Legislature(2007 - 2008)SENATE FINANCE 532
05/09/2007 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB109 | |
| HB133 | |
| HB229 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 133 | TELECONFERENCED | |
| += | HB 229 | TELECONFERENCED | |
| += | SB 104 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 109 | ||
MINUTES
SENATE FINANCE COMMITTEE
May 9, 2007
9:21 a.m.
CALL TO ORDER
Co-Chair Bert Stedman convened the meeting at approximately
9:21:19 AM.
PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
Also Attending: REPRESENTATIVE BOB BUCH; LALANYA SNYDER, Staff
to Representative Mike Chenault; DAVID JONES, Senior Assistant
Attorney General, Opinions, Appeals, and Ethics Section, Civil
Division, Department of Law; ANNE CARPENETI, Assistant Attorney
General, Criminal Division, Department of Law; TAMMY KEMPTON,
Juneau Branch Administrator, Alaska Public Offices Commission,
Department of Administration; JERRY BURNETT, Legislative Liaison
and Director, Division of Administrative Services, Department of
Revenue; GEOFF BULLOCK
Attending via Teleconference: From offnet locations: PATRICK
GAMBLE, President and Chief Executive Officer, Alaska Railroad
Corporation, Department of Commerce, Community and Economic
Development; BILL O'LEARY, Vice President and Chief Financial
Officer, Alaska Railroad Corporation, Department of Commerce,
Community and Economic Development; LISA PARKER, Government
Relations Manager Agrium USA, Inc.
SUMMARY INFORMATION
HB 109- DISCLOSURES & ETHICS/BRIBERY/RETIREMENT
The Committee heard from the Department of Law, the Alaska
Public Offices Commission, and took public testimony. Five
amendments were considered with four being adopted and one being
withdrawn from consideration. The bill reported from Committee.
HB 133-ELECTRONIC MONITORING OF GANG PROBATIONER
The Committee heard from the bill's sponsor. The bill reported
from Committee.
HB 229-KENAI GASIFICATION PROJECT; RAILROAD BOND
The Committee heard from the bill's sponsor, the Department of
Revenue, the Alaska Railroad Corporation, and a representative
of Agrium, USA, Inc. The bill was held in Committee.
9:22:24 AM
SENATE CS FOR CS FOR HOUSE BILL NO. 109(JUD)
"An Act relating to bribery, receiving unlawful gratuities,
and campaign contributions; denying public employee
retirement pension benefits to certain legislators,
legislative directors, and public officers who commit
certain offenses, and adding to the duties of the Alaska
Retirement Management Board and to the list of matters
governed by the Administrative Procedure Act concerning
that denial; relating to campaign financing and ethics,
including disclosures, in state and municipal government,
to lobbying, and to employment, service on boards, and
disclosures by certain public officers and employees who
leave state or municipal service or leave certain positions
in state or municipal government; restricting
representation of others by legislators; relating to blind
trusts approved by the Alaska Public Offices Commission;
and providing for an effective date."
This was second hearing for this bill in the Senate Finance
Committee.
9:22:41 AM
Amendment #6: This amendment supersedes Committee action taken
by the adoption of Amendment #4 during the May 8, 2007 hearing
on this bill which changed $10 to $50 in paragraph (1) of
subsection (b) added to AS 24.45.051 by Section 12, page 6 lines
17 through 24. This amendment instead changes the $10 to $30.
The revised language reads as follows.
(b) A lobbyist required to report to the commission
under (a) of this section, who provides or pays for food or
beverage for immediate consumption by a legislator or
legislative employee or a member of the immediate family of
a legislator or legislative employee shall report the date
the food or beverage was provided or paid for and the
recipient's name and relationship to the legislator or
legislative employee, unless the food and beverage
(1) cost $30 or less; or
Co-Chair Stedman moved and objected for purposes of discussion.
9:23:32 AM
Senator Huggins understood that this action would not prevent a
lobbyist from taking someone out to dinner; it simply pertained
to the reporting and bookkeeping requirement associated with
that activity. Nonetheless, he questioned whether the
requirement might be an "administrative burden".
Co-Chair Stedman affirmed that a meal or beverage costing more
than $30 would be required to be logged in and reported to the
Alaska Public Offices Commission (APOC). It would not
significantly add to a lobbyist's administrative duties as they
typically provide a copy of such expenses to their employers for
reimbursement. Increasing the reporting threshold to $30 is an
attempt to find a middle ground that would not be "overly
burdensome" but would allow the public "to know who is lobbying
who, particularly outside of this building at lunch and in the
evenings."
Co-Chair Stedman removed his objection.
Without further objection, Amendment #6 was ADOPTED.
9:25:21 AM
Conceptual Amendment #1, as amended: This amendment inserts a
new section on page 1 following line 12 as follows.
Section 1. AS 11.56 is amended by adding a new section to
read:
Sec. 11.56.124. Failure to report bribery or receiving
a bribe. (a) A public servant commits the crime of failure
to report bribery or receiving a bribe if the public
servant
(1) witnesses what the public servant knows or
reasonably should know is
(A) bribery of a public servant by another
person; or
(B) receiving a bribe by another public
servant; and
(2) does not as soon as reasonably practicable
report that crime to a peace officer or law enforcement
agency.
(b) Failure to report bribery or receiving a bribe is
a class A misdemeanor.
This amendment also deletes the entirety of subsection (a) of
Section 65, page 38 lines 26 through 27, and replaces it with
the following.
(a) AS 11.56.124, added by sec. 1 of this Act, and the
amendment of AS 11.56.130(1) made by sec. 2 of this Act
apply to offenses occurring on or after the effective date
of secs. 1 and 2 of this Act.
