Legislature(2015 - 2016)SENATE FINANCE 532

03/25/2015 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 33 Presentation: Overview FY17 Operating Budget TELECONFERENCED
Heard & Held
+ SB 49 CIVIL LEGAL SERVICES FUND TELECONFERENCED
Heard & Held
+ SB 32 TIMBER SALES TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 25, 2015                                                                                            
                         9:04 a.m.                                                                                              
                                                                                                                                
9:04:49 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  MacKinnon  called  the  Senate  Finance  Committee                                                                    
meeting to order at 9:04 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Peter Micciche, Vice-Chair                                                                                              
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Anna  Kim, Tax  Division, Department  of Revenue;  Genevieve                                                                    
Wojtusik,  Staff,  Senator  Lesil  McGuire;  Nicole  Nelson,                                                                    
Director, Alaska Legal  Services; Marie Darlin, Coordinator,                                                                    
American  Association  of  Retired  Persons,  Juneau;  Chris                                                                    
Maisch,  Director,  Division   of  Forestry,  Department  of                                                                    
Natural  Resources;  Ron  Arvin,  Member,  Matanuska-Susitna                                                                    
Borough Assembly.                                                                                                               
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Brandon   S.   Spanos,   Deputy  Director,   Tax   Division,                                                                    
Department  of Revenue;  Linda  Towarak,  Native Village  of                                                                    
Unalakleet,   Unalakleet;   Monina  Willis,   Alaska   Legal                                                                    
Services,  Anchorage;  Melba  Biggs, Self,  Anchorage;  Erin                                                                    
McLarnon,   Executive   Director,  Working   Forest   Group,                                                                    
Anchorage;  James Mackovjak,  Self, Gustavus;  Steve Gibson,                                                                    
Self, Homer.                                                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 33     FEES FOR TIRES                                                                                                        
                                                                                                                                
          SB 33 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SB 49     CIVIL LEGAL SERVICES FUND                                                                                             
                                                                                                                                
          SB 49 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SB 32     TIMBER SALES                                                                                                          
                                                                                                                                
          SB 32 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
Co-Chair MacKinnon discussed the agenda.                                                                                        
                                                                                                                                
SENATE BILL NO. 33                                                                                                            
                                                                                                                                
     "An Act relating to remittance of tire fees; and                                                                           
     providing for an effective date."                                                                                          
                                                                                                                                
9:05:36 AM                                                                                                                    
                                                                                                                                
ANNA KIM, TAX DIVISION,  DEPARTMENT OF REVENUE, discussed SB                                                                    
33. She explained that the bill  changed the due date of the                                                                    
tire  fee return  and payment  from 30  days (following  the                                                                    
calendar quarter)  to the last  day of the  calendar quarter                                                                    
in which  the tires were  sold or studs were  installed. The                                                                    
rationale for  the bill was  to mitigate  taxpayer confusion                                                                    
that  was a  result  of quarterly  tax  due-dates that  fell                                                                    
prior to  the last  day of  the month,  and had  resulted in                                                                    
late fees and penalties.                                                                                                        
                                                                                                                                
Ms. Kim  went over the legislation,  explaining that Section                                                                    
1 changed the  due date of the tire fees.  Currently for the                                                                    
months of  July, October  and January the  fees were  due on                                                                    
the 30th  of the month; the  bill would set the  due date on                                                                    
the last  day of  each month. She  explained that  Section 2                                                                    
aligned the payment  dates used to determine  the timely pay                                                                    
credit (compensation to taxpayers  for timely collection and                                                                    
remittance) with the  new dates in Section  1. She specified                                                                    
that  the  timely pay  credit  was  equal  to 5  percent  of                                                                    
collected taxes, not  to exceed $900 per  quarter. Section 3                                                                    
applied  to the  due date,  which  would be  changed to  the                                                                    
first calendar quarter after the  effective date of the act.                                                                    
Section  4   indicated  that  the  act   would  take  effect                                                                    
immediately.                                                                                                                    
                                                                                                                                
9:08:10 AM                                                                                                                    
                                                                                                                                
Ms. Kim stated  that the attached fiscal note  was zero, and                                                                    
furthered  that there  were no  new positions  proposed. She                                                                    
clarified  that   there  would  be  an   approximate  $5,000                                                                    
reduction  from a  change  in revenue  due  to an  estimated                                                                    
$2,500 increase  in the timely  pay credit and  an estimated                                                                    
$2,500 less in penalties collected.                                                                                             
                                                                                                                                
Vice-Chair  Micciche noted  that he  had a  constituent that                                                                    
commented on the bill, and asked  Ms. Kim to verify if there                                                                    
was  an increase  in the  per-tire fee  associated with  the                                                                    
legislation. Ms. Kim responded in the negative.                                                                                 
                                                                                                                                
Co-Chair MacKinnon  asked if the bill  addressed a quarterly                                                                    
fee. Ms. Kim answered in the affirmative.                                                                                       
                                                                                                                                
Co-Chair MacKinnon  observed that  the state  was collecting                                                                    
about $1.3 million in tire  fees, and that the penalties and                                                                    
interest had gone down over time. Ms. Kim agreed.                                                                               
                                                                                                                                
