Legislature(2015 - 2016)SENATE FINANCE 532
04/09/2015 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB56 | |
| SCR1 | |
| SJR2 | |
| SB22 | |
| SB26 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB 56 | TELECONFERENCED | |
| += | SCR 1 | TELECONFERENCED | |
| += | SJR 2 | TELECONFERENCED | |
| + | SB 22 | TELECONFERENCED | |
| SB 50 | |||
| = | SB 26 | ||
SENATE FINANCE COMMITTEE
April 9, 2015
1:55 p.m.
1:55:23 PM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 1:55 p.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Gene Therriault, Deputy Director, Statewide Energy Policy
Development, Alaska Energy Authority, Department of
Commerce, Community and Economic Development; Emily Ford,
Energy Policy and Outreach Manager, Alaska Energy
Authority, Department of Commerce, Community and Economic
Development; Kathy Wasserman, Alaska Municipal League,
Juneau; Tim Lamkin, Staff, Senator Gary Stevens; Kristen
Pratt, Staff, Senator Anna MacKinnon; Senator Cathy
Giessel, sponsor; Laura Pierre, Staff, Senator Anna
MacKinnon; Pat Pitney, Director, Office of Management and
Budget, Office of the Governor; Mary Siroky, Director,
Division of Administrative Services, Department of
Transportation and Public Facilities.
PRESENT VIA TELECONFERENCE
Chris Rose, Executive Director, Renewable Energy Alaska
Project (REAP), Anchorage; Daniel Moore, Treasurer,
Municipality of Anchorage, Anchorage.
SUMMARY
SB 22 MOTOR VEHICLE REG. TAX: COLLECTION COSTS
SB 22 was HEARD and HELD in committee for further
consideration.
SB 26 BUDGET: CAPITAL
CSSB 26(FIN) was REPORTED out of committee with a
"do pass" recommendation.
SB 56 MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
SB 56 was HEARD and HELD in committee for further
consideration.
SCR 1 CIVICS EDUCATION TASK FORCE
CS SCR 1(EDC) was REPORTED out of committee with
a "do pass" recommendation and with one new zero
fiscal note from the Senate Finance Committee for
the Legislature.
SJR 2 CONST. AM: G.O. BONDS FOR STUDENT LOANS
SJR 2 was REPORTED out of committee with a "do
pass" recommendation and with one previously
published zero fiscal note: FN1 (GOV).
Co-Chair MacKinnon discussed the schedule.
SENATE BILL NO. 56
"An Act adopting the Municipal Property Assessed Clean
Energy Act; authorizing municipalities to establish
programs to impose assessments for energy improvements
in regions designated by municipalities; imposing
fees; and providing for an effective date."
1:56:43 PM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY (AEA), DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (DCCED),
discussed SB 56, and explained that the bill would offer a
new mechanism to municipal governments to work with the
commercial property owners to implement energy improvements
to their facilities. He recounted that in 2010, the
legislature set a goal for a 15 percent increase in energy
efficiency in the state by the year 2020. He shared that
AEA had been tracking the progress towards the goal, and
evaluating areas in which the state was moving forward or
not. He explained that AEA operated a program that assisted
commercial property owners with energy audits of their
properties. He recounted that AEA had done about 170 of the
audits through the program across the state, and for
properties that had subsequently moved forward with
improvements they generally saw yearly energy savings of
about 30 percent. He remarked on the sizable possible
savings and expressed a desire that more businesses would
do the audits and follow through with the improvements.
Through a survey of energy audit participants, AEA had
concluded that financing was one of the primary impediments
for businesses to complete the improvements.
1:59:27 PM
Mr. Therriault related that through his interaction with a
national energy association, he met with the participants
from different states and looked at mechanisms other states
were using in the same scenario. He identified that
Property Assessed Clean Energy (PACE) financing was
currently being used in about 31 other states. He directed
attention to the presentation "SB 56 Property Assessed
Clean Energy (PACE)" (copy on file), and emphasized the
concept of "property assessed" within the financing
mechanism.
Mr. Therriault detailed that by using PACE, a local
government that assessed property tax could voluntarily
engage a program under which they (through a revenue bond)
would collect a pool of money or work with local lenders to
lend to private business owners. The repayment of the loans
was made by a voluntary assessment that was added to the
individual property owner's yearly tax bill. Because the
loan had the enforcement and collection power of the local
government, the default rate was very low. He furthered
that because of the low default rate, the loans were low-
risk, could lead to lowered interest rates, and could allow
the property owner to stretch the payments over a longer
period of between 10 and 20 years.