This amendment also adds the definition of "Public Servant" to
the bill, as follows.
"Public Servant" is defined in 11.81.900(54)
(54) "public servant means to each of the following,
whether compensated or not, but does not include jurors or
witnesses:
(A) an officer or employee of the state, a
municipality or other political subdivision of the state,
or a governmental instrumentality of the state, including
legislators, members of the judiciary, and peace officers;
(B) a person acting as an advisor, or consultant, or
assistant at the request of, the direction of, or under
contract with the state, a municipality or other political
subdivision of the state, or another governmental
instrumentality; in this subparagraph "person includes an
employee of the person;
(C) a person who serves as a member of the board or
commission created by statute or by legislative, judicial,
or administrative action by the state, a municipality or
other political subdivision of the state , or a
governmental instrumentality;
(D) a person nominated, elected, appointed, employed,
or designated to act in a capacity defined in (A) - (C) of
this paragraph, but who does not occupy the position;
[Note: This amendment was drafted to CS HB 109(JUD) am, Version
25-GH1059\N.A. Therefore, conforming changes must be made.]
9:25:27 AM
Senator Dyson moved Conceptual Amendment #1, as amended, and
objected for purposes of explanation.
[NOTE: Conceptual Amendment #1 had been offered and then
withdrawn from consideration during the Committee's May 8, 2007
hearing on the bill.]
Senator Dyson stated that when Amendment #1 was offered during
the first hearing on this bill, a question had arisen regarding
the definition of "public servant". After conferring with the
amendment's drafter, Tamara Cook, Director, Legislative Legal
and Research Services, the decision was made to amend the
amendment to add the definition of "public servant".
Senator Dyson noted that there has been a national political
movement "to add some responsibilities" that would assist in
preventing "good people from turning into bad people". This
amendment is one such action.
Co-Chair Hoffman understood that the provisions of the amendment
would only require public servants, rather than members of the
public, to report a bribe.
9:28:29 AM
Senator Dyson affirmed that to be the intent.
While Senator Elton appreciated the addition of the definition
to the amendment, he was unsure how language in subsection a(1)
of Section 1, which reads "(1) witnessing what the public
servant knows or reasonably should know is…", would be
interpreted by the court system.
DAVID JONES, Senior Assistant Attorney General, Opinions,
Appeals, and Ethics Section, Civil Division, Department of Law
communicated that this "would involve a combined standard. First
of all because this is a criminal statute, 'the beyond a
reasonable doubt' standard of proof would apply." The second
standard, "reasonably should know" would be a "more objective
standard".
9:29:49 AM
Mr. Jones continued that the combination of these two standards
would provide the circumstance in which someone could be
convicted of this offense. It would be quite obvious a bribe was
occurring if both standards were present.
9:30:10 AM
Senator Dyson appreciated Senator Elton's question as he also
had wrestled with the interpretation of language during a
separate bill on child crime reporting that specified that a
person had the duty to report a child being raped, kidnapped,
assaulted, or murdered. To that point, he shared having
experienced a quandary once when trying to determine whether he
was witnessing a child kidnapping or simply a child upset with
his father. Thus, the question is whether a reasonable person
could make a determination; the body of law "says that unless it
was really clear, you're off the hook, but you do have a duty."
Senator Thomas sought further clarification about how to
interpret language in the definition of public servant that
reads "includes an employee of the person"; particularly as he
would not consider consultants, advisors, and other professions
to qualify as "public servants".
Mr. Jones specified that "person" in the legal definition
includes corporations and other non-human entities. Thus,
"employees of a corporation that is under contract with the
State" must abide by this reporting requirement.
9:32:46 AM
Senator Thomas understood therefore that it would not pertain to
"a private citizen".
Mr. Jones clarified that it would apply to a private citizen who
was under contract to the State.
Senator Thomas surmised therefore, that the individual must be
receiving some type of compensation by the public entity.
Mr. Jones affirmed. The person must be "under contract with the
State" to provide their service.
9:33:16 AM
Senator Dyson expressed that "the definition was crafted to
include" all who could "influence the public process". For
instance, people on boards and commissions are specifically
identified regardless of whether they receive compensation for
their service.
Senator Dyson removed his objection.
There being no further objection, Conceptual Amendment #1, as
amended, was ADOPTED.
9:34:13 AM
Amendment #5: This amendment inserts a new paragraph following
"commission;" on page 6 line 15 of AS 24.45.041(b), amended by
Section 11, as follows.
(9) A sworn affirmation by the lobbyist that the
lobbyist has not been previously convicted of a felony
involving moral turpitude; in this paragraph "felony
involving moral turpitude" has the meaning given in AS
15.60.010, and includes convictions for a violation of the
law of this state or a violation of the law of another
jurisdiction with similar elements to a felony involving
moral turpitude in this state.
In addition, this amendment adds a new bill section as follows.
Section 12. AS 24.45.041 is amended by adding new
subsections to read:
(i) A person may not register if the person has been
previously convicted of a felony involving moral turpitude
in violation of a law of this state or the law of another
jurisdiction with elements similar to a felony involving
moral turpitude in this state.
(j) In this section,
(1) "felony involving moral turpitude" has the
meaning given in AS 15.60.010;
(2) "previously convicted" means the defendant
entered a plea of guilty, no contest, or nolo contendere,
or has been found guilty by a court or jury; "previously
convicted" does not include a conviction that has been set
aside under AS 12.55.085 or a similar procedure in another
jurisdiction, or that has been reversed or vacated by a
court.
