Legislature(2017 - 2018)SENATE FINANCE 532

05/11/2018 10:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 119 AIDEA:DIVIDEND;INCOME;VALUE;PROJECTS;TAX TELECONFERENCED
Moved SCS CSHB 119(FIN) Out of Committee
+= HB 79 OMNIBUS WORKERS' COMPENSATION TELECONFERENCED
Moved SCS CSHB 79(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                       May 11, 2018                                                                                             
                         6:28 p.m.                                                                                              
                                                                                                                                
6:28:56 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  MacKinnon  called  the  Senate  Finance  Committee                                                                    
meeting to order at 6:28 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Click Bishop, Vice-Chair                                                                                                
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Gary Stevens                                                                                                            
Senator Natasha von Imhof                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None.                                                                                                                           
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Juli  Lucky, Staff,  Senator Anna  MacKinnon; Heidi  Drygas,                                                                    
Commissioner,    Department   of    Labor   and    Workforce                                                                    
Development;  Fred Parady,  Deputy Commissioner,  Department                                                                    
of  Commerce,  Community,  and  Economic  Development;  Juli                                                                    
Lucky,  Staff, Senator  Anna  MacKinnon; Heather  Carpenter,                                                                    
Staff,  Senator  Pete  Kelly; Representative  John  Lincoln;                                                                    
Representative  Dan  Ortiz;  Rynnieva Moss,  Staff,  Senator                                                                    
John  Coghill; Senator  John  Coghill; Representative  Chuck                                                                    
Kopp; Darwin  Peterson, Legislative Director, Office  of the                                                                    
Governor.                                                                                                                       
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Glenn  Brown,   Attorney  for  Ketchikan   Gateway  Borough,                                                                    
Ketchikan.                                                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
CSHB 79(FIN)                                                                                                                    
     OMNIBUS WORKERS' COMPENSATION                                                                                              
                                                                                                                                
     SCS CSHB 79(FIN)  was REPORTED out of  committee with a                                                                    
     "do  pass"  recommendation  and with  three  previously                                                                    
     published fiscal impact  notes: FN5(ADM), FN7(LWF), and                                                                    
     FN8(LWF).                                                                                                                  
                                                                                                                                
CSHB 119(FIN)                                                                                                                   
     AIDEA:DIVIDEND;INCOME;VALUE;PROJECTS;TAX                                                                                   
                                                                                                                                
     SCS CSHB 119(FIN) was REPORTED  out of committee with a                                                                    
     "do  pass"  recommendation  and with  three  previously                                                                    
     published  fiscal   notes,  one  with   fiscal  impact:                                                                    
     FN4(EED/Fund Cap);  and two  zero notes:  FN2(CED), and                                                                    
     FN3(EED).                                                                                                                  
                                                                                                                                
CS FOR HOUSE BILL NO. 79(FIN)                                                                                                 
                                                                                                                                
     "An Act relating to  workers' compensation; relating to                                                                    
     the second  injury fund; relating  to service  fees and                                                                    
     civil penalties  for the  workers' safety  programs and                                                                    
     the  workers'  compensation  program; relating  to  the                                                                    
     liability of business entities  and certain persons for                                                                    
     payment  of workers'  compensation  benefits and  civil                                                                    
     penalties;    relating   to    civil   penalties    for                                                                    
     underinsuring or failing to  insure or provide security                                                                    
     for  workers'   compensation  liability;   relating  to                                                                    
     preauthorization   and  timely   payment  for   medical                                                                    
     treatment and  services provided to  injured employees;                                                                    
     relating  to incorporation  of  reference materials  in                                                                    
     workers'   compensation    regulations;   relating   to                                                                    
     proceedings  before  the Alaska  Workers'  Compensation                                                                    
     Board; relating  to the  authorization of  the workers'                                                                    
     compensation benefits  guaranty fund  to claim  a lien;                                                                    
     excluding   independent   contractors   from   workers'                                                                    
     compensation  coverage; establishing  the circumstances                                                                    
     under  which  certain nonemployee  executive  corporate                                                                    
     officers  and members  of  limited liability  companies                                                                    
     may obtain workers'  compensation coverage; relating to                                                                    
     the  duties of  injured employees  to report  income or                                                                    
     work;  relating to  misclassification of  employees and                                                                    
     deceptive  leasing;  defining 'employee';  relating  to                                                                    
     the  Alaska Workers'  Compensation Board's  approval of                                                                    
     attorney fees in a  settlement agreement; and providing                                                                    
     for an effective date."                                                                                                    
                                                                                                                                
                                                                                                                                
6:30:00 PM                                                                                                                    
                                                                                                                                
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute   for  CSHB   79(FIN),  Work   Draft  30-GH1789\E                                                                    
(Wallace, 5/11/18).                                                                                                             
                                                                                                                                
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
                                                                                                                                
JULI  LUCKY, STAFF,  SENATOR ANNA  MACKINNON, discussed  the                                                                    
changes to the bill. She  explained that most of the changes                                                                    
to the bill were removals.  She referenced an Explanation of                                                                    
Changes document  (copy on file),  and read sections  of the                                                                    
document:                                                                                                                       
                                                                                                                                
     The Senate Finance CS contains the sections of HB 79                                                                       
     that:                                                                                                                      
          ? Ensure Adequate Funding                                                                                             
          ? Reduce Administrative Costs                                                                                         
          ? Define Independent Contractors                                                                                      
                                                                                                                                
     The   SCS   also   creates   a   Legislative   Workers'                                                                    
     Compensation  Working  Group  to   act  as  an  interim                                                                    
     committee to continue work  and develop new legislation                                                                    
     for   consideration  during   the  31st   Alaska  State                                                                    
     Legislature.                                                                                                               
                                                                                                                                
Ms. Lucky noted  that the new Section 23 of  the bill, which                                                                    
formed the Legislative  Workers' Compensation Working Group,                                                                    
could be found on page 10,  Line 12 of the bill. She relayed                                                                    
that the committee had been  concerned about making sure the                                                                    
bill was balanced and ensuring  there was legislative intent                                                                    
to discuss  the issues over  the interim. The  working group                                                                    
would  be comprised  of six  members, with  three from  each                                                                    
body. The  members would consult with  stakeholders from the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED); the  Department of Labor and  Workforce Development                                                                    
(DLWD);  the Medical  Services  Review Committee;  organized                                                                    
labor;  school   district  administrators;  and   the  state                                                                    
business community.                                                                                                             
                                                                                                                                
Ms.  Lucky  continued  discussing  the  legislative  working                                                                    
group proposed in  the bill. The goal of the  group would be                                                                    
to recommend  improvements to the laws  relating to workers'                                                                    
compensation and put forth a report  that would be due on or                                                                    
before  December 1,  2018.  The intent  was  to ensure  that                                                                    
there   was  adequate   time  for   review  and   put  forth                                                                    
legislation  in front  of the  next  legislature. She  noted                                                                    
that  the  Explanation  of  Changes  document  showed  items                                                                    
removed  from   the  bill  with   a  strikethrough,   and  a                                                                    
renumbering of those items that would remain in the bill.                                                                       
                                                                                                                                
Ms.  Lucky   relayed  that  she   had  conferred   with  the                                                                    
department and there was no change to the fiscal notes.                                                                         
                                                                                                                                