Co-Chair  MacKinnon  wondered  if the  administration  still                                                                    
believed there  was a reason  some taxpayers were  not aware                                                                    
of the  current fee  timetable. Ms. Kim  discussed education                                                                    
and outreach with taxpayers that  resulted in a reduction in                                                                    
penalties   and  interest   over  time.   She  thought   the                                                                    
legislation  was a  simple  administrative  change to  bring                                                                    
more efficiency to the system.                                                                                                  
                                                                                                                                
Co-Chair  MacKinnon shared  that  in 2012  the penalties  in                                                                    
interest  for the  tire  fee  was $20,026,  in  2013 it  was                                                                    
$18,435, in 2014 it was  $3,477; and reflected a significant                                                                    
drop   in  penalties   to  taxpayers.   She  commended   the                                                                    
administration for its work.                                                                                                    
                                                                                                                                
9:10:42 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon asked for clarification  as to what would                                                                    
happen if  the last day of  the month fell on  a Saturday or                                                                    
Sunday.                                                                                                                         
                                                                                                                                
BRANDON   S.   SPANOS,   DEPUTY  DIRECTOR,   TAX   DIVISION,                                                                    
DEPARTMENT  OF  REVENUE  (via teleconference),  cited  Title                                                                    
43.05,  which  allowed  for  the  payment  due  date  to  be                                                                    
extended to  the next business day  if it fell on  a weekend                                                                    
or holiday.  He added  that the significantly  lower penalty                                                                    
and interest fees  from 2014 had been due  to the department                                                                    
tax auditors  being completely engaged  in developing  a new                                                                    
revenue  management system  and having  no time  to complete                                                                    
audits.                                                                                                                         
                                                                                                                                
Co-Chair MacKinnon  wondered if the bill  was necessary. Mr.                                                                    
Spanos  explained   that  there  was  still   an  occasional                                                                    
taxpayer  that  expressed  confusion with  the  current  due                                                                    
dates.  He  expressed  the need  for  alignment  with  other                                                                    
quarterly tax filings.                                                                                                          
                                                                                                                                
9:12:48 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  asked about the justification  for the tire                                                                    
fee, and  wondered if other  states employed the  same fees.                                                                    
Mr. Spanos was not aware  of the fees other states employed.                                                                    
He  explained   that  the  tire   fee  (for   studded  tires                                                                    
specifically)  was  created to  assist  in  revenue for  the                                                                    
deterioration of  roads. He added  that the fee  for studded                                                                    
tires was twice that of regular tires.                                                                                          
                                                                                                                                
Senator  Hoffman  asked  if   there  was  a  differentiation                                                                    
between the  fees of studded  and regular tires.  Mr. Spanos                                                                    
explained that  the $2.50  new tire fee  applied to  all new                                                                    
tires sold, with an additional $5 fee for studded tires.                                                                        
                                                                                                                                
Senator Hoffman  commented that the most  significant damage                                                                    
to  roads  in Alaska  was  due  to  studded tires,  and  the                                                                    
expense ran into the tens  and possibly hundreds of millions                                                                    
of dollars. He wondered how  tire fees in Alaska compared to                                                                    
other  states.  Mr.  Spanos  agreed   to  get  back  to  the                                                                    
committee with the information.                                                                                                 
                                                                                                                                
Ms.  Kim  interjected  that the  classification  of  studded                                                                    
tires in  the current statute  was defined by  "heavy studs"                                                                    
that  weighed 1.1  grams  or more.  She  concurred that  the                                                                    
department  would  provide   information  about  how  Alaska                                                                    
compared to other states.                                                                                                       
                                                                                                                                
Vice-Chair   Micciche  asked   what   year  Alaska   started                                                                    
collecting  tire fees.  Ms. Kim  thought  that the  original                                                                    
bill to collect the fees was passed in 2003.                                                                                    
                                                                                                                                
9:16:07 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon OPENED and CLOSED public testimony.                                                                          
                                                                                                                                
SB  33  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
SENATE BILL NO. 49                                                                                                            
                                                                                                                                
     "An Act allowing appropriations to the civil legal                                                                         
     services fund from court filing fees."                                                                                     
                                                                                                                                
9:17:21 AM                                                                                                                    
                                                                                                                                
GENEVIEVE WOJTUSIK, STAFF,  SENATOR LESIL MCGUIRE, discussed                                                                    
the intent of  the legislation. She explained  that the bill                                                                    
was  designed to  help fund  civil legal  services for  low-                                                                    
income  Alaskans, and  provide a  mechanism for  funding the                                                                    
Alaska  Legal Services  Corporation (ALSC)  by allowing  the                                                                    
legislature to appropriate  up to 25 percent  of filing fees                                                                    
paid to the  Alaska Court System during  the previous fiscal                                                                    
year. She  recounted that the  corporation was  a non-profit                                                                    
charitable 501(c)(3)  established in  1966 to  address civil                                                                    
legal aid need  of low-income Alaskans; and  was funded from                                                                    
a  variety  of  state,  federal, and  private  sources.  She                                                                    
specified  that the  bill had  a zero  fiscal note  from the                                                                    
court system.                                                                                                                   
                                                                                                                                