Co-Chair Stedman moved the amendment and objected for purposes
of discussion.
Co-Chair Stedman advised that this amendment would exclude a
person convicted of a felony involving moral turpitude from
being a paid lobbyist. He reviewed the list of offenses that
qualify as a felony involving moral turpitude.
Co-Chair Stedman felt that the responsibilities of the
Legislature, specifically the allocation of money to various
communities and projects "that move the direction of the State
that have the affect that ripples through decades", require
there being "tight requirements on who is allowed to be a
lobbyist and lobby the individual elected officials to try to
persuade them in particular directions." In a similar fashion to
laws that prevent convicted felons from holding certain licenses
and undertaking a multitude of other activities, a person
convicted of a felony involving moral turpitude should not be
allowed to be a paid lobbyist.
9:36:49 AM
Senator Thomas asked whether a person convicted of this offense
could be elected to the Legislature.
9:37:09 AM
ANNE CARPENETI, Assistant Attorney General, Criminal Division,
Department of Law, deferred to Mr. Jones.
9:37:46 AM
Mr. Jones communicated that following the previous day's
discussion on this issue, he had conducted further research. One
of the qualifications required to serve in the Legislature is
that the person be a registered voter. He reviewed this statute
as follows.
Alaska Statute (AS) 15.050.030. Loss and restoration of
voting rights. provides that a person convicted of a crime
that constitutes a felony involving moral turpitude under
state or federal law may not vote in a state, federal, or
municipal election from the date of the conviction through
the date of the unconditional discharge of the person. Upon
the unconditional discharge, the person may register under
AS 15.07, which of course invites the question, what is
unconditional discharge.
Mr. Jones continued.
AS 15.06.010 provides, in subsection (b)(39), unconditional
discharge means that a person is released from all
disability arising under a conviction and sentenced,
including probation and parole.
9:39:09 AM
Senator Thomas understood that, after a certain period of time,
an unconditional discharge is the typical course of action.
Mr. Jones believed that to be true.
9:39:31 AM
Co-Chair Hoffman asked whether this was State or federal law; if
it was State law, the State could change the language to
prohibit a convicted felon from running for public office.
9:39:55 AM
Mr. Jones suspected, but was uncertain as to whether a
Constitutional provision established the qualifications for the
Legislature. If that were the case, a Constitutional amendment
would be required to change it.
Ms. Carpeneti understood that a separate bill had been
introduced this year that would change when a person convicted
of a felony would be eligible to vote. That bill would allow a
person released from custody to register to vote regardless of
whether they were on probation, parole, or another provision.
9:40:54 AM
Senator Elton pointed out that "a fundamental difference between
a Legislator and a lobbyist" is the manner in which they are
"hired". The issue of whether a candidate has a past felony
conviction would likely be part of a campaign discussion. "It's
not necessarily part of a discussion when an entity is hiring a
lobbyist."
Senator Elton considered this hiring process difference to be a
significant factor. Thus, while he had previously questioned
treating a lobbyist differently than a Legislator, he was
comfortable with the approach proposed in this amendment.
9:41:57 AM
Senator Dyson requested a copy of Mr. Jones' research.
Co-Chair Stedman noted that the material would be provided.
9:42:21 AM
In response to a question from Senator Thomas, Mr. Jones stated
that the Legislative voting provisions referenced in his remarks
were in the State Constitution.
Co-Chair Stedman removed his objection.
AT EASE 9:42:56 AM / 9:43:30 AM
Senator Dyson objected. Clarification was sought as to whether
the amendment's language would allow a person who had regained
their voting right to become a lobbyist.
Co-Chair Stedman considered "the amendment, as written," to be
appropriate in its prohibition on allowing a person convicted of
a felony of moral turpitude from becoming a lobbyist. It could
be revisited in the future if the determination changed.
Senator Dyson asked whether a court challenge to the amendment
is anticipated.
Ms. Carpeneti communicated that a person could file a lawsuit
about any law adopted by the Legislature. A "more important
question is" whether this prohibition would be upheld by the
Court. She "wouldn't be surprised if a lawsuit were filed
challenging it. I'm not sure exactly what issues, probably expos
facto or other issues. It's hard to predict exactly what would
happen, but I think it would be defensible by the Department."
Senator Dyson removed his objection.
Without further objection, Amendment #5 was ADOPTED.
9:45:54 AM
Amendment #7: This amendment inserts the words "before or"
following the word "year" on page 40 line 9 of AS 39.52.180(d)
amended by Section 66. The revised language would read as
follows.
(d) An individual who formerly held a position listed
in this subsection [A FORMER GOVERNOR, LIEUTENANT GOVERNOR,
OR HEAD OF A PRINCIPAL DEPARTMENT IN THE EXECUTIVE BRANCH]
may not engage in activity as a lobbyist under AS 24.45 for
a period of one year before or after leaving that position
[SERVICE AS THE GOVERNOR, LIEUTENANT GOVERNOR, OR
DEPARTMENT HEAD, AS APPROPRIATE]. This subsection does not
prohibit service as a volunteer lobbyist described in AS
24.45.161(a)(1) or a representational lobbyist as defined
under regulations of the Alaska Public Offices Commission.
This subsection applies to the position of
(1) the governor;
(2) lieutenant governor;
(3) head or deputy head of a principal department
in the executive branch;
(4) director of a division or legislative liaison
within a principal department in the executive branch;
(5) legislative liaison, administrative
assistant, or other employee of the Office of the Governor
or Office of the Lieutenant Governor in a policy making
position;
(6) member of a state board or commission that
has the authority to adopt regulations, other than a board
or commission named in AS 08.01.010;
(7) member of the governing board and executive
officer of a state public corporation.