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further  OBJECTION,  it was  so  ordered.  The CS  for  CSHB                                                                    
79(FIN) was ADOPTED.                                                                                                            
                                                                                                                                
6:34:06 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:38:58 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  MacKinnon informed  that the  Committee Substitute                                                                    
(CS) for CSHB 79(FIN) was posted online.                                                                                        
                                                                                                                                
Co-Chair MacKinnon thanked the  commissioner of DLWD for all                                                                    
of the  work that  had been  done on  the issue  of workers'                                                                    
compensation. She explained  that the CS was  a trimmed down                                                                    
version  of  the bill.  The  committee  had identified  many                                                                    
issues that  were important to  workers; and had  learned of                                                                    
issues to  balance for  employers before  accommodating some                                                                    
of the  administration's requests.  She understood  that the                                                                    
CS  was  not  the  complete   package  as  proposed  by  the                                                                    
administration.                                                                                                                 
                                                                                                                                
6:40:58 PM                                                                                                                    
                                                                                                                                
HEIDI   DRYGAS,  COMMISSIONER,   DEPARTMENT  OF   LABOR  AND                                                                    
WORKFORCE   DEVELOPMENT,    thanked   the    committee   for                                                                    
consideration  of the  bill. She  described the  bill as  an                                                                    
"efficiencies bill."  She mentioned  provisions kept  in the                                                                    
CS   including  funding   for  the   Division  of   Workers'                                                                    
Compensation,  electronic  filing,  and  the  definition  of                                                                    
independent contractor.  She stated that there  were several                                                                    
things left out of the CS  that would make the division work                                                                    
better  and  hoped  the  items would  be  addressed  by  the                                                                    
working group over the subsequent summer.                                                                                       
                                                                                                                                
Commissioner Drygas  remarked that there had  been a lengthy                                                                    
conversation  between labor  and  industry about  addressing                                                                    
substantive  benefits  in  the   interim.  She  thought  the                                                                    
stakeholders  were   the  best   groups  (rather   than  the                                                                    
department) to address  the issues. She stated  that she was                                                                    
eager to see  how the working group came  together, and that                                                                    
the  department was  ready to  assist in  the endeavor.  She                                                                    
supported the  bill with the  understanding that  there were                                                                    
sections the department had not supported removing.                                                                             
                                                                                                                                
Co-Chair MacKinnon  indicated that the  committee understood                                                                    
the  sentiments   of  the  department.  She   discussed  the                                                                    
challenge  of passing  legislation. She  considered that  if                                                                    
elected officials  could hear both  sides of  the proposals,                                                                    
progress  would   be  made.  She  referenced   the  work  of                                                                    
Representative   Josephson  in   his  proposed   legislation                                                                    
pertaining  to   damages  for  workers'   compensation.  She                                                                    
emphasized the importance of understanding  all sides of the                                                                    
issue.                                                                                                                          
                                                                                                                                
6:44:30 PM                                                                                                                    
                                                                                                                                
Senator Olson  referenced the working  group as  proposed in                                                                    
the  bill.  He  was   pessimistic  about  making  monumental                                                                    
changes in  age-old conflicts such as  workers' compensation                                                                    
and wondered how to make progress.                                                                                              
                                                                                                                                
Commissioner Drygas  stated that  the bill language  did not                                                                    
come from the  department, but she had reviewed  it. She was                                                                    
aware that it  was an election year and  thought work during                                                                    
the  interim  might be  difficult.  She  referenced a  group                                                                    
called  The Workers  Compensation  Ad  Hoc Committee,  which                                                                    
included stakeholders  from organized labor and  industry to                                                                    
discuss   substantive  benefits   and  reform   to  workers'                                                                    
compensation. She  understood that the committee  had worked                                                                    
very  well  together for  many  years.  She hoped  that  the                                                                    
committee  could be  revived. She  qualified that  the group                                                                    
came from  the stakeholders rather from  the department. She                                                                    
noted that it  had been 18 years  since substantive benefits                                                                    
had been increased for workers.                                                                                                 
                                                                                                                                
Co-Chair MacKinnon  stated that  the concept of  the working                                                                    
group had  come from  her office.  She referenced  a working                                                                    
group  on  reducing  sexual  assault   and  noted  that  the                                                                    
legislature    had    since   implemented    every    single                                                                    
recommendation.    She    referenced    implementation    of                                                                    
recommendations from  an oil and  gas working group.  The CS                                                                    
proposed for the legislature  to bring together stakeholders                                                                    
to  share perspectives  and  subsequently elected  officials                                                                    
would  implement  the  recommendations. She  emphasized  the                                                                    
need for accord.                                                                                                                
                                                                                                                                
Senator  Olson  understood that  the  ad  hoc committee  was                                                                    
frustrated after its recommendations were not taken.                                                                            
                                                                                                                                
Commissioner  Drygas could  not recall  the past  actions of                                                                    
the  ad hoc  committee and  outcome of  its recommendations.                                                                    
She suspected that  the work of the ad  hoc committee halted                                                                    
because legislation  it worked on  was passed over  in favor                                                                    
of  legislation  that  did  not  include  stakeholders.  She                                                                    
reiterated  that  the events  in  question  took place  long                                                                    
before her tenure in the department.                                                                                            
                                                                                                                                
6:49:24 PM                                                                                                                    
                                                                                                                                
Vice-Chair Bishop  discussed the fiscal notes.  He addressed                                                                    
FN 5 from the Department  of Administration, a fiscal impact                                                                    
note that  showed a cost  of $40,000  in the first  year and                                                                    
$12,900 in the out years.  He read from the Analysis section                                                                    
on page 2 of the fiscal note:                                                                                                   
                                                                                                                                
     This bill will have a  financial impact on the Division                                                                    
     of Risk Management (DRM).                                                                                                  
                                                                                                                                
     This bill  will clarify, amend, add  and repeal several                                                                    
     statutes  within  workers' compensation.  Changes  that                                                                    
     will  impact  DRM  include  reporting  changes  to  the                                                                    
     Alaska Workers Compensation Board.  The Board will move                                                                    
     from  a  manual process  to  an  Electronic Data  Input                                                                    
     (EDI) process,  with changes  to the  appropriate forms                                                                    
     used for reporting.                                                                                                        
                                                                                                                                
     DRM  anticipates a  first year  cost of  $40.0 for  the                                                                    
     initial  implementation,   including  changes   to  the                                                                    
     software  and costs  related  to  submitting forms  via                                                                    
     EDI. Costs are  estimated at $12.9 annually  in the out                                                                    
     years. Costs  will be absorbed by  agencies through the                                                                    
     annual rate process.                                                                                                       
                                                                                                                                
Vice-Chair  Bishop addressed  FN 8  from DLWD,  which was  a                                                                    
fiscal impact note. There was  an in increase the percent of                                                                    
fees  deposited into  the Workers'  Safety and  Compensation                                                                    
Administrative Account (WSCAA). The  increase did not add to                                                                    
any premiums from any employers  but was built into what was                                                                    
collected by the Division of Insurance.                                                                                         
                                                                                                                                
Vice-Chair Bishop addressed FN 7 from DLWD, which was a                                                                         
fiscal impact note. He read from the fiscal note Analysis                                                                       
on page 2:                                                                                                                      
                                                                                                                                