Co-Chair  MacKinnon referred  to an  analysis on  the fiscal                                                                    
note,  and   remarked  that   currently  the   court  system                                                                    
collected  a   little  over  $2  million,   with  an  annual                                                                    
appropriation to the legal services  fund of up to $550,000.                                                                    
Ms. Wojtusik  reported that the  court system  had collected                                                                    
$2.252 million  the previous year,  with up to a  quarter of                                                                    
that  amount ($563,225)  allowed to  be appropriated  to the                                                                    
fund.                                                                                                                           
                                                                                                                                
Co-Chair MacKinnon asked if the  legislature already had the                                                                    
ability  to appropriate  the funds.  Ms. Wojtusik  responded                                                                    
that legislature currently gave  money through the operating                                                                    
budget,  but did  not actually  designate funds  every year,                                                                    
which the bill would allow for.                                                                                                 
                                                                                                                                
9:19:36 AM                                                                                                                    
                                                                                                                                
Vice-Chair Micciche clarified that SB  49 did not require an                                                                    
appropriation,  but   rather  allowed  the   legislature  to                                                                    
appropriate  up  to  25  percent of  the  filing  fees.  Ms.                                                                    
Wojtusik concurred.                                                                                                             
                                                                                                                                
Vice-Chair Micciche  suggested that  when the state  was not                                                                    
in a  compromised budget environment that  it currently was,                                                                    
it could appropriate funds to the legal services fund.                                                                          
                                                                                                                                
Vice-Chair Micciche  expressed concern  that the  funds were                                                                    
used to fund abortions.                                                                                                         
                                                                                                                                
NICOLE NELSON, DIRECTOR, ALASKA  LEGAL SERVICES, stated that                                                                    
federal  law   prohibited  any  funds  coming   through  the                                                                    
organization to be used  to fund abortion-related litigation                                                                    
or  other  controversial  areas such  as  clients  who  were                                                                    
undocumented or incarcerated.                                                                                                   
                                                                                                                                
9:21:49 AM                                                                                                                    
                                                                                                                                
Senator  Dunleavy asked  for a  description of  the services                                                                    
provided by  ALSC. Ms. Nelson  related that ALSC was  a non-                                                                    
profit law firm  that provided free legal  aid to low-income                                                                    
Alaskans  statewide.  She  added  that  the  firm  had  been                                                                    
operating for 45  years through 11 offices  located in urban                                                                    
and  rural  communities;  striving  to  serve  clients  with                                                                    
critical  unmet  civil  legal needs.  Ms.  Nelson  described                                                                    
typical scenarios under which  individuals might access ALSC                                                                    
services:   domestic  abuse/child   custody  issues;   child                                                                    
guardianship   rights   for  grandparents;   and   veteran's                                                                    
benefits  disputes. She  furthered  that  in criminal  cases                                                                    
individuals  were  guaranteed  a  court-appointed  attorney;                                                                    
whereas in the civil realm  there was no such guarantee. She                                                                    
specified  that ALSC  served about  2,500 people  each year,                                                                    
which ended up directly impacted about 6,000 families.                                                                          
                                                                                                                                
Senator Dunleavy asked how the  bill would benefit ALSC. Ms.                                                                    
Nelson explained that currently  the organization was forced                                                                    
to turn  away half  of the  individuals seeking  legal help.                                                                    
The legislation  would help  with the  unmet legal  needs of                                                                    
those who  were turned  away due to  lack of  resources. She                                                                    
discussed  the  cost  efficiency  of  the  organization  and                                                                    
commented  that 80  percent of  cases were  resolved without                                                                    
having to go  to court, with the average  case costing $600.                                                                    
She  pointed out  that the  attorneys were  paid well  below                                                                    
market rate, and first year  attorney was paid about $42,000                                                                    
a  year.  She  mentioned leveraging  funds  through  donated                                                                    
office space and volunteers.                                                                                                    
                                                                                                                                
9:25:32 AM                                                                                                                    
                                                                                                                                
Senator Bishop asked  how many attorneys were  on staff. Ms.                                                                    
Nelson  stated that  there were  approximately 25  attorneys                                                                    
statewide, as well as a  large network of pro bono attorneys                                                                    
who volunteered their time.                                                                                                     
                                                                                                                                
Co-Chair  MacKinnon  asked if  there  was  a reason  not  to                                                                    
change the requirement to require  volunteer service as part                                                                    
of  licensing   renewal  for   attorneys.  Ms.   Nelson  was                                                                    
uncertain  if  she knew  how  to  answer the  question,  and                                                                    
advised that  the Alaska  Bar Association  was in  charge of                                                                    
licensing requirement.  She added that attorneys  were asked                                                                    
by  the association  to  volunteer 50  hours  per year,  and                                                                    
there were many attorneys who  were very generous with their                                                                    
time.                                                                                                                           
                                                                                                                                
9:26:37 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon OPENED public testimony.                                                                                     
                                                                                                                                
Senator  Olson   asked  if  ALSC   only  dealt   with  civil                                                                    
litigation rather  than criminal cases. Ms.  Nelson answered                                                                    
in the affirmative.                                                                                                             
                                                                                                                                
Senator  Olson  asked  if  ALSC  dealt  with  mediation  and                                                                    
arbitration. Ms.  Nelson reported that ALSC  would help with                                                                    
mediation and arbitration if it was appropriate.                                                                                
                                                                                                                                
