation  of the committee substitute, Version "I"                                                            
is correct.  He  reiterated that  the intent  of Version  "I" is  to                                                            
"reinstitute the  exemption for the roadway, or any  future roadway,                                                            
that would  be utilized  without  a non-excusive  use agreement"  by                                                            
another user who receives AIDEA funding.                                                                                        
AT EASE 9:47 AM / 9:50 AM                                                                                                       
TAMARA  COOK, Director,  Legislative  Legal and  Research  Services,                                                            
Legislative  Affairs  Agency,  testified   via teleconference   from                                                            
Juneau and informed that  the incorporation of technical legislation                                                            
changes  adopted since  FY 2000  has inadvertently  resulted in  the                                                            
omission of the  University of Alaska property exemption  in Version                                                            
"I" of the bill. She assured  that it would be acceptable to correct                                                            
this oversight through the technical correction process.                                                                        
SFC 03 # 68, Side B 09:54 AM                                                                                                    
Senator  Hoffman  qualified   that,  by  law,  the  changes  to  the                                                            
legislation would  be limited to "only the highlighted  language" in                                                            
the bill. Therefore,  he informed,  "existing law would prevail"  in                                                            
regards to any technical error corrections.                                                                                     
Ms. Cook concurred  with Senator Hoffman's assessment.  She informed                                                            
that this section  amends a law that  was enacted in the  year 2000,                                                            
and that law, she informed,  "did not reflect changes to the statute                                                            
that occurred  during the last two years." She stated  that it would                                                            
be acceptable  for the  Committee)  to amend Session  Laws (SLA)  to                                                            
reflect  recent   changes  and  other  technical  corrections.   She                                                            
reiterated that,  as Senator Hoffman has attested,  "this bill would                                                            
have the  effect  of making  only the changes  to the  SLA that  are                                                            
bracketed  out  and  underlined.  It  would  not  change  the  other                                                            
provisions.  We  have  other  laws that  have  changed  those  other                                                            
Co-Chair  Green agreed  with the  legal assessment  provided by  Ms.                                                            
Cook;  however, she  voiced  that litigation  might  argue that  the                                                            
omission of  this language was intentional.  She stated that,  while                                                            
this discussion clarifies  that this omission was unintentional, she                                                            
requested, "a review be  conducted to verify that what is before the                                                            
Committee is reflected in statute."                                                                                             
Ms. Cook suggested that  were the Committee to adopt Version "I," it                                                            
could additionally  "grant the authority  to further amend  that SLA                                                            
to include  any changes that  have been made  to statutes since  the                                                            
time of its enactment."                                                                                                         
Senator Taylor  asked whether Version  "I" would affect the  current                                                            
taxation  status  of  the  dock and  the  other  properties,  as  he                                                            
understood that it would only impact the road.                                                                                  
Mr. Van Sant responded  that, in addition to providing the exemption                                                            
for  the Red  Dog Mine  road, this  legislation  would additionally                                                             
eliminate the  termination date regarding the exemption  of the port                                                            
and ore  storage facility.  He clarified  that Cominco's  possessory                                                            
interest in the ore storage  buildings and the port facilities would                                                            
be taxable were this bill adopted.                                                                                              
Senator  Taylor   asked  for  clarification   as  to  whether   this                                                            
information  is included in  Version "I" or  CS HB 112, Version  23-                                                            
Mr. Van Sant clarified  that the version being discussed  is Version                                                            
Senator Taylor asked for specifics regarding Version "H."                                                                       
Mr. Van Sant informed  that he does not have access  to Version "H."                                                            
Co-Chair Wilken  clarified that Version "H" is the  version that was                                                            
reported  from the House  of Representatives  Finance Committee.  He                                                            
explained that  Version "H" includes  the road, whereas Version  "I"                                                            
excludes the road from taxation.                                                                                                
Ms. Cook interjected  that Version "H" repeals Sections  3 and 19 of                                                            
Chapter 117 SLA 2000.                                                                                                           
Co-Chair  Wilken furthered  that Version "H"  would remove  the full                                                            
value  determination  sunset  provision  for  the exemption  of  the                                                            
assets  and thereby  "include the  road, the port,  and the  dockage                                                            