     This  legislation will  sunset the  Second Injury  Fund                                                                    
     (AS  23.30.040). Future  claim  payments  will only  be                                                                    
     made on  those claims  accepted by the  effective date.                                                                    
     There will  be no reduction  in the near future  in the                                                                    
     staffing  required  to  process  these  claim  payments                                                                    
     because it  will likely  take decades  for the  Fund to                                                                    
     pay  these   ongoing  claim   obligations.  Ninety-five                                                                  
     percent of  these claims  are categorized  as permanent                                                                    
     total disability (PTD) benefits.  PTD benefits are paid                                                                    
     until disability ends or until death.                                                                                      
                                                                                                                                
     The  reduced Fund  liability reflected  in this  fiscal                                                                    
     note  assumes  the  average  age  of  the  claimant  at                                                                    
     closure would  be 80 years  old and two to  three cases                                                                    
     would  be closed  per  year  due to  the  death of  the                                                                    
     claimants.  The  reduced   revenue  reflected  in  this                                                                    
     fiscal note  is because employer and  insurance carrier                                                                    
     contribution  rates  will  decline  over  time  as  the                                                                    
     Fund's   liability  is   exhausted  as   prescribed  in                                                                    
     statute.                                                                                                                   
                                                                                                                                
     Revenue to the  Second Injury Fund (SIF)  comes from an                                                                    
     annual  assessment on  Workers' Compensation  insurance                                                                    
     providers   and   self-insured  employers   through   a                                                                  
     contribution  rate that  changes  every  year based  on                                                                    
     statute designed to ensure  sufficient revenue to cover                                                                    
     expenses.  Insurance companies  are able  to pass  this                                                                    
     assessment  on to  employers through  premiums. As  SIF                                                                    
     claims  decline   costs  to  insurance   providers  and                                                                    
     self-insured  employers  will  decline,  including  the                                                                  
     State   of    Alaska   through   the    Department   of                                                                    
     Administration's Risk Management division.                                                                                 
                                                                                                                                
     In FY2017,  the State of Alaska  comprised 11.5 percent                                                                    
     of  total SIF  revenue  ($343,150  of $2,984,507).  The                                                                    
     State of  Alaska could  save as much  as $46,000  if it                                                                    
     represented  11.5   percent  of  the   projected  total                                                                    
     savings of  $400,000 starting FY2020, and  this savings                                                                    
     would grow  incrementally in the following  years. This                                                                    
     cost savings  will be passed  on to all  state agencies                                                                    
     through decreased  personal services benefit  costs and                                                                    
     included  in  future  year budget  salary  and  benefit                                                                    
     adjustments.                                                                                                               
                                                                                                                                
Vice-Chair  Bishop noted  that  the reason  that the  Second                                                                    
Injury Fund would sunset was due  to the fact that it was no                                                                    
longer legal to ask an employee if they had a disability.                                                                       
                                                                                                                                
6:54:31 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:54:57 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair Bishop  MOVED to report  SCS CSHB 79(FIN)  out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
SCS CSHB  79(FIN) was REPORTED  out of committee with  a "do                                                                    
pass"  recommendation and  with  three previously  published                                                                    
fiscal impact notes: FN5(ADM), FN7(LWF), and FN8(LWF).                                                                          
                                                                                                                                
6:55:36 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:58:04 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
CS FOR HOUSE BILL NO. 119(FIN)                                                                                                
                                                                                                                                
     "An  Act   relating  to  a  mandatory   exemption  from                                                                    
     municipal  property taxes  for  certain  assets of  the                                                                    
     Alaska  Industrial  Development and  Export  Authority;                                                                    
     relating  to  dividends   from  the  Alaska  Industrial                                                                    
     Development  and  Export  Authority;  relating  to  the                                                                    
     meanings of 'mark-to-market  fair value,' 'net income,'                                                                    
     'project   or  development,'   and  'unrestricted   net                                                                    
     income'   for  purposes   of   the  Alaska   Industrial                                                                    
     Development and Export Authority;  and providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
6:58:04 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon informed  that the  committee had  heard                                                                    
the companion bill for HB 119 (SB 57) on March 2, 2017.                                                                         
                                                                                                                                
6:58:29 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:58:43 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair MacKinnon  asked for an  overview of the  bill from                                                                    
the perspective of the department.                                                                                              
                                                                                                                                
FRED  PARADY, DEPUTY  COMMISSIONER, DEPARTMENT  OF COMMERCE,                                                                    
COMMUNITY, AND  ECONOMIC DEVELOPMENT, explained that  he had                                                                    
served  as   the  commissioner's  delegate  to   the  Alaska                                                                    
Industrial Development and Export  Authority (AIDEA) and the                                                                    
Alaska Energy Authority  (AEA) for the previous  three and a                                                                    
half years. He  thought that the bill had  major pieces that                                                                    
were familiar.  He thought  the bill  specifically addressed                                                                    
concerns that  AIDEA had with  two issues in  accounting for                                                                    
purposes of  dividend calculation for payment  to the state.                                                                    
The first  issue pertained to market  valuation adjustments.                                                                    
Under  current   Governmental  Accounting   Standards  Board                                                                    
(GASB) rules  it was  required to estimate  the value  of an                                                                    
asset  on  a  particular  day, which  inflated  or  deflated                                                                    
valuation    and   thereby    impacted   AIDEA's    dividend                                                                    
calculation. He  stated that there was  a solution contained                                                                    
in  the bill  would  take the  non-cash  adjustments out  of                                                                    
income calculations  before dividend calculation  to reflect                                                                    
real neat income.                                                                                                               
                                                                                                                                
Mr. Parady  discussed the second  problem he  had identified                                                                    
with accounting,  which was an  AIDEA dividend  penalty that                                                                    
was  triggered   by  non-AIDEA-based  project   funding.  He                                                                    
detailed that  in 2002, the legislature  instructed AIDEA to                                                                    
disregard  project  funding   from  non-AIDEA  sources  when                                                                    
calculating the  dividend so as to  not artificially inflate                                                                    
net   income.   The   legislation  did   not   account   for                                                                    
circumstances when a project using  non-AIDEA funds might be                                                                    
cancelled  and   expenditures  were  written   off.  Without                                                                    
correction,  the  periodic  adjustments  could  artificially                                                                    
decrease net  income. The solution  was the same as  for the                                                                    
first problem,  which was  to back  out losses  for projects                                                                    
funded  from  non-AIDEA  funding  and  return  the  dividend                                                                    
calculation to real net income.                                                                                                 
                                                                                                                                
Mr. Parady informed that AIDEA  had paid the state dividends                                                                    
of approximately $380  million to since the  early 1990s and                                                                    
was working strongly to continue  to do so. He asserted that                                                                    
passage of  the bill would  make the yearly  dividend amount                                                                    
more predictable for planning purposes.                                                                                         
                                                                                                                                
7:01:53 PM                                                                                                                    
                                                                                                                                
Mr.  Parady addressed  the topic  of the  reestablishment of                                                                    
the Red  Dog Port and transportation  valuation exemption as                                                                    
proposed  by  the  bill. The  language  would  clarify  some                                                                    
reinstitutes  the property  tax  exemption for  the Red  Dog                                                                    
Port  and the  DeLong  Mountain  Transportation System.  The                                                                    
exemption  was  implemented  for the  structure  during  the                                                                    
early  2000s  but had  sunset  in  2017. The  language  also                                                                    
clarified  that the  exemption  applied  to the  AIDEA-owned                                                                    
port. It  had been  assumed as  such, but  there had  been a                                                                    
reinterpretation.  He wanted  to  ensure that  the mine  and                                                                    
port  were  treated  as  a   unit  and  were  excluded  from                                                                    
taxation. He pointed out the  retroactivity of the exemption                                                                    
to November 2017.                                                                                                               
                                                                                                                                