Senator Huggins moved Amendment #7. This amendment would close a
"huge loophole" in lobbying activities by precluding a lobbyist
from serving in a position subject to the provisions of this
bill for one year before or after being a lobbyist.
Senator Huggins declared that this prohibition had the same
merits as current laws which prevent a person holding a public
service position subject to the provisions of this bill from
becoming a lobbyist for one year after leaving their position.
Senator Dyson objected.
Senator Dyson stated that the amendment, while "well-intended",
might have the adverse affect of precluding people who provide
"an extemporary service" by lobbying because of their conviction
to a cause, such as those who "lobby on behalf of abused
children, and who typically receive no monetary consideration
for their effort from running for public office.
Senator Huggins acknowledged Senator Dyson's remarks, but
pointed out that the amendment would not alter language in the
subsection that excluded those who serve "as a volunteer
lobbyist described in AS 24.45.161(a)(1) or as a
representational lobbyist as defined under regulations of the
Alaska Public Offices Commission" from running for one of the
identified positions.
9:48:55 AM
Senator Dyson appreciated the clarification, but continued to
worry that the amendment might inadvertently preclude people who
serve in certain lobbying capacities.
AT EASE 9:49:14 AM / 9:50:11 AM
Without objection, Senator Huggins WITHDREW Amendment #7.
Conceptual Amendment #8: This amendment adds new language to the
bill to prohibit a person from being appointed or elected to a
position listed in Section 66 39.52.180(d) (1) through (7) for a
period of one year after engaging in activity as a lobbyist.
Senator Huggins moved the amendment.
Co-Chair Stedman objected for purposes of discussion.
Senator Elton understood the intent of the amendment, but could
not agree to precluding people who had been involved in the
governmental process as a lobbyist from running for Governor or
Lieutenant Governor. Adoption of the amendment would prohibit
such people from filing for those offices even though the issue
could be addressed during their election campaign.
Senator Elton stated that he had supported Section 66 because it
addressed the "legitimate public issue on whether or not
somebody was angling to get a job potentially as a lobbyist
while they were a public officer." He was unsure whether
prohibiting a lobbyist from becoming a public officer was a real
concern.
9:53:12 AM
Senator Thomas asked whether the action proposed by the
amendment was contrary to the Constitution in respect to a
person's right to run for office.
9:53:36 AM
Amendment to Amendment #8: This amendment removes Governor and
Lieutenant Governor from the positions subject to the
prohibition specified in Amendment #8. Thus the prohibition
would apply to the positions listed in Section 66 39.52.180(d)
(3) through (7).
Senator Huggins moved the amendment to Amendment #8.
Co-Chair Stedman objected for discussion.
9:54:19 AM
Senator Dyson concurred with Senator Elton's remarks. Regardless
of the "honor and prestige" associated with a State position, he
found it "hard to conceive" that a lobbyist would desire to move
to a position with the State because they would earn less money.
Senator Dyson understood that this amendment would prohibit the
Governor from hiring, for example, Joel Gilbertson, a former
Department of Health and Social Services commissioner, who, due
to his experience with public health issues and associated
financial aspects, was now employed as a lobbyist with
Providence Hospital in Anchorage.
Senator Dyson considered most lobbyists to be "honorable people
with a wealth of knowledge", and "limiting … the pool of
experienced people" might be detrimental to the State.
9:55:54 AM
Senator Huggins stated that there were a number of people,
including Mr. Gilbertson, whom he admired. However, were
people's biases a constant consideration "we would never pass
legislation." Defining what people could do before or after is
part of the solution. "It is a safeguard that's worth putting
into place."
Co-Chair Stedman removed his objection to the amendment to the
amendment
There being no further objection, the amendment to the amendment
was ADOPTED.
9:57:02 AM
Co-Chair Stedman stated that Amendment #8, as amended, was
before the Committee.
Senator Elton argued against the amendment. While he understood
the point that a person, formerly employed as a lobbyist, who
was appointed to a policy position in State government, could
have a bias toward their employer, a similar potential for bias
could be found in people with other backgrounds. He provided
examples and concluded that a person does not have to be
employed by an entity as a lobbyist to display a bias.
Senator Elton contended that a person's background would likely
be a consideration and a point of discussion in the hiring
process.
9:59:14 AM
Senator Huggins stressed that a lot of issues are addressed in
the bill, including some issues that might not require "fixing".
Nonetheless, he intended to vote for the bill "to safeguard
Alaskans and restore the confidence in this State in people who
work at the State level, period."
Co-Chair Stedman removed his objection to the amendment.
Senator Elton objected to the amendment.
A roll call was taken on the motion.
IN FAVOR: Senator Huggins, Senator Olson, Senator Thomas, Co-
Chair Hoffman and Co-Chair Stedman
OPPOSED: Senator Dyson and Senator Elton
The motion PASSED (5-2)
Amendment #8, as amended, was ADOPTED.
No further amendments were forthcoming.
10:00:39 AM
Co-Chair Stedman asked that the bill's fiscal notes be reviewed.
TAMMY KEMPTON, Juneau Branch Administrator, Alaska Public
Offices Commission, Department of Administration, stated that
this bill would require APOC to accept handwritten campaign
disclosure reports and have them available for viewing on APOC's
website within two days after receipt. In order to comply with
this provision, APOC must acquire two high speed scanners and
add one additional fulltime employee and an additional halftime
employee during State election years. The projected cost for FY
2008 is $250,000 as reflected in the Department of
Administration May 8, 2007 fiscal note.