facilities in place for full valued determination."                                                                             
Ms. Cook confirmed that it "would eliminate the sunset."                                                                        
Co-Chair  Wilken  clarified that  Version  "I" mirrors  Version  "H"                                                            
except that it  would not include the 52-mile road  in the valuation                                                            
Ms.  Cook  concurred,  and stated  that  Version  "I,"  rather  than                                                            
repealing the sunset "provision, would limit its application."                                                                  
Co-Chair  Wilken summarized  that Version "I"  would exempt  the 52-                                                            
mile road from taxation.                                                                                                        
Senator Hoffman asked Cominco's response to the legislation.                                                                    
ROBERT FLINT,  Attorney, Hartig Rhodes Hoge & Lekisch,  representing                                                            
Tech Cominco Alaska  Incorporated, stated that the  House version of                                                            
the bill, Version  "H," "maintains  the status quo by continuing  to                                                            
exempt the whole system,"  which includes the road and the port from                                                            
the assessment  for fair value determination  or property  taxation.                                                            
He stated that  the Senate committee substitute "basically  includes                                                            
in-taxation everything but the road."                                                                                           
Mr. Flint continued  that in terms  of dollar amounts, the  versions                                                            
"are opposite"  as the House committee  substitute taxes  the entire                                                            
system.  He shared  that,  in 1999,  the  assessor valued  the  road                                                            
during the  construction phase  when it was  at its peak value,  and                                                            
"it is the  highest component of the  system;" however, he  asserted                                                            
that  the  road  "is   the  one  component  that  is   most  rapidly                                                            
depreciated."   He  shared  that  when  the  assessment   was  first                                                            
determined,  "the road constituted  approximately 16 percent  of the                                                            
total  assessment  of  the  DeLong Mountain  Transportation   System                                                            
(DLMT). He continued  that because the depreciation  on the road "is                                                            
more rapid than  the depreciation on the other assets,"  he "assumed                                                            
that by 2003,  that the proportion  is even lower." He stated  that,                                                            
"the affect  of the  committee substitute  would be  to add  over 80                                                            
percent of the system to  the assessment roles for the DLMT which is                                                            
owned by AIDEA; excluding  only, he attested, "the small portion now                                                            
attributable to the assessed valuation of the road."                                                                            
Co-Chair  Wilken noted that  the overview provided  by Mr.  Van Sant                                                            
titled  " Red  Dog Mine  Full  Value Issue  History"[copy  on  file]                                                            
identifies  the various  component  values.  He continued  that  the                                                            
total 1999  value was  $154 million  and that  of that total,  $24.5                                                            
million was attributed to the value of the road.                                                                                
Co-Chair Green  asked whether the language on page  two, lines seven                                                            
and  eleven of  Version  "I"  "more clearly  defines  the  exemption                                                            
parameters for the State Assessor."                                                                                             
Mr. Van Sant agreed  that the language would define,  "for assessors                                                            
across  the  State,  that any  non-exclusive  use  roadway  that  is                                                            
financed  with AIDEA funds  would not be  included in the  valuation                                                            
Co-Chair  Wilken exampled that,  were the 28-mile  Pogo road  or the                                                            
road to Donlin Creek, financed  by AIDEA, they "would be transparent                                                            
to taxation."                                                                                                                   
Mr. Van Sant agreed  and stated that Version "I" provides  assessors                                                            
with  marching  orders"  not  to include  AIDEA-funded  roads  in  a                                                            
Senator  Bunde  questioned  how this  exemption  would  apply to  an                                                            
exclusive-use  road situation. He  noted that "other people  can and                                                            
do use the road to the Red Dog Mine."                                                                                           
Mr. Van  Sant clarified  that an exclusive-use  AIDEA financed  road                                                            
would be taxable;  however, he furthered that were  that road issued                                                            
a non-exclusive use agreement, it would be non-taxable.                                                                         
Co-Chair   Wilken  asked   whether  the   terms  non-exclusive   and                                                            
possessory interest are synonymous.                                                                                             
Mr. Van Sant  clarified that the term  non-exclusive applies  to the                                                            
use of a property,  and that as such, according to  the Alaska Court                                                            
System, would be taxable  and subject to the possessory interest for                                                            
taxation; however, he continued  that this language specifies that a                                                            
non-exclusive  use road financed by AIDEA "would not  be taxable and                                                            
would not be subject to the full value."                                                                                        