9:27:06 AM                                                                                                                    
                                                                                                                                
MARIE DARLIN,  COORDINATOR, AMERICAN ASSOCIATION  OF RETIRED                                                                    
PERSONS   (AARP),   JUNEAU,   spoke  in   support   of   the                                                                    
legislation.  She thought  the legislation  provided a  more                                                                    
stable funding  mechanism for ALSC,  which was  an important                                                                    
part  of  the  services  needed by  seniors  who  would  not                                                                    
otherwise  have access  to legal  support.  She stated  that                                                                    
without such  access, low-income seniors were  vulnerable to                                                                    
many things that could affect  their lives, and were subject                                                                    
to  all  kinds  of  unfair or  exploitative  practices.  She                                                                    
referred  to an  increasing  senior  population, and  stated                                                                    
that AARP fully supported the bill.                                                                                             
                                                                                                                                
9:29:26 AM                                                                                                                    
                                                                                                                                
LINDA  TOWARAK,  NATIVE  VILLAGE OF  UNALAKLEET,  UNALAKLEET                                                                    
(via  teleconference), spoke  in  support of  the bill.  She                                                                    
discussed  use  of  ALSC  services  by  Unalakleet  seniors;                                                                    
recounting that 11 community  elders had received assistance                                                                    
with wills. She  specified that 6 of the  11 individuals who                                                                    
received  assistance  were  military veterans,  and  4  were                                                                    
widows of veterans. She expressed  appreciation for the work                                                                    
of ALSC.                                                                                                                        
                                                                                                                                
9:31:34 AM                                                                                                                    
                                                                                                                                
MONINA  WILLIS,  ANCHORAGE  (via teleconference),  spoke  in                                                                    
support  of the  legislation.  She  related past  experience                                                                    
utilizing the  services of ALSC including  assistance with a                                                                    
domestic  violence  protective  order and  a  child  custody                                                                    
case. She emphasized  the impact that having  access to free                                                                    
legal  services had  made  upon  her life  and  that of  her                                                                    
daughter.                                                                                                                       
                                                                                                                                
9:33:32 AM                                                                                                                    
                                                                                                                                
MELBA BIGGS, SELF, ANCHORAGE  (via teleconference), spoke in                                                                    
support  of the  bill.  She related  that  she had  accessed                                                                    
legal services  from ALSC during  a child custody  case. She                                                                    
shared  her personal  financial details  and emphasized  the                                                                    
importance of the free legal assistance.                                                                                        
                                                                                                                                
9:35:06 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
                                                                                                                                
SB  49  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
9:35:14 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:35:43 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
SENATE BILL NO. 32                                                                                                            
                                                                                                                                
     "An Act relating to the sale of timber on state land;                                                                      
     and providing for an effective date."                                                                                      
                                                                                                                                
9:36:10 AM                                                                                                                    
                                                                                                                                
CHRIS MAISCH, DIRECTOR, DIVISION  OF FORESTRY, DEPARTMENT OF                                                                    
NATURAL  RESOURCES (DNR),  discussed the  legislation, which                                                                    
proposed to make  changes to timber sale  authorities in the                                                                    
Division of Forestry.                                                                                                           
                                                                                                                                
Mr. Maisch spoke to a document entitled "Briefing Paper: SB                                                                     
32 CS(RES), Negotiated Timber Sales" (copy on file.) He                                                                         
reviewed the state timber sale types on page 2:                                                                                 
                                                                                                                                
     Competitive sales (AS 38.05.120)                                                                                           
        · No volume limit within allowable cut                                                                                  
        · No duration limit                                                                                                     
        · Requires  best  interest  finding,  advertisement,                                                                    
          and public notice                                                                                                     
        · Price  determined by  auction, but  not less  than                                                                    
          base price                                                                                                            
        · This  is   the  standard   sale  type.     Use  of                                                                    
          negotiated sales is limited to the specific                                                                           
          conditions listed below.                                                                                              
                                                                                                                                
                                                                                                                                
     Small negotiated sales (AS 38.05.115)                                                                                      
        · Less  than  or  500thousand board  feet  (This  is                                                                    
          roughly equivalent to 20 acres in SE, 125 acres                                                                       
          in SC and 80 acres in the Interior)                                                                                   
        · Less than or                                                                                                          
        · 1 year in duration.                                                                                                   
        · No more than one per purchaser each year.                                                                             
        · No  best   interest  finding,   advertisement,  or                                                                    
          public notice required.                                                                                               
        · Price  determined by  fair market  value appraisal                                                                    
          and base price (11 AAC 71.092).                                                                                       
                                                                                                                                
     Negotiated sales for value added product (AS                                                                               
     38.05.123)                                                                                                                 
        · Up to10  million board feet per  year (100 million                                                                    
          board feet total over 10 years).                                                                                      
        · Up to 10 years.                                                                                                       
        · Requires best interest finding and public notice.                                                                     
        · Restricted  to  use  for  local  manufacture  that                                                                    
          includes "high value-added" wood products. By                                                                         
          statute, wood chips are defined as a "value-                                                                          
          added" product rather than a "high value-added"                                                                       
          product. Therefore, sales to supply a chip                                                                            
          operation  would  not  qualify for  this  type  of                                                                    
          sale.                                                                                                                 
        · Operators  must submit  a business  plan/operating                                                                    
          plan  for  their  processing facilities  prior  to                                                                    
          negotiating  a  .123 sale.  Processing  facilities                                                                    
          must  be operational  prior  to harvesting  timber                                                                    
          sold under this authority.                                                                                            
        · Requires best interest finding and public notice.                                                                     
        · State  typically   uses  RFP  process   to  select                                                                    
          winning  proposal,   especially  where   there  is                                                                    
         competitive interest in state resources.                                                                               
                                                                                                                                