Mr.  Parady continued  discussing the  bill. He  stated that                                                                    
there was  a revised fiscal note  for the bill that  did not                                                                    
show  an increase  in state  education aid  for the  Red Dog                                                                    
Mine, because the  funds were already contained  in the base                                                                    
education  budget and  would continue  to be  so. He  stated                                                                    
that although  the Northwest Arctic  Borough did not  levy a                                                                    
property  tax;  Teck,  Alaska  (Red  Dog  Mine  owner)  made                                                                    
negotiated  payments  through a  payment  in  lieu of  taxes                                                                    
(PILT)  agreement. The  PILT had  been renegotiated  and was                                                                    
increasing to  between $14 million  and $18 million.  In the                                                                    
current  year, the  borough appropriated  $4 million  to its                                                                    
school   district,  which   exceeded   any  required   local                                                                    
contribution.                                                                                                                   
                                                                                                                                
Mr.  Parady addressed  the issue  of the  Ketchikan Shipyard                                                                    
valuation  exemption.  The  bill   would  clarify  that  the                                                                    
property tax  exemption applied  to the  Ketchikan Shipyard,                                                                    
which was owned by AIDEA.  From 1997 until 2012 the shipyard                                                                    
was  considered  to be  covered  by  the existing  statutory                                                                    
property  tax exemption;  but in  2012 the  state assessor's                                                                    
office ruled that possessory interest  of the agreement with                                                                    
AIDEA  did  not qualify  for  the  mandatory exemption.  The                                                                    
effect of  the required local contribution  under the change                                                                    
was  that  Ketchikan  Gateway Borough  had  been  paying  an                                                                    
increased local  contribution to  education for a  number of                                                                    
years, including  the shipyard.  The increase  would require                                                                    
approximately   $79,000  in   increased  education   funding                                                                    
starting in FY 20.                                                                                                              
                                                                                                                                
Mr.  Parady asked  Co-Chair MacKinnon  if he  should address                                                                    
the  Interior   Energy  Project  (IEP)  bond   exception  as                                                                    
proposed in the CS.                                                                                                             
                                                                                                                                
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute  for   CSHB  119(FIN),  Work   Draft  30-GH1677\U                                                                    
(Laffen/Nauman, 5/11/18).                                                                                                       
                                                                                                                                
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
                                                                                                                                
Co-Chair  MacKinnon  explained  that other  bills  had  been                                                                    
attached  to  the  bill.  She wanted  to  consider  all  the                                                                    
proposed elements of the bill at once.                                                                                          
                                                                                                                                
7:06:00 PM                                                                                                                    
                                                                                                                                
JULI  LUCKY, STAFF,  SENATOR  ANNA  MACKINNON, addressed  an                                                                    
Explanation of Changes document (copy on file):                                                                                 
                                                                                                                                
     Adds language to AS 42.40.350  (a) that states that the                                                                    
     Alaska  Railroad Corporation  does  not have  authority                                                                    
     over  any   right,  title,  or  interest   in  property                                                                    
     transferred under  this subsection that was  not vested                                                                    
     in the United States at  the time of transfer. [Section                                                                    
     3]                                                                                                                         
                                                                                                                                
     Requires   notification  of   adjacent  landowners   by                                                                    
     registered mail  as part of  the public  notice process                                                                    
     before  the  Alaska  Railroad  Corporation  sells  land                                                                    
     under AS 42.40.352. [Section 5]                                                                                            
                                                                                                                                
     Adds language to AS 42.40.410  that states that land or                                                                    
     interest in land that is  not conclusively owned by the                                                                    
     United States at the time  of transfer is not available                                                                    
     and  does not  satisfy the  exception from  legislative                                                                    
     approval under AS 42.40.2085 (5)(C). [Section 6]                                                                           
                                                                                                                                
     Repeals   unnecessary   and  unused   bond   authority.                                                                    
     [Sections 7, 8, 13 & 14]                                                                                                   
                                                                                                                                
     Extends the  allowable time  for the  Alaska Industrial                                                                    
     Development and Energy Authority                                                                                           
     (AIDEA) to issue bonds for  the Interior Energy Project                                                                    
     (IEP) to June 30, 2023. [Section 12]                                                                                       
                                                                                                                                
     Authorizes transfer and exchange of real property from                                                                     
     the Alaska Railroad Corporation to various entities.                                                                       
     [Sections 15  22]                                                                                                          
                                                                                                                                
     Requires the Alaska Railroad Corporation to annually                                                                       
     report on the land transfers and exchanges.                                                                                
     [Section 23]                                                                                                               
                                                                                                                                
Ms. Lucky  pointed out that Section  1 of the bill  had been                                                                    
in HB  118 and  pertained to  the tax  assessment previously                                                                    
discussed by Mr. Parady. She  detailed that Section 2 of the                                                                    
bill  contained  the sunset  for  the  same provisions.  The                                                                    
effective date  of Section 2,  which was included in  HB 119                                                                    
as it  came to  the committee, would  be November  30, 2027.                                                                    
She described  that Section  3 of the  bill was  a technical                                                                    
change and  was made necessary  by the inclusion  of Section                                                                    
6. She  furthered that Section  4 was a new  section sourced                                                                    
from a  bill related to  railroad land disposals and  had to                                                                    
do with railroad ownership for corporations.                                                                                    
                                                                                                                                
Ms. Lucky continued to discuss  the changes to the bill. She                                                                    
hoped that Section 5 would be  familiar to members; it was a                                                                    
provision  put into  the  bill  regarding railroad  property                                                                    
transfers. It  required notification to  adjacent landowners                                                                    
when  the railroad  sold property.  Section 6  was also  new                                                                    
language  regarding  the interest  in  land.  Section 7  and                                                                    
Section 8  removed some bond  authority and had been  in the                                                                    
bill  related  to  railroad property  disposals.  Section  9                                                                    
correlated to Section  3 of the bill and related  to mark to                                                                    
market calculations. She continued  that Section 10 was also                                                                    
in HB  119 as it came  to the committee; as  well as Section                                                                    
11,  which was  concerned with  the definitions  of mark  to                                                                    
market and project and developments.                                                                                            
                                                                                                                                
Ms. Lucky  stated that  Section 12  of the  bill, concerning                                                                    
the IEP,  which extended authorization bonds  until June 30,                                                                    
2023.  If the  bill were  not to  pass, authorization  would                                                                    
sunset on June  30, 2018. Section 13 and  Section 14 removed                                                                    
the unneeded  bond authority  that had  been a  provision of                                                                    
the bill the  committee passed that was  related to railroad                                                                    
land transfers.                                                                                                                 
                                                                                                                                