Co-chair Wilken surmised,  therefore, that this exemption is limited                                                            
to AIDEA projects.                                                                                                              
Senator  B. Stevens  stated that the  language of  Version "I"  "re-                                                            
interprets  the agreement between  Cominco and AIDEA concerning  the                                                            
DeLong Mountain  Regional Transportation  System" as it states  that                                                            
the port facilities and  the road are the property of AIDEA once the                                                            
bonds are retired. He asked whether this is correct.                                                                            
RON MILLER,  Executive  Director,  Alaska Industrial  Development  &                                                            
Export Authority, Department  of Community and Economic Development,                                                            
testified via teleconference  from an offnet site and expressed that                                                            
the whole system is the property of AIDEA.                                                                                      
Senator B. Stevens  restated the understanding that,  when the bonds                                                            
are retired, the whole system becomes the property of AIDEA.                                                                    
Mr. Flint clarified  that the facilities currently  belong to AIDEA,                                                            
and that  "there is  no residual  ownership of  any kind, like  Tech                                                            
Cominco, in that whole system."                                                                                                 
Senator  B. Stevens  objected, "to  splitting up"  the State's  road                                                            
transportation  system. He continued  that, "one piece, while  still                                                            
owned  by a State  agency,  can be included  in  the tax  assessment                                                            
while another piece, while  still owned by the same state agency" is                                                            
exempt from taxation and assessment."                                                                                           
Mr. Van  Sant explained that  in the agreement  between Cominco  and                                                            
AIDEA, Cominco  has priority  right to use  certain properties,  and                                                            
that Section 1(b)(3)  of the bill, specifies that,  at any time that                                                            
Cominco  is  not  fully  using  its  priority   rights  to  use  the                                                            
facilities  at the  dock area,  AIDEA may, with  Cominco's  consent,                                                            
license  others  to  use  that property.  Were  this  to  occur,  he                                                            
continued, AIDEA would  charge a license fee for the usage, and then                                                            
funnel  that money  to Cominco.  However,  he elaborated  that  this                                                            
language  provision does  not apply  to road  facilities. He  stated                                                            
that  upon  review,  the  road  was  determined   to  be  "the  more                                                            
appropriate  component" not to be  taxed. He stressed that  "its not                                                            
ownership we're  assessing, it's a  right-to-use that property."  He                                                            
continued that  Cominco does possess  the priority right  to use the                                                            
properties identified in the agreement.                                                                                         
Co-Chair Wilken stated  that were Cominco to allow, for example, the                                                            
Acme Gold Company to use  the facility, then Acme Gold Company would                                                            
pay AIDEA,  and then AIDEA would pay  Cominco. Therefore,  he opined                                                            
that, "in  essence," Cominco  benefits from  ACME Gold "being  there                                                            
and using the excess capacity of the facility."                                                                                 
Mr. Van Sant concurred  that this is the procedure  specified in the                                                            
Senator Taylor  asserted that when  the Governor, the Department  of                                                            
Natural Resources,  and AIDEA reviewed  the situation, it  was noted                                                            
that taxation laws have  changed as the result of new rulings or new                                                            
interpretations  of a tax law. He  stated that this, in conjunction                                                             
with  the  July  1, 2003  sunset  provision,  required  addressing.                                                             
Therefore,  he  continued,  the Governor  submitted  legislation  to                                                            
continue the status quo.                                                                                                        
Senator Taylor  furthered that this situation involves  an operating                                                            
zinc mine in  which the State "has  invested heavily," and  is being                                                            
repaid  for that  investment.  He also  noted  that as  part of  the                                                            
process,  there  was a  need  to develop  a  road, which  the  State                                                            
Assessor has now  determined could provide a taxing  opportunity. He                                                            
questioned  the  need to  change  the  status  quo agreement  as  he                                                            
attested that  it has been adequate and should be  continued without                                                            
Senator  Taylor  voiced  that  the State's  fiscal  dilemma  and  in                                                            
particular,  the need  for adequate  education  funding, might  have                                                            
triggered  the change.  He  voiced the  understanding  that  Cominco                                                            
currently  pays   approximately  one  million  dollars   a  year  in                                                            
education funding to the Northwest Arctic Borough (NWAB).                                                                       
Mr. Flint  stated that  Cominco would  pay $5,850,000  to NWAB  this                                                            