Mr. Therriault stated that AEA's goal was to offer a low-
cost source of capital with a long repayment period, so
that on a yearly basis individual property owners could
have net-positive cash flow through lowering their energy
cost by more than the yearly loan repayment amount. He
noted that the legislation was modelled after a bill passed
in Texas a year previously, and SB 56 contained a number of
protections that were offered in the Texas statute.
Mr. Therriault agreed to point out the various protections
as the committee was viewing the remaining presentation,
including those that pertained to local government, local
business, and existing banks. He continued that he had
worked with the Alaska Banking Association, and they were
supportive of the legislation pending inclusion of a
specific provision in the bill. Other supporters included
the Alaska Municipal League and the Alaska Statewide
Chamber of Commerce. He characterized PACE as a "common
sense tool" for local governments to use in moving towards
the goal of energy efficiency.
2:02:43 PM
EMILY FORD, ENERGY POLICY AND OUTREACH MANAGER, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, presented slide 2, "What is
Commercial PACE?"
· PACE was named one of the top 20 "world-changing ideas
by Scientific American magazine."
· Commercial Property Assessed Clean Energy programs
(PACE) allows property owners to finance qualifying
energy efficiency improvements overtime through a
voluntary assessment on the property tax bill.
· Voluntary participation by municipalities AND
commercial property owners
· Mortgage holder consent is required before
applications are approved and assessments are placed
· Improvements can include lighting upgrades, renewable
energy, conversion to natural gas, high-efficiency
boilers, and additional energy efficiency improvements
· The repayment obligation transfers with the sale of
property
Ms. Ford discussed slide 3, "Benefits":
· Energy efficiency upgrades are financed with capital
secured by a primary lien on the property, lower-
interest capital and favorable repayment terms can
be raised from the private sector
· Allows for longer repayment periods allowing the
building owner to recognize immediate operating
savings while repaying the debt
· Can use traditional lending sources
· In Alaska, provides consistency with state energy
policy, energy efficiency and renewable energy goals
Ms. Ford presented slide 4, "Creating a PACE Program":
· 31 states have authorized PACE programs
· State legislatures must provide authority for local
governments to establish and operate commercial PACE
programs
· Municipalities to create the program and select
financing models
· Resources: U.S. Department of Energy, PaceNow.org,
C-Pace.com
Ms. Ford noted that there were multiple resources online
for municipalities and businesses, including marketing
tools and sample contracts.
Ms. Ford presented slide 5, "Potential PACE Models,"
detailing the wide spectrum of PACE programs that could be
implemented on the local level:
· Local-government driven
o Either property assessment office or a PACE
office used as interface with commercial
property owners and potential lenders
o Bond financing
· Private-sector driven
o Third-party administrator under contract with
local government
o Private financing
· Hybrid model
o Smaller local governments can contract with
other communities or regional organizations to
administer the program
o Identify all potential funding sources (bonds,
revolving loan funds, private capital)
Ms. Ford discussed that the local-government-driven models
for states with many energy efficiency programs and efforts
had separate PACE offices and the government was
responsible for the marketing and interfacing with the
community. The private-driven or "main street" model was
developed so the work was absorbed by the existing
assessor's office and was reliant on the private sector to
market the program. She related that most often there was a
hybrid model where all sources of funding were used.
2:04:41 PM
Ms. Ford addressed slide 7, explaining that the subsequent
slides would consist of a sectional analysis of the bill.
She read from slide 7:
· Section 1 amends AS 29 by adding a new chapter: AS
29.49: Municipal Property Assessed Clean Energy Act
· AS 29.49.020 Would allow for a property tax
assessment to be added for financing of qualified
projects on real property.
o Improvements may not be made to vacant lots or
property undergoing development at the time of
assessment
o Not to finance purchase of temporary products
or anything not permanently fixed to real
property
· AS 29.49.30 Would require a written contract between
the local government and record owner of the real
property
Ms. Ford continued on slide 8:
· AS 29.49.040 Establishes the program
o Local government may enter into a contract with
a property owner to impose an assessment.
Financing can be provided by the municipality
or a third-party
o If third-party financing is used, the
municipality, third-party financer and real
property owner must all enter into a contract
o The assessment imposed may cover some costs for
the commercial property owner, including permit
and lenders fees, administration, and project
development and engineering costs
· AS 29.49.050 Designates the Eligible Region
o The municipality's governing body may designate
one or more area(s) of the municipality (within
its jurisdiction) as a PACE-eligible region(s)
Ms. Ford commented that the provision for designating the
eligible region was consistent with land use policies, and
was a tool for incentivizing commercial districts.