10:03:24 AM
GEOFF BULLOCK informed the Committee that he was a lobbyist, a
father of five, a foster parent, and a felon. The adoption of
Amendment #5 "puts me out of work." He made some bad business
decisions in 1998, was convicted, served time, and eventually
reestablished his lobbying business. He does not agree with the
amendment and considers it "collateral damage".
Mr. Bullock could understand furthering such action if "a felony
was committed in the act of a lobbyist or the act of a
legislator," but he could not understand the broad action of
labeling all felons as being bad. They are not. He "wouldn't
mind if any" of the 515 inmates he served time with were his
neighbors. "We all make mistakes, we all reach for the first
stone to throw, and you guys threw it and it hit me and my
family and it hurts."
10:05:14 AM
Senator Elton spoke to the Department of Administration's
"purely administrative" fiscal note which provided for the cost
of compiling reports. Missing from the discussion was "the
investigatory function of APOC", particularly as APOC was
"created to be a watchdog for Alaskans." Not addressing this
function in the fiscal note was "bothersome" to him.
Nonetheless, he appreciated the efforts exerted to develop this
bill and "looked forward to its adoption."
10:06:45 AM
Senator Dyson was "moved by" Mr. Bullock's testimony and wished
that the Committee "had allowed for felons who had served their
time and got their rights restored."
10:07:08 AM
Co-Chair Hoffman moved to report the bill, as amended, from
Committee with individual recommendations and accompanying
fiscal notes.
There being no objection, SCS CSHB 109(FIN) was REPORTED from
Committee with previous zero fiscal note #2 from the Department
of Law and new $250,000 fiscal note, dated May 8, 2007, from the
Department of Administration.
10:07:42 AM
CS FOR HOUSE BILL NO. 133(JUD)
"An Act relating to requiring electronic monitoring as a
special condition of probation or parole for offenders
whose offense was related to a criminal street gang."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Stedman noted that the Committee had previously
reported out SB 89-ELECTRONIC MONITORING OF GANG PROBATIONER,
the Senate companion bill to this legislation. The sponsor of HB
133 would be providing an explanation of the differences between
the two bills.
10:08:22 AM
REPRESENTATIVE BOB BUCH, the bill's sponsor, stressed the
importance of this bill: it "may be the difference between life
and death for some of those people living in Anchorage." Both SB
89 and HB 133 would require people "convicted of violent gang
related crimes to wear electronic monitoring devices" when
released on probation or parole.
Representative Buch addressed the differences between the two
bills as follows.
HB 133 is more narrowly focused than SB 89.
SB 89 applies to offenders convicted of both misdemeanors
and felonies. HB 133 applies only to offenders convicted of
felonies. Because of this difference, HB 133 has a
substantially lower fiscal note.
SB 89 allows offenders to replace prison time with
electronic monitoring. HB 133 does not allow offenders to
replace prison time with electronic monitoring.
HB 133 has a sunset provision. SB 89 has no sunset
provision.
HB 133 gives the Department of Corrections the receipt
authority to collect funds from the offender to pay for the
cost of electronic monitoring.
HB 133 is the version that is supported by the Department
of Corrections and the Department of Law.
Representative Buch noted that people living in the Anchorage
and Kenai areas and their police departments support this bill
version.
Representative Buch pointed out that HB 133's fiscal notes are
similar to those accompanying SB 89 except they are "less
expensive". For instance, the Department of Corrections' fiscal
note accompanying SB 89 contained three different cost
scenarios; the Department of Corrections fiscal note
accompanying HB 133 is the least of those three.
10:11:17 AM
In response to a question from Senator Thomas, Representative
Buch clarified that, unlike SB 89, HB 133 would not allow a
person to replace jail time with electronic monitoring.
10:11:55 AM
Senator Olson asked whether there was any opposition to the
bill.
Representative Buch considered this a very serious piece of
legislation. While it would have a fiscal impact, it has been
tightly constructed to accommodate law enforcement requests. It
has significant support from the communities of Anchorage,
Kenai, and Fairbanks.
Senator Olson commended the bill's sponsor for his efforts on
the bill.
10:12:45 AM
Co-Chair Hoffman asked whether gang-related crimes were an issue
in other areas of the State besides Anchorage, Fairbanks, and
Kenai.
Representative Buch replied that other communities believe that
addressing the gang-related crime activity that is being
"expressly exhibited in Anchorage" would assist in preventing
this type of activity from spreading to other areas of the
State. The idea is to "nip it in the bud as early as possible."
10:13:24 AM
Co-Chair Hoffman moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, CS HB 133(FIN) was REPORTED from
Committee with four previous fiscal notes: zero fiscal note #1
from the Department of Law; indeterminate fiscal note #2 from
the Department of Administration; indeterminate fiscal note #3
from the Department of Corrections; and indeterminate fiscal
note #4 from the Alaska Court System.
10:14:25 AM
HOUSE BILL NO. 229 am
"An Act authorizing the Alaska Railroad Corporation to
participate in a project consisting of the acquisition,
construction, improvement, maintenance, equipping, or
operation of real and personal property, including
facilities and equipment, for the Kenai gasification
project and Port MacKenzie rail link, authorizing the
corporation to issue bonds to finance all or a portion of
the project, and identifying these as bonds for an
essential public and governmental purpose; and providing
for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
10:14:39 AM
LALANYA SNYDER, Staff to Representative Mike Chenault, the
bill's sponsor, explained the bill as follows.