Senator  Taylor   exclaimed  that   the  tax  resulting   from  this                                                            
legislation  would not  be paid to  the State,  but would rather  be                                                            
paid to the  NWAB, which is already  collecting a tax from  Cominco.                                                            
He  asked for  further  information  regarding  the  current  taxing                                                            
authority of the NWAB.                                                                                                          
Mr. Flint expressed  that there is  no tax imposed by the  NWAB, but                                                            
rather that this money  is paid as a condition of a "Payment in lieu                                                            
of taxes" (PILOT) agreement between the two entities.                                                                           
Senator  Taylor interjected  that the  NWAB could  enact a tax,  but                                                            
opted instead to establish a PILOT agreement with Cominco.                                                                      
Senator Taylor  asked why the State would subject  the mine to a tax                                                            
that exempts a  portion of a road and which might  not result in any                                                            
additional  funds being paid to the  Borough. He asked whether  NWAB                                                            
supports this legislation.                                                                                                      
Co-Chair Wilken reviewed  that the original House bill was sponsored                                                            
as a Governor's  bill "to simply extend AIDEA's bonding  authority."                                                            
He  furthered  that the  bill  was  expanded  in the  House  Finance                                                            
Committee to include the  taxation issue involving the Red Dog Mine.                                                            
He  stated  that  this  subject,  rather   than  the  AIDEA  bonding                                                            
authority, is currently  being discussed. He clarified that the $5.8                                                            
million  being  paid  to the  NWAB  supports  borough  services.  He                                                            
continued  that were  Cominco's possessory  interests  taxed in  the                                                            
manner  supported  by  the  State  Assessor,   it  would  result  in                                                            
approximately $259,000  being paid to support education in the NWAB.                                                            
He stated that this payment  would reduce the amount the State would                                                            
pay to the Borough to support  education funding. He stated that the                                                            
issue at  hand "is  the 4 mils  requirement based  on full and  true                                                            
value, and  this obviously increases  by some $100 million,  because                                                            
of the possessory interest, the taxable property in the NWAB."                                                                  
Senator  Olson pointed  out that the  road to the  Pogo Mine  was an                                                            
existing road  as opposed to the development of both  a new road and                                                            
a port to enable  Red Dog Mine resources to be transited  to market.                                                            
He  stated  that  this  point  should  be  a  consideration  in  the                                                            
Senator Bunde  voiced that  this and other  recent discussions  have                                                            
provided the  Committee with opportunities  to discuss whether  "one                                                            
group of people  should be treated differently than  another and how                                                            
long the State could continue  to afford subsidies" created when the                                                            
State had considerable  cash flow  revenue. He asserted,  "these are                                                            
valid issues that need to be discussed."                                                                                        
Co-Chair  Wilken commented,  "this bill  is very  clear…do we,  as a                                                            
Legislature,  support what  we ask our State  Assessor to do.  If we                                                            
don't, we  should just tell  him to make his  rules as he  wishes to                                                            
make them" and  then either the Legislature can change  them or that                                                            
citizens,  through  the use  of the  Court System,  could  challenge                                                            
Co-chair Wilken continued  that the committee substitute addresses a                                                            
public policy  call whereby the Legislature could  assess roads as a                                                            
means  of encouraging  development in  the State  by excluding  them                                                            
from  asset valuation.  He  stated that  the  Legislature's  current                                                            
position  is that roads  could encourage  development in the  State;                                                            
and  that   the  question  is,  in   this  situation,  whether   the                                                            
Legislature should  overturn the decision of the State  Assessor who                                                            
has performed  his duties as requested. He stated  that this is what                                                            
the committee  substitute, Version  "I" does. He stressed  that some                                                            
compromise legislation should be developed.                                                                                     
Senator  Olson  commented  that Co-chair  Wilken  presents  a  valid                                                            
point,  as  he agreed  that  the  Assessor  is  performing  his  job                                                            
responsibilities.   However,    he  contended   that   it   is   the                                                            
Legislature's  duty to develop long-range plans, specifically  those                                                            
relating to  resource development  that would benefit the  State. He                                                            
asserted  that,  in  addition  to the  extensive  time  required  to                                                            
receive  a  ruling,  legal system  challenges  have  the  affect  of                                                            