Ms. Lucky elaborated that when  the committee had passed the                                                                    
bill  related  to  railroad  land  transfers,  it  contained                                                                    
authority for  the Alaska Railroad Corporation  to sell land                                                                    
without  legislative approval.  Changes  in  the other  body                                                                    
proposed  to  give  the corporation  authority  for  certain                                                                    
projects rather than a blanket  authority. She detailed that                                                                    
Sections  15 through  Section 22  all  pertained to  various                                                                    
projects for which the corporation  had wanted to dispose of                                                                    
the associated real estate.                                                                                                     
                                                                                                                                
Ms. Lucky  explained that Section  23 contained  a reporting                                                                    
requirement, which  had been added to  provide understanding                                                                    
for the  legislature regarding  selling land  for commercial                                                                    
interest.  Section  24  was   a  retroactivity  section  and                                                                    
referred  back to  Section 1.  Section 25  was an  immediate                                                                    
effective date for the rest of  the bill, and Section 26 was                                                                    
a delayed effective date of  November 30, 2027 for Section 2                                                                    
(the repeal of the tax assessment sections).                                                                                    
                                                                                                                                
7:12:09 PM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further OBJECTION, it was so ordered.  The CS for HB 119 was                                                                    
ADOPTED.                                                                                                                        
                                                                                                                                
Mr.  Parady stated  that the  IEP  bond authorization  would                                                                    
extend  the bond  authorization for  a five-year  period. It                                                                    
allowed for  AIDEA (in working  in conjunction  locally with                                                                    
the Interior  Gas Utility) to  access bond  financing. There                                                                    
was  no  other  change  to  the  bond  financing  previously                                                                    
authorized. He  noted that construction  on the  project was                                                                    
underway,  and  the construction  of  the  5 million  gallon                                                                    
liquified natural gas storage tank was ongoing.                                                                                 
                                                                                                                                
HEATHER CARPENTER, STAFF, SENATOR  PETE KELLY, informed that                                                                    
the IEP provision  of the bill in Section  12 (originally in                                                                    
SB 125) would  extend the allowable time for  AIDEA to issue                                                                    
bonds  for the  energy project  by  five years  to June  30,                                                                    
2023.  She  reminded  that  the   committee  had  heard  the                                                                    
associated legislation  on Feb 12,  2018; and had  passed it                                                                    
out of committee  on February 16, 2018. The  bill had passed                                                                    
the Senate unanimously.                                                                                                         
                                                                                                                                
Ms. Carpenter continued  to discuss Section 12  of the bill.                                                                    
She  reminded  that  the interior  suffered  from  the  most                                                                    
volatile  energy costs  of any  community  on the  Railbelt.                                                                    
Cold  winters  and  high  energy   costs  resulted  in  many                                                                    
households  that burned  wood  and  coal, which  exacerbated                                                                    
high  energy costs  and  air quality  issues.  There was  an                                                                    
existing gas  distribution system in Fairbanks  that did not                                                                    
serve  more  than  1,200  customers. There  was  a  lack  of                                                                    
sufficient local LNG storage that  prevented the addition of                                                                    
new residential customers. The IEP  was developed to address                                                                    
the issues  and expand availability of  clean and affordable                                                                    
natural gas in  the greater Fairbanks and  North Pole areas.                                                                    
She discussed  the funding for  the IEP, which had  all been                                                                    
spent or obligated.                                                                                                             
                                                                                                                                
Ms. Carpenter  detailed that the  AIDEA team  had diligently                                                                    
deployed   its   resources   but  needed   to   extend   the                                                                    
authorization  for  the  bond component  of  financing.  The                                                                    
bonding  was necessary  for  increasing production  capacity                                                                    
for the  LNG plant at  Point McKenzie and  further expansion                                                                    
of  the  gas  distribution  network  in  the  Interior.  She                                                                    
discussed accomplishments by the  IEP, including the passage                                                                    
of the Property Assessed  Clean Energy Project. She detailed                                                                    
that on its present schedule,  the project would provide its                                                                    
first expanded  gas availability was expected  in the winter                                                                    
of 2019. Further expansion of  converting homes to gas would                                                                    
occur  in the  construction season  of 2020.  She emphasized                                                                    
that extending the sunset for  AIDEA's bonding authority for                                                                    
IEP would ensure continued success.                                                                                             
                                                                                                                                
7:18:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHN  LINCOLN, spoke  to  Section  1 of  the                                                                    
bill,  which  clarified  and  reauthorized  a  property  tax                                                                    
assessment exemption for  the DeLong Mountain Transportation                                                                    
System. The  exemption was implemented in  the early 2000's,                                                                    
was reauthorized in 2012, and  had expired in November 2017.                                                                    
He relayed that the Northwest  Arctic Borough did not have a                                                                    
property tax, and most likely  would not for some time. Much                                                                    
of the  property in the  borough was tax exempt  per federal                                                                    
law.  The   region  struggled  with   high  costs   and  low                                                                    
employment. He  stated that  a property  tax would  create a                                                                    
significant  inequity  in  the  community.  He  stated  that                                                                    
despite not having  a property tax, the  state partially set                                                                    
the   state's   funding   for    a   school   district   and                                                                    
municipality's  local  minimum   contribution  based  on  an                                                                    
estimate of what a hypothetical  property tax would generate                                                                    
in revenue.                                                                                                                     
                                                                                                                                
Representative Lincoln  continued to  address Section  1. He                                                                    
stated  that  the  transportation system  was  a  tax-exempt                                                                    
state-owned  asset   could  not   be  taxed   despite  AIDEA                                                                    
receiving millions  of dollars per  year for the use  of the                                                                    
facility.   He  detailed   that  the   exemption  would   be                                                                    
retroactive to  November 2017 to provide  seamless extension                                                                    
for  the facility.  The fiscal  note did  not show  a change                                                                    
relative to  the transportation  system, because  funds were                                                                    
already  budgeted and  expected to  be maintained  in future                                                                    
years.                                                                                                                          
                                                                                                                                
7:21:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAN  ORTIZ, spoke to  Section 1 of  the bill,                                                                    
which  pertained  to  the Ketchikan  Shipyard.  The  section                                                                    
would clarify  the question of  whether the  perceived value                                                                    
of Vigor  Alaska's long-term operating agreement  for use of                                                                    
the AIDEA-owned  tax-exempt property  should be  included in                                                                    
the state's  calculation of the Ketchikan  Gateway Borough's                                                                    
minimum  local contribution  to schools.  He referenced  Mr.                                                                    
Parady's  explanation  of when  AIDEA  took  control of  the                                                                    
shipyard in 1997,  there had been an exemption as  a part of                                                                    
the  agreement  for  AIDEA's ownership.  The  exemption  had                                                                    
lasted  until 2012,  at which  time state  assessor's put  a                                                                    
different  calculation  forward.  He stated  that  the  bill                                                                    
provision  reestablished the  exemption, based  on the  idea                                                                    
that it  was state-owned  property and  part of  the initial                                                                    
operating agreement when AIDEA took ownership in 1997.                                                                          
                                                                                                                                
Representative  Ortiz  continued  discussing  the  Ketchikan                                                                    
Shipyard,  which  serviced  vessels for  the  Alaska  Marine                                                                    
Highway.  He  detailed that  AIDEA  owned  the shipyard  and                                                                    
Vigor  Alaska  operated the  facility  based  on a  ten-year                                                                    
contract  with  AIDEA that  expired  in  2025. The  shipyard                                                                    
employed 226  workers at  an average  salary of  $80,000 per                                                                    
year. He asserted that the  shipyard served the needs of the                                                                    
state and did  a good job of recruiting  workers from around                                                                    
the  state.  He   thought  the  facility  did   a  good  job                                                                    
cooperating  with other  entities  on workforce  development                                                                    
and  recruitment  including  Northern  Industrial  Training,                                                                    
Alaska  Native  corporations,  high  schools,  and  regional                                                                    
training centers.                                                                                                               
                                                                                                                                