The purpose of this bill is to authorize the Alaska
Railroad Corporation to issue up to $2.9 billion in tax-
exempt bonds to finance a portion of the Kenai Gasification
project. The project will bring coal from Healy to Kenai
where low emission coal gasification and electricity
generation plants would be built next to the Agrium plant.
The project will also generate electricity for South
Central Alaska. It will generate excess carbon dioxide that
could be used to improve oil recovery from the wells in
Cook Inlet and continue to supply fertilizer to Alaska.
Payment of debt service for facilities and equipment that
would not be owned by the Railroad would be provided
through a long term contract or other agreement between the
Railroad and the project's owner or operator.
Ms. Snyder advised the Committee that an amendment adopted on
the House floor allowed the potential for the rail line to be
extended to Port MacKenzie. If shipping the coal from Port
MacKenzie instead of Anchorage was deemed infeasible, the line
would only extend to Anchorage. The bond issuance amount was
increased from $2.6 billion to $2.9 billion by the adoption of
that amendment.
10:17:28 AM
PATRICK GAMBLE, President and Chief Executive Officer, Alaska
Railroad Corporation, Department of Commerce, Community and
Economic Development, testified via teleconference from an
offnet location and announced that the Railroad had a twofold
interest in this legislation. First, from an operational
perspective, being able to increase the Railroad's ability to
transport coal mined in Healy to an offload point where it would
be available to the Agrium fertilizer plant would be a "good
sound business" move.
Mr. Gamble stated that "the "second component of our interest"
pertained to the federal Alaska Railroad Transfer Act which
provided the Railroad the "authority to issue tax free bonds on
behalf of the State economic development, which is the mission
of the Railroad."
Mr. Gamble noted that while this bonding authority has been
authorized in the past, it has never been utilized.
Mr. Gamble specified that this proposal would provide "a general
authorization to use our tax-free bonding capability as a
financial tool in order to improve the business case for
Agrium," if they deem the Railroad extension project to be a
viable option. Even if authorized, the Railroad's Board of
Directors would be required to approve each bond issuance.
Mr. Gamble disclosed that, were the decision made to proceed
with the project, "as a partner and financier, we would then
expect to receive some sort of a fee for the ability to provide
this financing."
10:19:49 AM
Mr. Gamble communicated that, after careful consideration, the
Alaska Railroad Corporation and its Board of Directors have
concluded that the actions proposed in this bill would be "good
business" for both the Railroad and the State.
10:20:08 AM
Co-Chair Stedman asked the risk exposure the Railroad might
experience from underwriting the bonds.
10:20:39 AM
BILL O'LEARY, Vice President and Chief Financial Officer, Alaska
Railroad Corporation, Department of Commerce, Community and
Economic Development, testified via teleconference from an
offnet location to discuss the Railroad's risk exposure. The
proposal currently specifies that some of the authorized amount
be directed toward Railroad assets such as locomotives, hopper
cars and other infrastructure improvements necessary to support
this transportation initiative. The debt that would be issued
for those assets would have recourse to the Railroad.
Mr. O'Leary clarified, however, that the vast majority of the
debt that would be authorized under this legislation would be
recoursed to Agrium or whatever entity Agrium might joint
venture or partner with as the operator of the facility.
Mr. O'Leary stated that the current estimate for the non-
Railroad debt is approximately $2.4 billion dollars.
10:22:33 AM
Mr. O'Leary explained that the Railroad would be working with
Agrium or the entity created for the project to develop a
financial plan for selling the bonds. The standard bond issuance
process would include a competitive selection process for
choosing the numerous investment banking firms that would be
required in a transaction of this size.
Mr. O'Leary reiterated that the Board would be required to
approve any debt issuance.
10:23:25 AM
Co-Chair Stedman asked for further information about the action
taken by the House that added $300 million to the scope of the
project.
10:23:33 AM
Mr. Gamble explained that the amendment adopted by the House
pertained to the Port MacKenzie transportation component. While
several transportation options were considered during the
history of this legislation, two are "still in play". One
involves improving an existing line to the Port of Anchorage and
constructing a coal transfer facility which would transfer coal
from a train to a covered coal pile. That coal would then be
transferred onto a barge and transported to Nikiski.
Mr. Gamble stated that the other, and "preferable",
transportation option would include utilizing vast empty acreage
at Port MacKenzie. This option "looks very attractive in the
abstract". It would allow an efficient dock and offloading
process to be "designed from scratch". Unfortunately, the rail
line does not currently extend to Port MacKenzie. The $300
million added to the bill by the House would allow further
review of this option, including a determination of whether
having to extend the rail line 40 miles from Willow to Port
MacKenzie might affect its viability.
Mr. Gamble communicated that another key consideration is
whether the Port MacKenzie rail line extension and port
development could be "synchronized" with the timeline Agrium has
identified for its plant expansion and "the transfer of its
energy source" from gas to coal gasification.
Mr. Gamble stressed that even though the Port of Anchorage is
the known and available option, the Port MacKenzie option is
considered the better choice both for Agrium and other interior
resource development projects which could benefit from having
access to this tidewater port.
Mr. Gamble noted that the financing component of the bill does
not specify how the debt service of the project would be
structured. This would allow the financing team, once engaged,
to begin the "long process" associated with designing the
financing aspect of the project. Conducting a study on the Port
MacKenzie transportation option would alleviate some of the
questions that might arise during discussions with potential
financing partners and buyers. The study would also "improve the
chances of getting an environmental impact study (EIS) started"
in regards to getting a rail line to the Port MacKenzie land.
10:28:02 AM
Mr. Gamble concluded his remarks by specifying that the Railroad
strongly supports further consideration of the Port MacKenzie
option.