2:06:04 PM
Ms. Ford explained went over slide 9:
· AS 29.49.060 Defines the Procedure to Create the
Program
o If the municipality chooses to create a PACE
program the governing body of a municipality
must (in order):
1) Adopt a resolution of intent that
ƒ shows that providing the PACE program
serves a valid public purpose
ƒ includes a statement the municipality
intents to make PACE available to
commercial property owners
ƒ includes a description of qualified
projects
ƒ describes the boundaries of the region
ƒ describes the available financing for
qualified projects (i.e. bonds, local
lenders, etc.)
ƒ describes the municipal debt servicing
procedures if third-party financing is
used
ƒ describes how the public can access the
program report required by AS 29.49.070
ƒ identifies public contacts regarding the
collection of the proposed contractual
assessments
Ms. Ford continued on slide 10:
· AS 29.49.060 Defines the Procedure to Create the
Program
o The governing body of a municipality must:
2) hold a public hearing with opportunity for
public comment
3) adopt a resolution establishing the program,
including terms consistent with the publicly-
available program report required by AS 29.49.070
o the description of each aspect of the
program can only be amended after another
public hearing
o The program can only be amended by resolution
o A municipality may hire and set compensation for
a program administrator, staff or contract for
professional services
o A municipality may impose fees to offset the
costs of administering the program, to include an
application fee and/or a component of the
interest rate
Ms. Ford turned to slide 11:
· AS 29.49.070 Requires a Publicly-Available Program
Report
o The report must include:
ƒ a map of the program region boundaries
ƒ a form contract between the municipality
and the property owner that specifies the
terms of the assessment and any financing,
including third-party and municipal
ƒ if appropriate a form contract between the
municipalities and the third-party
financer regarding the servicing of the
debt through assessments
ƒ a description of qualified projects
ƒ a plan for ensuring sufficient capital
ƒ if bonds are used the report must include:
· a maximum aggregate annual dollar
amount for financing
· a method for ranking requests from
property owners
· a method for determining the interest
rate and maximum amount of an
assessment
ƒ a method for ensuring the repayment period
does not exceed the useful life of the
qualified project
2:07:54 PM
Ms. Ford continued on slide 12:
· AS 29.49.070 Requires a Publicly-Available Program
Report (continued)
o The report must include:
ƒ a description of the application process and
eligibility requirements
ƒ a method for ensuring qualified applicants
can demonstrate financial ability to fulfill
financial obligations and verify the
applicant is the legal owner of the
property, is current on mortgage and
property taxes and is not insolvent or in
bankruptcy
ƒ an explanation of the assessment and
collection process
ƒ an explanation of the lender notice
requirement provided by AS 29.49.080
ƒ an explanation of the review requirement
provided by AS 29.49.090
ƒ a description of the marketing and education
services to be provided
ƒ a description of quality assurance and
antifraud measures
ƒ collection procedures
ƒ a requirement for an appropriate ratio
between the assessment and property value
o The report must be available online and at the
municipal offices
Ms. Ford explained slide 13:
· AS 29.49.080 Notice to Mortgage Holder Required
· AS 29.49.090 Review Required
o A third-party baseline energy audit and projected
energy savings are required
o Once a qualified project is complete, the
municipality shall obtain third-party verification
that the project was properly completed and
operating as intended
· AS 29.49.100 Direct Acquisition by Owner
o The property owner may be authorized to purchase
directly the related equipment and materials or
contract directly, including through lease, power
purchase agreement or other service contract for
the installation or modification of a qualified
improvement
Mr. Therriault clarified that the required notice to the
mortgage holder (AS 29.49.080) was one of the protections
he had mentioned earlier. He discussed working with the
Alaska Bankers Association, and noted that if a commercial
business had a mortgage to a local bank, permission from
the mortgage holder was required before initiating PACE
financing. He explained that the PACE financing appearing
on the property tax bill would become a superior lien and
relegate the mortgage to a secondary position. He furthered
that more banks across the nation were willing to do so, as
the PACE financing was collateralizing the mortgages and
making the associated businesses more financially viable.
With the provision included, the bankers association
supported the legislation.