7:24:54 PM                                                                                                                    
                                                                                                                                
GLENN  BROWN,   ATTORNEY  FOR  KETCHIKAN   GATEWAY  BOROUGH,                                                                    
KETCHIKAN (via  teleconference), added  to the  testimony of                                                                    
Representative   Ortiz.  He   stated   that  the   operating                                                                    
agreement in place had been  negotiated in 2005 was premised                                                                    
on an  up to 30-year  term, with the understanding  that the                                                                    
mandatory exemption was  in place. It was only  by virtue of                                                                    
a change in  the state assessor's view of  the shipyard that                                                                    
brought about  the full assessment  value increasing  by $74                                                                    
million.  He stated  that the  change impacted  the required                                                                    
local contribution significantly. At  the time of the change                                                                    
the  impact was  $196,000 per  year. Through  litigation and                                                                    
settlement  the  impact  was $79,000  per  year;  which  was                                                                    
reflected in the fiscal impact statement.                                                                                       
                                                                                                                                
Mr. Brown  asserted that the commonality  between the Delong                                                                    
Mountain  Transportation   System  and  the   shipyard  were                                                                    
poignant, in that they were  both under operating agreements                                                                    
rather than  simply leased by  AIDEA. Further,  the facility                                                                    
in Ketchikan primarily served as  a maintenance facility for                                                                    
the Alaska  Marine Highway  and had  significant competition                                                                    
from shipyards father  south. It was only  recently that the                                                                    
shipyard began  to produce profits.  He asked  the committee                                                                    
to consider the exemption.                                                                                                      
                                                                                                                                
7:28:01 PM                                                                                                                    
                                                                                                                                
RYNNIEVA  MOSS,  STAFF,   SENATOR  JOHN  COGHILL,  addressed                                                                    
Section 15 of  the bill, which pertained  to properties sold                                                                    
by the  Alaska Railroad Corporation.  Section 15 was  a land                                                                    
swap and  exchange of  cash (depending  on the  valuation of                                                                    
both properties) between the  Eklutna Native Corporation and                                                                    
the railroad corporation. She  explained that Eklutna wanted                                                                    
to  acquire property  owned  by the  railroad  to develop  a                                                                    
gravel  excavation   operation  and  other   development  in                                                                    
conjunction with adjacent land  already owned by Eklutna. In                                                                    
return, there  would be a  swap of land in  Birchwood, which                                                                    
was adjacent to land already owned by the railroad.                                                                             
                                                                                                                                
Ms. Moss explained  that Section 16 related  to the railroad                                                                    
selling approximately  20 acres of land  to the Municipality                                                                    
of  Anchorage for  $1.5 million,  and the  termination of  a                                                                    
102-acre  long-term  lease,  freeing  up over  80  acres  to                                                                    
revert  back  to  the  railroad's  operations  at  the  port                                                                    
facility. The  municipality was looking  to obtain  title to                                                                    
allow  for expansion  of the  port  facilities. She  relayed                                                                    
that Section 17  of the bill sold land to  the Usibelli Coal                                                                    
Mine.  In the  early  days  of the  mine,  housing had  been                                                                    
provided for  workers at  the mine camp.  As the  camp grew,                                                                    
the federal  government told  the mine  to move  workers and                                                                    
workers' families from  the mine property. Most  of the land                                                                    
in  the surrounding  area  was owned  by  the railroad.  The                                                                    
railroad  had leased  property  to  provide residential  and                                                                    
related  infrastructure including  schools, churches,  and a                                                                    
community   center.   Usibelli   subleased   the   land   to                                                                    
homeowners;  as well  as organizations  such  as the  Denali                                                                    
Borough,  churches,  and  day cares.  If  Usibelli  had  the                                                                    
opportunity to purchase  the land, it would  then go through                                                                    
a  process  to  make  the lots  available  for  purchase  by                                                                    
current subleases.                                                                                                              
                                                                                                                                
Ms. Moss addressed  Section 18 of the  bill, which pertained                                                                    
to  a  two-phase subdivision  across  the  Chena River  from                                                                    
Carlson  Center. Phase  1 had  already been  subdivided, and                                                                    
included  the  development  of   23  lots  into  residential                                                                    
housing.  She   continued  that  Section  19   of  the  bill                                                                    
pertained to development of an  area of almost 30 acres near                                                                    
Otto Lake. Alaska Tourism Development  had proposed to spend                                                                    
$30  million constructing  a  tourist  lodge and  associated                                                                    
resort facilities. Section  20 of the bill  was the approval                                                                    
of a transfer of rural  property to NeighborWorks, Alaska; a                                                                    
non-profit organization that sought  to make improvements to                                                                    
its housing. The organization  was having difficulty getting                                                                    
financing due to leasing rather than owning the property.                                                                       
                                                                                                                                
Ms.  Moss  addressed  Section  21   and  Section  22,  which                                                                    
pertained  to  approval  of  land  sales  in  the  Anchorage                                                                    
terminal  reserve. The  approval had  not been  solicited by                                                                    
the  railroad,  however  Lynden had  expressed  interest  in                                                                    
negotiating  with the  railroad  to  purchase the  long-term                                                                    
leases it had with the Anchorage reserve.                                                                                       
                                                                                                                                
7:32:56 PM                                                                                                                    
                                                                                                                                
Vice-Chair Bishop asked if Ms.  Moss' remarks were regarding                                                                    
a lease purchase of land in Anchorage.                                                                                          
                                                                                                                                
Ms. Moss answered in the affirmative.                                                                                           
                                                                                                                                
Co-Chair MacKinnon  noted that legislative approval  did not                                                                    
force the railroad to sell land it did not choose to sell.                                                                      
                                                                                                                                
Ms. Moss answered in the affirmative.                                                                                           
                                                                                                                                
Co-Chair MacKinnon  asked if all  the different  parcels for                                                                    
which sales were in question were included in the bill.                                                                         
                                                                                                                                
Ms. Moss  explained that there  were five parcels  for which                                                                    
the railroad  was interested in negotiating  sales. The last                                                                    
three parcels  were those that  lessees had  been interested                                                                    
in purchasing.                                                                                                                  
                                                                                                                                
Senator  von   Imhof  observed  that  the   bill  previously                                                                    
considered had  non-identification of  exact parcels,  and a                                                                    
three-year  sunset.  She  wondered   if  there  was  a  time                                                                    
limitation in the current bill.                                                                                                 
                                                                                                                                
Ms. Moss answered  in the negative. She stated  that five of                                                                    
the projects  had been in  a long-term negotiation  with the                                                                    
lessees, with the exception of  Chena Landing, which did not                                                                    
have a  lessee. The land was  owned by the railroad,  and it                                                                    
had been subdivided and developed.                                                                                              
                                                                                                                                