putting a stop  or a "yellow light"  to developers who might  invest                                                            
in  the State  "because  the rules  might  change."  He stated  that                                                            
investors are uncomfortable with this situation.                                                                                
Co-Chair Wilken  agreed and stated  that this is the reason  to move                                                            
this bill  forward. He stated  that this issue  must be resolved  in                                                            
order to remove the uncertainty  caused by sunset provisions such as                                                            
the one  included in this  committee substitute.  He stated  that to                                                            
eliminate  the uncertainly  that investors  might  face, either  the                                                            
Legislature  or the Court System could  resolve the issue;  however,                                                            
he voiced  that  resolving it  at the  Committee  level could  deter                                                            
legal delays  and the need to revisit  the issue again when  another                                                            
sunset date approaches.                                                                                                         
Senator  Olson  voiced support  of  this  endeavor. He  stated  that                                                            
"three years ago, I wasn't at your side…but I am now."                                                                          
Mr. Flint  voiced that  Cominco would prefer  that the Legislature,                                                             
rather  than  the  State  Assessor   or the  Alaska   Court  System,                                                            
establish  the  State's   economic  policy.  He  stated   that  this                                                            
legislation  should  be treated  as an  economic  situation and,  he                                                            
asserted, "that  there is no rational  basis for splintering  up the                                                            
DMTS as far  as taxes are concerned."  He stated that the  system in                                                            
its entirety  is intended  to provide  access to  a remote area  for                                                            
resource development.  He stressed  that each component such  as the                                                            
road, the storage area,  the port, and the loader are crucial to the                                                            
operation.  He stated that the agreement  between AIDEA and  Cominco                                                            
specifies  that "the  project  is a unitary  system"  and that  each                                                            
component,  including the road,  is an integral  part of the  system                                                            
and  are  all subject  to  priority  rights.  He  stated  that  Tech                                                            
Cominco,  as the first  user, "pays  for it all."  He stressed  that                                                            
general  funds  are  not  utilized,  and  that  Tech  Cominco  would                                                            
willingly  grant   another  entity  access  to  the  facilities   as                                                            
specified in the agreement, in order to share operational costs.                                                                
Mr. Flint confirmed that  any company would desire assurances rather                                                            
than uncertainty,  and he asserted that, "this committee  substitute                                                            
would serve to create uncertainty  to Tech Cominco by creating taxes                                                            
on basically  the whole  project."  He voiced, "if  it isn't  broken                                                            
don't fix  it," as he attested  that no one  had a problem  with the                                                            
process until 1999 when  the State Assessor "found a theory by which                                                            
he thought the assessment could be expanded."                                                                                   
Mr. Flint  stated  that through  analysis, it  was determined  that,                                                            
were a mil rate in place,  the local share for this project is above                                                            
those of comparable boroughs.  Additionally, he noted that the State                                                            
is reimbursed  for the loan with the  rate of return plus  the extra                                                            
tonnage fees,  which he  attested, generate  extra money that  AIDEA                                                            
might be  able to flow into  the general fund.  He stated that  this                                                            
committee  substitute would  be counterproductive  from an  economic                                                            
development  point  of  view  as  the  status  quo  has  been  quite                                                            
productive.  He  stated that  Tech  Cominco  would prefer  that  the                                                            
status quo be continued.                                                                                                        
Senator  Bunde asked for  confirmation that  this proposal  excludes                                                            
the  road  from  taxation,  but  includes  the  single  use  storage                                                            
facilities as well as the multiple use port facility.                                                                           
Mr. Van Sant responded that is correct.                                                                                         
Senator Bunde  opined that the multiple use argument  could apply to                                                            
the road and  the port, but would  exclude other facilities  such as                                                            
the storage facility.                                                                                                           
Mr. Flint interjected that  the storage facility could store any ore                                                            
or other items.                                                                                                                 
Co-Chair  Wilken asked Mr.  Flint for suggestions  on how the  State                                                            
might  address  future   AIDEA-funded  large  resource  development                                                             
projects; specifically  how the taxation exemption  policy regarding                                                            
assets such  as roads and facilities  could be developed  to provide                                                            
financial and  educational benefits  to the citizens in the  region.                                                            