     Negotiated sales for areas with high unemployment (AS                                                                      
     38.05.118)                                                                                                                 
        · No volume limit.                                                                                                      
        · Up to 25 years with reappraisal every five years.                                                                     
        · Limited  to  areas  with unemployment  >  135%  of                                                                    
          statewide average.                                                                                                    
        · This  sale  type  does not  apply  in  the  Mat-Su                                                                    
          Borough  or Fairbanks  North Star  Borough because                                                                    
          their   unemployment  rates   are  close   to  the                                                                    
          statewide average).                                                                                                   
        · Area   must   have   underutilized   manufacturing                                                                    
          capacity.                                                                                                             
        · Must have  underutilized allowable cut  or salvage                                                                    
          timber.                                                                                                               
        · Requires best interest finding and public notice.                                                                     
        · Price  determined by  fair market  value appraisal                                                                    
          and base price (11 AAC 71.092).                                                                                       
                                                                                                                                
     Personal use sales (AS 38.05.850)                                                                                          
        · Not for commercial use.                                                                                               
        · No  best   interest  finding,   advertisement,  or                                                                    
          public notice required.                                                                                               
        · Up  to10 thousand  board  feet  per purchaser  per                                                                    
          year.                                                                                                                 
        · Price  determined by  fair market  value appraisal                                                                    
          and base price (11 AAC 71.092).                                                                                       
                                                                                                                                
Mr.  Maisch qualified  that competitive  authority was  used                                                                    
most  frequently and  comprised about  90 percent  of timber                                                                    
sales. The  sales required  competitive bidding  with outcry                                                                    
or sealed bids,  and when there was  competitive interest it                                                                    
gained the  best price. He  continued that all of  the other                                                                    
methods were forms of negotiated sales.                                                                                         
                                                                                                                                
Mr.  Maisch  discussed   negotiated  sales  for  value-added                                                                    
products,   designed    to   encourage    high   value-added                                                                    
manufacturing.  He  pointed out  the  example  of the  wood-                                                                    
pellet mill in Fairbanks, with  which DNR was in the process                                                                    
of doing two  5-year sales. He added that  the definition of                                                                    
"high value wood  products" was covered both  in statute and                                                                    
in regulation, and  could be updated with the  advent of new                                                                    
technology and products.                                                                                                        
                                                                                                                                
9:39:10 AM                                                                                                                    
                                                                                                                                
Mr. Maisch  discussed the authority  in AS  38.05.118, which                                                                    
allowed  for negotiation  of sales  for  up to  25 years  in                                                                    
length. He noted that three  criteria that the bill proposed                                                                    
to strike from  the current law were found  in subsection C,                                                                    
and had  to do with specific  items that had to  be in place                                                                    
to use  the authority: a  high level of unemployment  in the                                                                    
area  of the  sale; an  excess  allowable cut  in the  state                                                                    
forest or  geographic area  of the  timber sale;  and excess                                                                    
manufacturing capacity at the  mill that would negotiate the                                                                    
sale. He  explained that it  was currently difficult  to use                                                                    
the authority  statewide. In  Fairbanks, Kenai,  and Mat-Su,                                                                    
the high level of unemployment criteria was not met.                                                                            
                                                                                                                                
Mr.  Maisch  discussed  the  log  export  and  manufacturing                                                                    
components of  the industry,  explaining the  state's policy                                                                    
of leveraging  timber sales to support  jobs in communities.                                                                    
He related that the state  was currently almost at the limit                                                                    
for  the  allowable  timber cutting  in  southern  Southeast                                                                    
Alaska,  which was  the original  target area  of the  bill.                                                                    
When  the limit  was  reached (in  approximately two  years)                                                                    
only  the  competitive  authority  would  allow  for  timber                                                                    
sales.  He  furthered that  the  round  log segment  of  the                                                                    
timber  industry  could  outbid  the domestic  part  of  the                                                                    
industry, which  would put  the state  at a  disadvantage in                                                                    
supporting communities and manufacturing in the area.                                                                           
                                                                                                                                
Mr. Maisch  discussed Section 1  and Section 2 of  the bill,                                                                    
reading from the sectional analysis:                                                                                            
                                                                                                                                
     Section 1 - New Subsection                                                                                                 
     Amends AS  38.05.110 to  clarify that  the commissioner                                                                    
     determines which of the applicable  sale methods is the                                                                    
     most  appropriate  authority  to use  for  each  timber                                                                    
     sale.                                                                                                                      
                                                                                                                                