Co-Chair  MacKinnon stated  that the  Senate (in  a previous                                                                    
bill  it  had  passed)  had authorized  a  general  purchase                                                                    
agreement  with  parameters  to allow  the  railroad  to  go                                                                    
forward with  three years to do  a test run of  the proposed                                                                    
land changes.  The House had  not accepted the  structure of                                                                    
the  proposal   and  had  proposed  to   approve  individual                                                                    
projects.  She  relayed that  the  language  in HB  119  was                                                                    
closer to what had been proposed by the House.                                                                                  
                                                                                                                                
Ms.  Moss  referenced  Ms.  Lucky's  testimony  regarding  a                                                                    
provision of the bill that  eliminated bonding authority and                                                                    
approved public notice.                                                                                                         
                                                                                                                                
Co-Chair  MacKinnon  referenced   approved  notification  to                                                                    
adjacent land owners.                                                                                                           
                                                                                                                                
SENATOR JOHN COGHILL, reminded the  committee that there was                                                                    
a  reporting mechanism  in the  bill that  would inform  the                                                                    
legislature.                                                                                                                    
                                                                                                                                
7:37:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHUCK KOPP, spoke to  Section 4 and Section 6                                                                    
of  the bill.  He  recounted that  two  years previously  he                                                                    
became aware that there were  some contested land use issues                                                                    
involving   the   railroad   right-of-way   extending   from                                                                    
Fairbanks to Seward.  The issues in question  all focused on                                                                    
sections of the  right-of-way that had to  do with homestead                                                                    
patent properties that had gone  from the federal government                                                                    
into  state hands.  Questions had  been raised  because land                                                                    
owners started  receiving invoices for sections  of lawn and                                                                    
gardens  that  were  in  the   right  of  way.  Land  owners                                                                    
questioned  the  invoice  as homestead  patents  showed  the                                                                    
railroad was  reserved a surface easement  (right-of-way for                                                                    
rail, telegraph, and telephone) but nothing more.                                                                               
                                                                                                                                
Representative Kopp continued  discussing the contested land                                                                    
use. Properties  were affected  in South  Anchorage, Midtown                                                                    
Anchorage, and  up through Eagle River.  The railroad agreed                                                                    
that  there  was a  question  of  legality and  had  stopped                                                                    
invoicing people.  He had realized  that there was  no long-                                                                    
term legislative  oversight to  say the railroad  should not                                                                    
claim  an  interest  in  the  right-of-way  if  the  federal                                                                    
government never owned the interest  to give to the state in                                                                    
the first place.                                                                                                                
                                                                                                                                
He had researched  the matter with public  lands lawyers and                                                                    
the  Alaska  Congressional  Delegation, he  had  received  a                                                                    
letter  highlighting the  legal opinion  that the  state was                                                                    
correct in  trying to pursue  a correction. He  referenced a                                                                    
letter  from United  States Congressman  Don Young  (copy on                                                                    
file).  The letter  suggested there  was  a clear  direction                                                                    
from  congress to  dutifully recognize  basic tenets  of due                                                                    
process.  the congressmen  suggested that  there had  been a                                                                    
failure  by  agencies  which  had  resulted  in  a  lack  of                                                                    
clarity. He read from the letter:                                                                                               
                                                                                                                                
     House  Joint Resolution  38 outlines  what can  only be                                                                    
     described as  a failure  by the agencies  to understand                                                                    
     clear   direction  from   Congress  and   to  dutifully                                                                    
     recognize  basic  tenets  of  due  process,  needlessly                                                                    
     resulting  in a  cloud  on title  for  both the  Alaska                                                                    
     Railroad  and its  neighbors along  the right-  of-way.                                                                    
     There  is  no  way  a  bill  quietly  annexing  private                                                                    
     property  rights,  especially  without  any  notice  or                                                                    
     compensation, would  have passed Congress in  1982. You                                                                    
     only have  to read the  plain language of ARTA  to know                                                                    
     that-the  transfer of  rail  properties  of the  Alaska                                                                    
     Railroad" over  privately-owned land only  included the                                                                    
     "Federal  interest"  in  those lands.  If  the  federal                                                                    
     government did not  own it, it was not  included in the                                                                    
     transfer. There is no  canon of statutory construction,                                                                    
     or  even  common-sense  reading, that  could  argue  an                                                                    
     unconstitutional taking of  private property rights was                                                                    
     the intent of Congress.                                                                                                    
                                                                                                                                
     The intent  was to transfer the  federally owned Alaska                                                                    
     Railroad's existing assets, which  can be clearly noted                                                                    
     throughout  the Act  itself and  the record.  Where the                                                                    
     underlying  estate was  federally owned,  as well,  the                                                                    
     issue became how  much of an interest to  pass along in                                                                    
     the  right-of-way over  those lands,  which is  spelled                                                                    
     out in  the Act.  The federal government  obviously had                                                                    
     sufficient  proprietary  interest  in the  transfer  of                                                                    
     rail  properties -  defined in  ARTA as  federally held                                                                    
     rights, titles, and interests -  which were directed to                                                                    
     be  transferred;  but,  nowhere in  ARTA  did  Congress                                                                    
     authorize  the  transfer  of privately  owned  property                                                                    
     interests, nor  could it do  so in such a  cavalier and                                                                    
     vague manner as is being suggested.                                                                                        
                                                                                                                                
7:41:32 PM                                                                                                                    
                                                                                                                                
Representative Kopp  stated that  the language in  Section 4                                                                    
had   the   legal   effect  of   providing   direction   and                                                                    
clarification  in  statute  to  prevent  the  railroad  from                                                                    
exercising  perceived  authority   to  continue  to  require                                                                    
privately owned  property interests in violation  of federal                                                                    
and  state  law. He  used  the  example  of a  fence  across                                                                    
private  property that  required a  land owner  to drive  20                                                                    
miles to a  public crossing to access the other  side of the                                                                    
same property.  He cited an  example of an access  issue for                                                                    
holders  of  an original  homestead  patent  North of  Eagle                                                                    
River.  He  emphasized  that  no  part  of  the  bill  would                                                                    
independently  result  in  a  change  of  ownership  of  any                                                                    
property interest. The bill  would not independently operate                                                                    
to  disclaim or  restore any  property rights.  The railroad                                                                    
would simply  not make  a claim  unless the  title recording                                                                    
system showed that the claim  was in the federal interest at                                                                    
the time it was transferred.                                                                                                    
                                                                                                                                
Representative Kopp emphasized that  the language in Section                                                                    
4  used  the  phrase  "to   not  have  authority  over  real                                                                    
property."  The  railroad  corporation had  been  given  its                                                                    
authority to act  in state law. The  bill language clarified                                                                    
that  the authority  did  not include  the  ability to  take                                                                    
action  or otherwise  manage property  if it  was unlawfully                                                                    
obtained.  No determination  of  as to  what  was lawful  or                                                                    
unlawful was  required for the  direction to  be appropriate                                                                    
from the legislation.                                                                                                           
                                                                                                                                
Representative Kopp  addressed Section 6 of  the bill, which                                                                    
included the terminology "conclusively  owned," which was to                                                                    
say  that generally  that any  individual parcel's  chain of                                                                    
title clearly  demonstrated that the federal  government was                                                                    
the fee owner  of the right, title or interest,  at the time                                                                    
it  was transferred  to the  state. The  direction from  the                                                                    
legislature would come into  play regarding the right-of-way                                                                    
that crossed private property. Each  parcel in the right-of-                                                                    
way  would need  to be  individually evaluated  to determine                                                                    
what the  federal government owned  when it  transferred the                                                                    
rail properties to the Alaska  Railroad, which only included                                                                    
what the United States owned.  If it became reasonably clear                                                                    
during  the   analysis  that  the   railroad  was   only  in                                                                    
possession of the  federal interest in the  parcel, then the                                                                    
amendments proposed in the bill would have no effect.                                                                           
                                                                                                                                