Mr.  Flint   responded   that  in   order  to   encourage   economic                                                            
development,   policy   makers   should   look  at   the   situation                                                            
"generically";  that is to consider  the entire situation  including                                                            
such things as  roads and other public infrastructure  in the remote                                                            
area as well as the tradeoffs  between the development of a tax base                                                            
and a resource  development. He stated  that, while these  tradeoffs                                                            
could affect  revenue, such things  as excess tonnage fees  could be                                                            
implemented to  offset it. He stated that policy makers  rather than                                                            
a business  should  make policy  determinations  regarding  economic                                                            
development on a statewide basis.                                                                                               
Co-Chair  Wilken asked whether  the Greens  Creek Mine in  Southeast                                                            
Alaska has a possessory interest classification.                                                                                
Mr. Van Sant stated that it does.                                                                                               
Co-Chair  Wilken  asked whether  the  State  might be  "required  to                                                            
forsake  the taxable  value"  of the  Fort Knox  Gold  Mine and  the                                                            
Greens  Creek  Mine   which  have  possessory  interests   in  their                                                            
project's  roads  and  facilities.  He  stated  that  allowing  this                                                            
legislation  to  proceed   as proposed   would  not  be  limited  to                                                            
jeopardizing  governments'  future  ability  to  access  funds  from                                                            
resource  developments   but could  also  cause  existing   resource                                                            
developments to be reevaluated.                                                                                                 
Mr. Flint  replied that one  of the important  things for  promoting                                                            
economic  development in  remote areas  is the  consideration  of an                                                            
existing  public  infrastructure.  He  noted  that  the lack  of  an                                                            
infrastructure  is a detriment to developing remote  areas, as, were                                                            
a company to choose,  it would choose a developed  area. He stressed                                                            
that the  State should "try  to even the playing  field" as  much as                                                            
possible in order  to encourage development in areas  where there is                                                            
a lack  of public infrastructure.  He stated  that while this  might                                                            
result in tradeoffs, "the overall policy might outweigh that."                                                                  
Senator  Taylor  declared  that the  NWAB  and  Red Dog  Mine  PILOT                                                            
agreement  is in lieu of  a taxation system  based on mil rates  and                                                            
assessed  valuation.  He asked  the amount  of money  that the  NWAB                                                            
would have collected  were the proposed committee  substitute, which                                                            
is  based  on  a Court  decision   upholding  the  State  Assessor's                                                            
valuation determination  in place  at the onset of the Red  Dog Mine                                                            
project. Additionally,  he asked the mil rate that would be required                                                            
to garner revenue equal to the current PILOT agreement amount.                                                                  
Co-Chair Wilken  clarified that rather than a Court  System decision                                                            
furthering  this  endeavor, it  was  incorrectly understood  by  the                                                            
State  Assessor,  that  a  valuation  system  rather  than  a  PILOT                                                            
agreement  existed in  the NWAB.  Subsequently,  the State  Assessor                                                            
furthered the valuation issue.                                                                                                  
Mr. Van Sant  affirmed that the Legislature,  rather than  the State                                                            
Assessor, establishes State  policy, and that "taxation is the rule,                                                            
and this exemption  is the exception to that rule."  He shared that,                                                            
in  1998,  he had  assumed,  when  he  visited the  NWAB,  that  the                                                            
taxation system  was based "on the full value rule."  He stated that                                                            
subsequent  to that visit,  it was clarified  that a PILOT  program,                                                            
rather  than an asset  assessment  program existed.  He stated  that                                                            
rather  than setting  policy, the  Assessor's "job  is to make  sure                                                            
that all property  in the State is  assessed equitably, and  in this                                                            
case, right now, we are not doing that."                                                                                        
Mr. Van Sant continued  that direction from the Legislature is being                                                            
sought  to determine  how resource  development  projects should  be                                                            
approached  and whether  "we  continue  with inequities  across  the                                                            
State."  He  stated   that  were  this  the  direction   given,  the                                                            
Assessor's   Office  would  comply.   However,  he  expressed   that                                                            
currently a  variety of assessments  are conducted such as  Kodiak's                                                            
SeaLand  assessment based  on a  preferential use  agreement on  the                                                            
public   dock   and  Anchorage's   consideration   of   granting   a                                                            