     Section 2 - Amendment to (a).                                                                                              
     Amends AS  38.05.118 to clarify that  negotiated timber                                                                    
     sales under  this section  do not  have to  comply with                                                                    
     the restrictions  on negotiated  sales in  AS 38.05.115                                                                    
     and the  timber sale  procedures for  competitive sales                                                                    
     in AS  38.05.120, but they  do have to comply  with the                                                                    
     requirements for  Forest Land Use Plans  (AS 38.05.112)                                                                    
     and   Five-year   Schedules   of   Timber   Sales   (AS                                                                    
     38.05.113). This  exempts sales under .118  from limits                                                                    
     on size and  duration up to 25 years,  but ensures that                                                                    
     large  negotiated  sales  are developed  with  adequate                                                                    
     notice  to   the  industry  and  general   public,  and                                                                    
     necessary  site-specific  design.   This  section  also                                                                    
     clarifies that  DNR may negotiate  sales to  wood fiber                                                                    
     users, including biomass  energy producers, in addition                                                                    
     to wood product manufacturers.                                                                                             
                                                                                                                                
Mr. Maisch clarified  that under state law, there  must be a                                                                    
best  interest finding  to allow  public process  for timber                                                                    
sales,  including a  civil  process  following any  appeals.                                                                    
Section  2  of the  bill  also  added  wood fiber  users  to                                                                    
allowable sales,  specifically to  address the needs  of the                                                                    
biomass industry in the state,  particularly in the Interior                                                                    
where  several   schools  used   wood  chips   for  heating.                                                                    
Additionally,  there  was a  pellet  mill  in Fairbanks  and                                                                    
compressed fuel logs being made  in several locations in the                                                                    
state.                                                                                                                          
                                                                                                                                
9:43:03 AM                                                                                                                    
                                                                                                                                
Mr.  Maisch stated  that there  was significant  support for                                                                    
the  legislation, and  referred  to  letters from  Southeast                                                                    
Conference,  the  Alaska  Forest Association,  the  Resource                                                                    
Development Council, and the Board of Forestry.                                                                                 
                                                                                                                                
Senator Dunleavy  related that he had  discussed timber sale                                                                    
contract duration  with individuals who were  logging in the                                                                    
Interior.  He wondered  if the  short contract  duration had                                                                    
prevented loggers  from lending and  capitalizing (borrowing                                                                    
capital for needed  equipment) for the project,  or if there                                                                    
were  other  such issues  related  to  contract length.  Mr.                                                                    
Maisch expressed  that the situation  would depend  upon the                                                                    
sale authority  being used; all DNR  timber sale authorities                                                                    
(especially competitive  sales under AS 38.05.120)  could be                                                                    
any length of time, and  were typically three and five years                                                                    
in length.  He explained  that when an  entity was  making a                                                                    
fairly  large investment  in manufacturing,  15 to  20 years                                                                    
was needed  to fully  amortize the investment.  He furthered                                                                    
that  such   considerations  were  the  rationale   for  the                                                                    
differing sale  authorities; and  through the  best interest                                                                    
finding  process  the  department   would  select  the  most                                                                    
appropriate  method.  He  added  that  typically  DNR  would                                                                    
default toward the  competitive process, so as to  not be in                                                                    
the position  of selecting the  proposer to  negotiate with.                                                                    
He thought  that in cases  like Southeast Alaska,  where DNR                                                                    
was  trying  to  encourage  manufacturing,  the  competitive                                                                    
process was the appropriate authority to use.                                                                                   
                                                                                                                                
9:45:05 AM                                                                                                                    
                                                                                                                                
Senator  Bishop  asked what  the  typical  timeline was  for                                                                    
negotiating a  timber sale.  Mr. Maisch  estimated 12  to 16                                                                    
months was a typical time frame  for a timber sale on longer                                                                    
term project. He  conveyed that there was a  specific set of                                                                    
steps  required;   including  preliminary  and   final  best                                                                    
interest findings, as  well as a forest land use  plan to be                                                                    
completed after the decision was  made to make the sale. The                                                                    
land use plan would  contain site-specific details and could                                                                    
be  appealed  by  commenters.   He  mentioned  the  recently                                                                    
concluded sale  process with the  pellet mill  in Fairbanks,                                                                    
and estimated that  it had taken approximately  one year. He                                                                    
furthered that  the project had  been fairly  ambitious, had                                                                    
two 5-year back  to back timber sales under  the value added                                                                    
timber authority,  and there  had been  competitive interest                                                                    
in the area to work through.                                                                                                    
                                                                                                                                
Senator Hoffman asked if there  were any timber sales on the                                                                    
Kuskokwim  River  on state  land.  Mr.  Maisch related  that                                                                    
there  had been  biomass interest  from rural  communities -                                                                    
both  chipping   and  round-wood  operations   which  fueled                                                                    
boilers in  rural areas.  He continued  that there  had been                                                                    
timber sales  on state  land on the  Kuskokwim River  in the                                                                    
past, and  the department  continued to respond  to requests                                                                    
for timber in that part of the state.                                                                                           
                                                                                                                                
Senator Hoffman  asked if the  legislation would  affect any                                                                    
of  the  sales in  the  area.  Mr.  Maisch stated  that  the                                                                    
legislation would  not negatively affect the  ability of DNR                                                                    
to offer  sales in the area.  He thought it was  likely that                                                                    
the department  would use  the competitive  sales authority,                                                                    
but  it would  examine the  circumstances to  make the  best                                                                    
decision within  the preliminary  best interest  process. He                                                                    
added that such decisions were  made by the commissioner and                                                                    
delegated to the state forester.                                                                                                
                                                                                                                                