10:28:13 AM
Co-Chair Stedman questioned the reason the $300 million was
offered as a Floor amendment rather than being included in the
original bill or adopted during the committee hearing process.
Mr. Gamble credited this as being a timing issue. Even though
the Port Mackenzie transportation option was one of the numerous
transportation options originally considered, it did not
materialize as a strong option until Agrium's plant and energy
source projects and the project financing structure became more
defined.
10:29:48 AM
Co-Chair Hoffman asked that a copy of the Alaska Railroad
Corporation's current financial statement be provided to the
Committee. He also sought information about the Railroad's long-
term expansion plans and other projects being considered.
10:30:36 AM
Mr. Gamble affirmed that this information would be provided. The
Railroad seeks local community participation when considering
expansion plans and other projects. Status reports are also
provided to the Legislature annually. Additional information
would be provided upon request.
Co-Chair Hoffman asked whether the Corporation has developed a
list of long-range projects. If so, he would appreciate that
information.
Mr. Gamble affirmed that the information would be provided. One
of the projects on the list is to move the existing rail line,
which runs through the middle of Fairbanks, to a less congested
area. Similar action is being considered for other communities
including Wasilla.
Co-Chair Hoffman asked whether the list is prioritized.
Mr. Gamble responded in the negative.
Co-Chair Hoffman asked "why not?"
10:32:12 AM
Mr. Gamble expressed that the size and scale of each project,
the length of time required to conduct a project EIS, and the
need to identify a funding source makes it difficult to
prioritize the list. Therefore, the Corporation advances work on
projects "in parallel". Experience indicates that while one
project might advance ahead of others today, in a year's time,
it may lag behind.
10:32:58 AM
Co-Chair Hoffman asked that action on the bill be delayed until
the requested information could be reviewed.
10:33:07 AM
Senator Thomas asked the anticipated timeline for this "big
project"; specifically how the money would be allocated and when
the Agrium plant might convert to coal gasification.
10:33:40 AM
Mr. Gamble deferred to representatives from Agrium USA, Inc.
10:33:50 AM
LISA PARKER, Government Relations Manager Agrium USA, Inc.
testified via teleconference from an offnet location and
communicated the expectation that the timeline "for bringing
this project on line" would be 2011 or 2012. Specific "gates"
have been identified. Once a gate is reached, the project would
be re-evaluated and a determination made regarding whether to
continue advancing the project. The next evaluation is scheduled
for the summer of 2007. If the project is approved at that
point, the next evaluation would be conducted a year later.
10:35:25 AM
Co-Chair Stedman, who considered it "odd that we would have a
$300 million Floor amendment", asked the Department of Revenue
to further address this issue. Something of this "magnitude"
should have been addressed during the committee process.
10:35:51 AM
JERRY BURNETT, Legislative Liaison and Director, Division of
Administrative Services, Department of Revenue, informed the
Committee that the Department had not been involved in the
discussions about the bill or about adding $300 million to it.
Mr. Burnett advised, however, that the bill would not affect the
State's debt capacity or credit rating, as the project would be
funded with "pure non-recourse project financing conduit revenue
bond type financing." The $300 million added by the Floor
amendment would have recourse to the Railroad.
10:36:45 AM
Co-Chair Stedman asked whether the Department had any interest
in how the Railroad, which is considered "a separate entity from
the State", operated.
Mr. Burnett pointed out that the Railroad, as an independent
corporation, "has specific authorization for their bonding"
under the Railroad Transfer Act. They are able to utilize this
type of bond structure "on their own."
10:37:29 AM
Co-Chair Hoffman understood, however, that "the State of Alaska
would be financially responsible" if the Corporation was unable
to pay the bonds.
Mr. Burnett replied that "the recourses would be against the
assets of the Railroad. There is no moral obligation or other
State credit support in this legislation."
10:38:13 AM
Co-Chair Hoffman qualified this as the reason he requested a
copy of the Railroad's financial reports. It is doubtful whether
the Railroad's "assets are sellable or marketable to anyone
else" or whether anyone else "would accept and operate the
Railroad to pay off this large debt." Thus, "the next person in
line will be the State of Alaska."
Co-Chair Hoffman deemed this a "fiduciary responsibility" the
Committee and the Department of Revenue should consider when
discussing a project of this nature. He expected the Department
to provide "a straight answer" when questioned about the issue.
10:39:18 AM
Co-Chair Stedman asked Mr. O'Leary to provide further
clarification on the issuance of the bonds and the recourse in
respect to the $2.3 million bonding authority and the $300
million component.
10:39:43 AM
Mr. Gamble interjected to acknowledge that the issue was
confusing. The bonding authority in the bill is a general
authority in accordance with the Federal Transfer Act; it
specifies that the Railroad's Board of Directors and the
Legislature must approve any sale of bonds by the Alaska
Railroad Corporation. However, the bonds could not be sold until
the entity assuming the debt service was identified.
Mr. Gamble reiterated that identifying the entity which would
assume the debt service is not required at this stage of the
game. The first step is to simply receive authorization from the
Legislature to consider utilizing the Railroad's bonding
ability. The most recent of several such authorizations was in
respect to funding the Alaska Gas Pipeline. No one had been
identified to assume debt service in that instance either.
Mr. Gamble continued as follows.
In this potential sale, there are three separate
components: the Agrium component, the amendment component,
and then the smaller component that the Railroad would have
recourse to, that I think Mr. O'Leary referred to when he
talked about us buying assets and then being responsible
for the payment of funds that might be borrowed to buy
assets. And in that sense, the recourse would be to the
Railroad. The remainder, if it were chosen, and that has
not yet been decided either, if the Railroad were chosen to
actually do the financing, it would be conduit financing
with no recourse to the Railroad.