Co-Chair MacKinnon  asked if  the railroad  was in  favor of                                                                    
the amendment.                                                                                                                  
                                                                                                                                
Representative  Kopp stated  that  the railroad  was not  in                                                                    
favor of  the change, because  it provided oversight  it was                                                                    
not comfortable  with. The railroad admitted  that there was                                                                    
a strong  legal argument in favor  of the bill and  had seen                                                                    
the letter from the congressional delegation.                                                                                   
                                                                                                                                
7:46:01 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon asked  if the  change to  Section 4  and                                                                    
Section 6 had the support of the administration.                                                                                
                                                                                                                                
Representative  Kopp stated  that the  sections of  the bill                                                                    
had   strong  support   of  the   administration.  All   the                                                                    
governor's appointees  on the railroad  commission supported                                                                    
the  provisions,  and  the governor's  office  had  conveyed                                                                    
support for the language in the bill.                                                                                           
                                                                                                                                
DARWIN  PETERSON,   LEGISLATIVE  DIRECTOR,  OFFICE   OF  THE                                                                    
GOVERNOR,  stated that  the Department  of Law  had reviewed                                                                    
the  CS for  HB 119.  The  administration did  not have  any                                                                    
opposition to the bill.                                                                                                         
                                                                                                                                
Co-Chair MacKinnon OPENED public testimony.                                                                                     
                                                                                                                                
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
                                                                                                                                
Vice-Chair  Bishop addressed  FN  2(CED), which  was a  zero                                                                    
fiscal note.  He read  from the  Analysis on  page 2  of the                                                                    
fiscal note:                                                                                                                    
                                                                                                                                
     A  prediction  of   future  market  conditions,  future                                                                    
     actuarial  estimates,  or   potential  impairments,  an                                                                    
     thereby, their effect on AIDEA's  dividend to the State                                                                    
     of Alaska cannot be made.                                                                                                  
                                                                                                                                
Vice-Chair  Bishop addressed  FN  3(EED), which  was a  zero                                                                    
fiscal note.  He read  from the  Analysis on  page 2  of the                                                                    
fiscal note:                                                                                                                    
                                                                                                                                
     The  funding mechanism  is a  general fund  transfer to                                                                    
     the  Public  Education  Fund  (PEF).  The  fiscal  note                                                                    
     effect  for FY2018  through FY2023  is reported  in the                                                                    
     fiscal note  for the PEF,  as the funding  is deposited                                                                    
     to  the PEF  not  into the  Foundation Program  funding                                                                    
     component.  The above  analysis is  presented here  for                                                                    
     explanation purposes only.                                                                                                 
                                                                                                                                
Vice-Chair Bishop  addressed FN 4 (GOV/Fund  Cap), which had                                                                    
fiscal impact. Starting in FY  20, there was a fiscal impact                                                                    
of $79,600 per year. He read  from the Analysis on page 2 of                                                                    
the fiscal note:                                                                                                                
                                                                                                                                
     Under   the  optional   exemption,  Ketchikan   Gateway                                                                    
     Borough's  annual  Required  Local  Contribution  (RLC)                                                                    
     payment  for  the  possessory  interest  value  of  the                                                                    
     shipyard  was $79,596  for 2017.  For purposes  of this                                                                    
     fiscal  note  the  $79,596   per  year  represents  the                                                                    
     current  RLC which  may change  in the  future. If  the                                                                    
     bill  as amended  is adopted,  the obligation  for this                                                                    
     funding for  the RLC for  the Ketchikan  Gateway School                                                                    
     District would shift and  become the funding obligation                                                                    
     of  the  State  of  Alaska under  AS  14.17.410  Public                                                                    
     School Funding program.                                                                                                    
                                                                                                                                
     Additionally, the  statutory exemption for the  Red Dog                                                                    
     Mine  sunset in  November  2017. Under  this bill,  the                                                                    
     exemption for  the Red Dog Mine  would be retroactively                                                                    
     applied  back to  November 30,  2017  and continue  the                                                                    
     prior exemption which would result  in no fiscal impact                                                                    
     to the state.                                                                                                              
                                                                                                                                
     It is understood the exemption  for the Alaska Ship and                                                                    
     Drydock  will  begin  with calendar  year  2018.  Since                                                                    
     there is a  two year lag in the assessed  full and true                                                                    
     values  being  applied  to the  public  school  funding                                                                    
     formula  under  AS 14.17.410,  the  cost  to the  state                                                                    
     would not be realized until FY2020.                                                                                        
                                                                                                                                
Vice-Chair Bishop MOVED  to report SCS CSHB  119(FIN) out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
SCS CSHB 119(FIN)  was REPORTED out of committee  with a "do                                                                    
pass"  recommendation and  with  three previously  published                                                                    
fiscal  notes, one  with fiscal  impact: FN4(EED/Fund  Cap);                                                                    
and two zero notes: FN2(CED), and FN3(EED).                                                                                     
                                                                                                                                
7:51:36 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
7:53:30 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair MacKinnon stated she would RECESS to the call of                                                                       
the chair. She discussed the schedule for the following                                                                         
day.                                                                                                                            
                                                                                                                                
7:54:05 PM                                                                                                                    
RECESSED                                                                                                                        
                                                                                                                                
[Note: This meeting was adjourned on 5/12/18 at 11:11:07                                                                        
a.m., with no further action taken.]                                                                                            
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HB 119 Differences - SB 57.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 57
HB 119 - Letters of Support.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 AIDEA slides.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Scheduling Request.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Sectional Analysis ver J.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Summary of Changes ver A to ver J.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB119 Additional Backup - Property Tax Exemptions.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB119 Transmittal Letter 2.15.17.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB119-SB57 Backup AIDEA GASB Examples.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 57
HB 119 Ketchikan Shipyard Letter.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 RR Private Property Support Taylor.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 79 SCS FIN v. E Explanation.pdf SFIN 5/11/2018 10:00:00 AM
HB 79
HB 79 SCS FIN work draft version E.pdf SFIN 5/11/2018 10:00:00 AM
HB 79
HB 119 - SB86 Punlic Testimony Ashlock.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Public Testimony Brewer.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Public Testimony Rosenberg.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 and SB 86 Public Testimony Brown - Language.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB86 Public Testimony Federico.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 Public Testimony Gastrock Input on Amendment to HB 119.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 - SB 86 Public Testimony Elam.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB86 Public Testimony Gambill.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 Public Testimony Mooter.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Public Testimony Magowan.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 - SB 86 Tallee Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 French - Please maintain Alaskan's property rights language in HB119..pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Bradley Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Webb Input on Amendment to HB 119.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Anderson Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB119 - SB86 Campbell Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 89 Spurlin Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 89
HB 119 - SB 86 Springen Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Moore Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB119 SCS FIN v. U Explanation.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 SCS Work Draft version U.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 April 16, 2018 Don Young Letter.pdf SFIN 5/11/2018 10:00:00 AM
HB 119