9:48:10 AM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon clarified  that the  "meat" of  the bill                                                                    
was on page 2, line 1 - repealing AS 38.05.118c:                                                                                
                                                                                                                                
     (c)  A sale  of timber  may  not be  negotiated by  the                                                                    
     commissioner  under this  section except  on a  finding                                                                    
     that,  within an  area proximate  to the  business site                                                                    
     that  the manufacturer  may  economically serve,  there                                                                    
     exists, or will exist within two years,                                                                                    
                                                                                                                                
Mr.  Maisch concurred  that the  section Co-Chair  MacKinnon                                                                    
referred to was  where most of the change  occurred, and the                                                                    
rest of the bill was clarification language.                                                                                    
                                                                                                                                
Co-Chair MacKinnon  remarked that the appeal  section of the                                                                    
bill  was  where  the  committee   should  be  focused.  She                                                                    
referred to current statutes  (specifically AS 38.05.115) on                                                                    
timber  sales   and  suggested   there  was   an  antiquated                                                                    
reference  to "board  feet". She  wondered  if the  language                                                                    
needed  to  be  updated.   Mr.  Maisch  concurred  that  the                                                                    
language referenced  an older measurement term  "MBM", which                                                                    
stood  for thousand-board  measure.  He  explained that  the                                                                    
term  was  interchangeable  with  the  current  wood  volume                                                                    
measurement  terminology of  MBF, which  stood for  thousand                                                                    
board feet. He  was not sure that the  change was necessary,                                                                    
and thought  it would  be important  to examine  whether the                                                                    
term appeared in other areas in statute or regulation.                                                                          
                                                                                                                                
9:50:40 AM                                                                                                                    
                                                                                                                                
RON  ARVIN,  MEMBER,   MATANUSKA-SUSITNA  BOROUGH  ASSEMBLY,                                                                    
spoke in  favor of  the bill. He  related that  the assembly                                                                    
had  taken  up  the  subject  in the  form  of  a  unanimous                                                                    
resolution  of  support  after   robust  discussion  on  the                                                                    
matter.  He  shared  that  he   was  a  former  logger  from                                                                    
Southeast   Alaska,   and   discussed  the   importance   of                                                                    
supporting  the  timber  industry.  He  spoke  of  the  many                                                                    
logging companies that were no longer in business.                                                                              
                                                                                                                                
9:52:04 AM                                                                                                                    
                                                                                                                                
ERIN  MCLARNON, EXECUTIVE  DIRECTOR,  WORKING FOREST  GROUP,                                                                    
ANCHORAGE  (via teleconference),  spoke  in  support of  the                                                                    
bill. She  relayed that  she was  a member  of the  Board of                                                                    
Forestry, and  thought the legislation  would enable  DNR to                                                                    
better respond  to the economic and  geographic realities of                                                                    
the forest  product industry. She discussed  biomass energy,                                                                    
and  demand  for  state  timber.  She  thought  the  25-year                                                                    
negotiated timber sale provision  was crucial for medium and                                                                    
large biomass  energy projects  to get  off the  ground. She                                                                    
mentioned  the timber  sale methods  available  to DNR,  and                                                                    
highlighted  the  importance to  the  state  and wood  fiber                                                                    
users.                                                                                                                          
                                                                                                                                
9:53:18 AM                                                                                                                    
                                                                                                                                
JAMES MACKOVJAK, SELF,  GUSTAVUS (via teleconference), spoke                                                                    
in opposition to  the bill. He expressed  preference for the                                                                    
value-added timber sale authority  and related that he lived                                                                    
in  a house  built  almost  completely of  wood  cut in  the                                                                    
Tongass  National  Forest.  To   build  the  house,  he  had                                                                    
purchased wood from  eight small sawmills in  the region. He                                                                    
wondered  who  would  benefit   from  the  legislation,  and                                                                    
questioned  that there  was no  discussion of  building wood                                                                    
processing facilities.  He thought  that long-term  sales of                                                                    
up to 25 years conveyed  special rights to a public resource                                                                    
to  the  exclusion  of  others.  He  was  concerned  that  a                                                                    
negotiated 25-year  sale would ignore the  market, and price                                                                    
redetermination by  bureaucrats rather than the  open market                                                                    
was objectionable. He thought  that limiting timber sales to                                                                    
5 years and  selling through a bidding process  was the only                                                                    
way to  ensure transparency  and ensure the  public received                                                                    
fair value for the resource.                                                                                                    
                                                                                                                                
9:54:57 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:57:28 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
STEVE  GIBSON, SELF,  HOMER (via  teleconference), spoke  in                                                                    
opposition to the  bill. He related that he had  been in the                                                                    
wood  milling  business  for the  previous  35  years  using                                                                    
primarily  state timber.  He  clarified that  he  was not  a                                                                    
direct  purchaser of  the  timber, but  his  supplier was  a                                                                    
customer  of  the  state.  He was  alarmed  about  the  long                                                                    
duration of a 25-year  negotiated timber sale, and expressed                                                                    
concern that there could be  deals with DNR that were overly                                                                    
advantageous   for  some   manufacturers   or  loggers.   He                                                                    
recognized  that there  was a  great deal  of infrastructure                                                                    
required to solidify the supply  line of timber, but did not                                                                    
consider  that a  25-year contract  would  allow for  enough                                                                    
private  enterprise  to bid  on  regularly.  He thought  the                                                                    
extended contract  length would set up  a lumber utilization                                                                    
structure that had not been productive in the past.                                                                             
                                                                                                                                