preferential  use agreement to SeaLand.  He reiterated that,  rather                                                            
than changing  policy,  the State  Assessor is  attempting "to  make                                                            
sure that everything that is taxable is on the assessment role."                                                                
Mr.  Van  Sant  was  unable  to answer  Senator   Taylor's  question                                                            
regarding  the revenue or  mil rate for the  NWAB. He stressed  that                                                            
his job is to attempt to  determine the "full valuation estimate for                                                            
everything  that is taxable up there,  and that is what I  attempted                                                            
to  do  in  1998."  He  stated  that  the  goal  of  this  committee                                                            
substitute,  rather than being  an attempt  to change things,  is to                                                            
determine  whether  the  Legislature   wishes  to  exclude  resource                                                            
development projects from  taxation. He ventured that the NWAB would                                                            
support  resource development  projects  being taxed,  as would  the                                                            
communities  of Fairbanks or  Juneau. He stated  that were  a change                                                            
desired, then the Legislature  must let the State Assessor know what                                                            
that change is.                                                                                                                 
Senator Taylor  calculated  that, in order  for the NWAB to  achieve                                                            
the amount collected under  the PILOT agreement, the project must be                                                            
assessed  at $500  million with  ten-mil rate.  He voiced  amazement                                                            
that the State  Assessor and the NWAB  attorney were unaware  that a                                                            
PILOT agreement  existed "between AIDEA and the State  and the NWAB"                                                            
to have  a payment  made in lieu  of taxes and  thus not have  those                                                            
assets not listed on their tax roles."                                                                                          
Mr. Van Sant  communicated that at  the time he became aware  of the                                                            
PILOT agreement between  Cominco and the NWAB, the monetary terms of                                                            
that agreement  were not investigated  because he asserted  that the                                                            
amount of the  agreement is not something  that should concern  him.                                                            
He shared that  Cominco maintains an extensive list  of mine assets,                                                            
and  he commended  their  accountants  for  keeping current  on  the                                                            
hundreds of  thousands of pages of  items "that come and  go through                                                            
that mine." He noted that  the PILOT agreement was discovered when a                                                            
site visit was conducted.                                                                                                       
Mr. Flint disclosed that  the NWAB does not have an assessor because                                                            
it does not have a tax role.                                                                                                    
Senator  Taylor argued,  nonetheless, that  a contractual  agreement                                                            
does exist between the NWAB and Cominco.                                                                                        
Senator Bunde  responded to Senator Taylor's comment  that a company                                                            
would not agree to a PILOT  payment that would be higher than a tax.                                                            
Senator  Bunde  suggested  that  a company  would  support  a  PILOT                                                            
agreement  for two reasons:  1) certainty  and 2)  to pay an  amount                                                            
that is "a lesser number  than taxes, as no business would volunteer                                                            
to pay a higher assessment than absolutely required."                                                                           
Mr. Flint explained  that the PILOT  agreement amount was  driven by                                                            
the NWAB  school-funding  needs. He  informed that  the mine  is the                                                            
only  private  business  paying  to the  local  government,  as  the                                                            
Borough has no  taxation system. He stated that the  NWAB is largely                                                            
a school district  and it is "claimed" that 77 percent  of the PILOT                                                            
agreement revenues fund  school expenses. He continued that analysis                                                            
estimated that were the  77 equated to a mil rate, the rate would be                                                            
higher  than Tech  Cominco  would  pay in  the Juneau  or  Anchorage                                                            
boroughs.  He stated that  another important  consideration  is that                                                            
Cominco  is committed  to  hiring local  NANA  Regional Corporation                                                             
Co-Chair Wilken voiced  that by his calculations, the Fort Knox Gold                                                            
Mine in the  Fairbanks North Star  Borough is taxed at 18  mils with                                                            
an assessed  value of $383 million.  He stated that this  calculates                                                            
to $6.82 million.                                                                                                               
Mr. Flint clarified that  his calculation is based on the 77-percent                                                            
of  the  PILOT agreement  payment  that  supports  the  NWAB  school                                                            
program as  compared to,  for instance, the  8.4 percent school  mil                                                            
rate in the Fairbanks area.                                                                                                     
SFC 03 # 69, Side A 10:42 AM                                                                                                    
Co-chair Wilken concurred.                                                                                                      