And also I might mention that these projects are not in
competition with any other projects, whether they're
current Railroad projects that are already on the books or
ones that could be anticipated in the future.
These financings are independent and because we're not
capped, hum, we're not prioritizing nor are we precluding
the option of continuing to work other large projects with
other options for financing those projects as well. That is
a strength of this tool that the State has, and one we're
very interested in working with the State to use for
continued economic development. With that as sort of an
overview, Mr. Chairman, thank you. And I'll pass the more
detailed portion of your question to Mr. O'Leary.
10:43:09 AM
Co-Chair Stedman asked that Mr. O'Leary also address the non-
recourse element associated with this issuance; specifically how
the State or the Railroad might be affected "if Agrium was to go
insolvent and default on their bonds."
10:43:40 AM
Mr. O'Leary stressed that the portion of the bond issuance that
would be recoursed to the Railroad was "the smallest piece of
this proposed transaction." That debt would be recoursed to the
assets owned by the Railroad if the Railroad was unable to pay
their portion of the debt.
Mr. O'Leary specified that the largest piece of the transaction
relates to Agrium.
Mr. O'Leary explained "that, by statute," bonds issued by the
Alaska Railroad Corporation "cannot be backed by the full faith
and credit of the State of Alaska. So, there is no recourse to
the State." This would be expressly included in the
documentation accompanying any such bonds.
10:45:00 AM
Mr. O'Leary clarified that his references to Agrium in this
discussion should be interpreted to represent either Agrium or a
joint venture or partnership involving Agrium in regards to this
project. The bonds sold to support this project "would have
recourse only to the assets of that entity". There would be no
recourse to either the Railroad or the State.
Mr. O'Leary pointed out that if that entity fails to meet its
debt service obligation, "the lenders would look to the assets
of that entity."
Mr. O'Leary noted that while the management of the Railroad must
recommend and the Board of the Railroad must approve the sale of
the bonds, "the marketplace" would have the "ultimate control on
this." Prior to the sale of the bonds, "the marketplace would
opine as to whether they believe that the project and this
entity will be able to pay those bonds back." If the
determination is positive, the bonds will sell; otherwise, they
would not.
10:46:40 AM
Co-Chair Stedman voiced disbelief that the marketplace could be
so "efficient that once they decide to issue double A, triple A
bonds, they never get downgraded and never go into default."
Nonetheless, he understood that if there was a default on this
issuance, it would not impact the Railroad's ability to issue
bonds in the future. "It wouldn't affect their rating, wouldn't
affect the State in any way. It would just be a $2.4 billion
collapse all in the laps of Agrium."
Mr. O'Leary stated that even though "this would not be a
positive thing for the Railroad," there would be no "legal
recourse to the Railroad's assets." The bonds would never be
sold with the "Railroads' assets as the security or supporting
it" simply because the Railroad's balance sheet and revenue
streams could not "support something of this magnitude."
10:48:08 AM
Co-Chair Hoffman pointed out that there have been [unspecified]
bonds sold in the past that have not been repaid. This
undermines one's confidence that bonds receiving the financial
market's "seal of approval …are guaranteed to be paid back."
Co-Chair Hoffman then questioned why the Legislature must
approve the sale of these bonds if the State would not be held
liable.
Mr. O'Leary responded that Alaska Statutes require Legislative
approval in order for the Alaska Railroad "to issue public
debt".
Co-Chair Hoffman declared that "there has to be a reason for
that." He shared the belief that the Legislature has "a
fiduciary responsibility for many of the corporations that are
under us, even though we don't approve your budgets. You are a
State corporation, and then by being a State corporation, I
believe that the State of Alaska is ultimately responsible."
Co-Chair Hoffman voiced that while this may be argued, in his
opinion, the "corporation is owned by the State of Alaska" and
therefore an entity that the Legislature could "decide to keep
or decide to sell." Thus, were to Legislature to approve the
sale of these bonds and there were a default, "the State of
Alaska would be responsible. We do have a fiduciary
responsibility to make sure that the State of Alaska is
protected."
10:50:35 AM
Senator Elton asked whether the $300 million added by the House
amendment would solely support the construction of the spur line
from Wasilla to Port Alexander or whether it would also provide
finding to support the transfer facility "between the rail and
marine link."
10:51:59 AM
Mr. Gamble stated that "the $300 million is the all-in cost for
the Railroad component". It would accommodate both the spur line
and "the operational activities that would occur at the end of
the spur line" at Port MacKenzie. This would include the off-
loading and coal pile facilities as well as on-site maintenance.
The local government would be providing the land and Agrium
would be responsible for the barge loading and dock improvements
"specific to the project."
10:52:47 AM
Senator Elton asked that Agrium be provided an opportunity to
discuss whether incorporating the Port MacKenzie spur into the
project would increase their costs.
Co-Chair Stedman stated that that information would be provided
during the next hearing on the bill.
10:53:22 AM
Senator Thomas understood that Agrium was considering switching
its power source from gas to coal gasification because of the
limited amount of gas available in South Central Alaska. Thus,
he raised concern that this switch would be detrimental to
further exploration and development of gas in Cook Inlet. It
might also negatively affect consideration of running a spur
gasline from the North Slope to the area.
10:54:17 AM
Co-Chair Stedman ordered the bill HELD in Committee.
ADJOURNMENT
Co-Chair Bert Stedman adjourned the meeting at 10:54:28 AM.
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