10:00:09 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
                                                                                                                                
Co-Chair MacKinnon asked Mr. Maisch  to address the concerns                                                                    
of the previous testifiers  who spoke regarding the proposed                                                                    
25-year contract  length and fears  of lack  of transparency                                                                    
in  the   process.  Mr.  Maisch  clarified   that  the  bill                                                                    
specified the  contract would  be up to  25 years,  and they                                                                    
would  select  length  of  time  necessary  to  achieve  the                                                                    
objectives  during the  best interest  findings process.  He                                                                    
reviewed the  process; which would start  with a preliminary                                                                    
best  interest finding  to include  the  proposed method  of                                                                    
sale,  length of  contract, and  rationale. The  preliminary                                                                    
finding would  also inform the  reasoning for the  length of                                                                    
the proposed  sale, and would  be open for  inter-agency and                                                                    
public comment.  The department would consider  the comments                                                                    
and  incorporate any  changes into  the final  best interest                                                                    
finding, which would  be the decision document  to affirm or                                                                    
deny a  sale. Following the final  decision, individuals had                                                                    
administrative  appeal rights  and  finally  the ability  to                                                                    
pursue a  civil case when  appeal rights were  exhausted. He                                                                    
referred back to the forest  land use plan, also open inter-                                                                    
agency  and public  review and  comment. He  added that  the                                                                    
most often discussed item in such plans was road access.                                                                        
                                                                                                                                
Mr.  Maisch addressed  the testifier's  concern regarding  a                                                                    
large  negotiated sale  and subsequent  export  of logs.  He                                                                    
related that the statute  specified a manufacturer (on-shore                                                                    
domestic processor) and the authority  could not be used for                                                                    
a sale for round-log export.  He furthered that the only way                                                                    
to  do a  sale for  export was  through the  competitive bid                                                                    
process which would be an open market competition.                                                                              
                                                                                                                                
10:03:03 AM                                                                                                                   
                                                                                                                                
Senator  Bishop thought  that the  bill was  consistent with                                                                    
the  governor's  recent  comments regarding  getting  value-                                                                    
added for  the state's resources. Mr.  Maisch concurred, and                                                                    
remarked that the governor and  the administration wanted to                                                                    
generate the maximum amount of  jobs out of each timber sale                                                                    
in the state,  and the bill was  consistent with encouraging                                                                    
domestic manufacturing.                                                                                                         
                                                                                                                                
Senator Bishop  spoke about preventative  forestry practices                                                                    
and thought  the legislation  might aid  DNR in  meeting its                                                                    
mission and  increase fire safety around  rural communities.                                                                    
Mr.  Maisch  reflected  that there  were  increased  biomass                                                                    
activities statewide, and used  the example of the community                                                                    
of Tok,  which has  been investing  in the  biomass industry                                                                    
for  several   years.  He  recounted   that  DNR   had  made                                                                    
significant progress  in reducing dangerous fuels  that were                                                                    
close to  communities, which in turn  helped with mitigation                                                                    
of wildland fires.                                                                                                              
                                                                                                                                
10:05:07 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon  asked if DNR  already had  the authority                                                                    
to issue  timber sale contracts  up to 25 years.  Mr. Maisch                                                                    
answered in  the affirmative, and  specified that  there was                                                                    
no time limit on the competitive sale statute.                                                                                  
                                                                                                                                
SB  32  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
10:05:32 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon relayed the afternoon agenda.                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:06:40 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:06 a.m.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
SB33 Sponsor Statement.pdf SFIN 3/25/2015 9:00:00 AM
SB 33
SB 49 civil legal services fund sheet.pdf SFIN 3/25/2015 9:00:00 AM
SB 49
SB 49 Letter of Support-Alaska Mental Health Board.pdf SFIN 3/25/2015 9:00:00 AM
SB 49
SB 49 Letter of Support-Council on Disabilities.pdf SFIN 3/25/2015 9:00:00 AM
SB 49
SB 49 Letter of Support-VCI.jpg SFIN 3/25/2015 9:00:00 AM
SB 49
SB 49 Sponsor Statement. ALSC.pdf SFIN 3/25/2015 9:00:00 AM
SB 49
SB49 Letter of Support-ACOA.pdf SFIN 3/25/2015 9:00:00 AM
SB 49
SB 32 AFA Support Letter.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB 32 Briefing Paper.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB 32 CSSB32 Supporting Documents- Resolution.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB 32 Letter of Support 2.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB 32 Sectional Analysis.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB 32 Sponsor Statement.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB 32 Written Testimony - Knight.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB32 Letter of Support 1.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB32 Letter of Support 3.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB32 Summary of Changes.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB32 Supporting Documents- Letter of Support Superior Pellets.pdf SFIN 3/25/2015 9:00:00 AM
SB 32
SB 33 Public Testimony Myers - opposition.pdf SFIN 3/25/2015 9:00:00 AM
SB 33