Senator  Taylor asserted  that the  PILOT program  is an  "extensive                                                            
agreement"  that includes  other provisions  including training  and                                                            
local hire requirements.                                                                                                        
Mr.  Flint agreed  and  stated that  the  commitment  to hire  local                                                            
residents  is a critical  component  and should  be "the number  one                                                            
goal" of economic development.                                                                                                  
Senator Taylor understood  the PILOT agreement to be between Cominco                                                            
and the NWAB.                                                                                                                   
Mr. Flint responded that  the Borough, Cominco and AIDEA are parties                                                            
to  the  agreement  as well  as  the  NANA  Native  Corporation.  He                                                            
informed that Cominco leases  land from the NANA Native Corporation.                                                            
He noted that the NWAB's  obligation is to provide training to local                                                            
Senator Taylor  opined that any community would make  concessions in                                                            
order to encourage economic  development in its area. He stated that                                                            
the City  and Borough of  Juneau's annexation  of the Green's  Creek                                                            
Mine on Admiralty  Island is such an example. He furthered  that the                                                            
Red Dog Mine provides  job opportunities to the people  in the NWAB.                                                            
However,  he voiced concern  about the "message  being sent"  by the                                                            
continuance  of the status  quo situation;  however, he stated  that                                                            
the  Legislature  is setting  a  new economic  policy,  which  would                                                            
negate an ongoing economic  agreement, and he asked for a legitimate                                                            
economic  reason  to  do  this.  He  voiced  support  for  a  region                                                            
negotiating  economic  development   plans  with  a  developer  with                                                            
provisions such  as hiring a specific number of local  residents and                                                            
paying a certain amount of taxes.                                                                                               
Senator  Taylor reminded  the Committee  that  previous Legislators                                                             
awarded  a  five-year  tax  deferral   to  the  timber  industry  in                                                            
Ketchikan  as a  means of  attracting  development.  He stated  that                                                            
numerous communities and  states provide incentives to developers in                                                            
order to promote economic  activity. He declared that this committee                                                            
substitute is  a "dramatic" policy shift that he could  not support.                                                            
Mr. Van  Sant responded  that,  while Anchorage  and Fairbanks  have                                                            
local economic  incentives such as an exemption from  local taxes to                                                            
encourage development,  the full value  of the business is  depicted                                                            
in the State's property tax assessments of the communities.                                                                     
Co-Chair  Green commented  that this is very  complicated issue  and                                                            
that the discussions  are appreciated. However, she  stated that she                                                            
has  "come to  the realization  that",  in  the future,  when  AIDEA                                                            
project proposals come  before the Committee for approval, she would                                                            
understand  that  these  projects  would be  granted  "a  different,                                                            
unreachable  status  apparently."  She  stated  that,  "this  has  a                                                            
chilling  influence" on her  decisions, and  she stated that  rather                                                            
than seeking  AIDEA funding, these  companies should pursue  private                                                            
Co-Chair  Wilken stated that  this is a simple  but "very  important                                                            
bill for the  future of Alaska," and  "that is why the Committee  is                                                            
spending so much time on it."                                                                                                   
Senator Olson  stated that the Red Dog Mine has been  operating at a                                                            
profit;  however other  projects, such  as the  Healy Coal  Project,                                                            
have not. He asked  whether the Healy Coal Project  is recognized as                                                            
a possessory interest project.                                                                                                  
Mr. Van Sant  responded that because  the Healy Coat Project  has no                                                            
private sector interest, there is no possessory interest.                                                                       
A roll call was taken on the motion to adopt Version "I".                                                                       
IN FAVOR: Co-chair Green and Co-chair Wilken                                                                                    
OPPOSED: Senator  B. Stevens, Senator  Taylor, Senator Hoffman,  and                                                            
Senator Olson                                                                                                                   
ABSENT: Senator Bunde                                                                                                           
The motion FAILED (2-4-1)                                                                                                       
The Version "I" Committee Substitute FAILED to be ADOPTED.                                                                      
Co-Chair Wilken  informed that the bill would be HELD  in Committee.                                                            
Co-Chair Gary Wilken adjourned the meeting at 10:52 AM                                                                          

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