Mr. Ford read from slide 14:
· AS 29.49.110 Contractual Assessment must be Noticed
o Written notice of each contractual assessment
shall be filed by the municipality in the real
property records, including the assessment
amount, legal description of the property, name
of each property owner and the reference to the
statutory assessment lien provided under this
chapter
· AS 29.49.120 Contractual Assessments and any Interest
or Penalties are Primary Liens on the Property
o exceptions are municipal tax liens and special
assessments
o enforcement provided in AS 29.45.320-470
o contractual assessment liens stay with the land
and not eliminated by foreclosure
o penalties and interest may be added to delinquent
installments, as provided in AS. 29.45.250
o municipalities may recover cost and expenses,
including attorney fees to collect a delinquent
installment
· AS 29.49.130 Collection of Assessments
o Municipalities may contract with another
governing body of another taxing unit to perform
assessments collections
Ms. Ford noted that AS 29.49.130 was important to smaller
communities that might not have the internal capacity to be
able to administer a PACE program.
2:10:24 PM
Ms. Ford presented slide 15:
· AS 29.49.140 Municipalities may Issue Bonds or Notes
to Finance Qualified Projects
o These may not be general obligations bonds and
must be secured by one or more of the following:
ƒ payments of the contractual assessments
ƒ municipal reserves from grants, bonds, or
net proceeds and other lawfully available
funds
ƒ municipal bond insurance, lines of credit,
public or private guarantees, standby bond
purchase agreements, collateral assignments,
mortgages, or available means of providing
credit support or liquidity
ƒ any other funds lawfully available for
purposes consistent with this chapter
o A municipal pledge of assessments, funds, or
contractual rights in connection with the
issuance of bonds is a first lien valid and
binding against any other person, with or without
notice
o Bonds or notes issued must further an essential
public and governmental purpose, including
reducing energy costs, improving electrical
reliability, reduction of energy demand on
utilities, economic development, employment and
enhancement of property values
Mr. Therriault pointed out that the section contained
another of the aforementioned protections; general
obligation bonds could not be utilized, and PACE could be a
sub-unit of the borough. A revenue bond would entail money
loaned out and paid back by the specific property owners
that used the funds.
Ms. Ford moved to slide 16.
· AS 29.49.150 Joint Implementation
o Any combination of municipalities may agree to
jointly implement or administer a program or
contract with a third party. A public hearing
as outlined in AS 29.49.060 is required.
· AS 29.49.160 Prohibited Acts
o A municipality that establishes a PACE region
may not compel a property owner to use PACE or,
make any permit, license, or authorization
contingent on a property owner using PACE.
· AS 29.49.900 Adds Definitions of Program, Qualified
Improvement, Qualified Project, Real Property and
Region.
· AS 29.49.995 Adds the Short Title "Municipal
Property Assessed Clean Energy Act."
· Section 2 Establishes an Immediate Effective Date
Mr. Therriault spoke to AS 29.49.160 of the bill, and
stated that it was an important protection; if the local
government chose to offer PACE, they could not coerce any
business owner to use the mechanism. They could not
withhold any license or permit, and it needed to be used by
the business owner on a completely voluntary basis.
2:12:02 PM
Co-Chair MacKinnon thanked the testifiers for their concise
and clear overview.
Senator Bishop asked if Sections 29.49.130 and 29.49.150
helped the hybrid model be conforming. He referenced the
potential PACE models listed on slide 5 and thought that
those sections of the bill made the hybrid model work. Ms.
Ford agreed, stating that it pertained to the collection
aspect of the model.
Co-Chair MacKinnon OPENED public testimony for SB 56.
2:13:31 PM
KATHY WASSERMAN, ALASKA MUNICIPAL LEAGUE, JUNEAU, testified
in support of the bill. She stated that the municipal
league was in favor of the bill, and related that she had
talked at length with Mr. Therriault about the legislation.
She supported the fact that the program was optional. She
discussed cities and boroughs that might participate, and
thought that the legislation could benefit the business
owners as well as the municipalities. She stressed the
importance that the bill allowed for a public process, so
that the members of the community would know what the city
was doing with the funds.
2:15:01 PM
CHRIS ROSE, EXECUTIVE DIRECTOR, REAP, ANCHORAGE (via
teleconference), testified in support of the bill. He
related that REAP was a statewide education and advocacy
group for renewable energy and energy efficiency. The
project had been promoting the idea of property-assessed
clean energy for a couple of years. He considered it to fill
a gap in the state to incentivize commercial building owners
to do energy retrofits. He echoed Mr. Therriault's comments
regarding the 30 percent increase in efficiency. He pointed
out the advantage to communities of having more funds stay
locally rather than being exported for energy costs without
the increased efficiencies.
Senator Dunleavy asked Mr. Rose if his group would benefit
from the legislation, and in what way. Mr. Rose responded
that the project would not benefit from the bill.
Co-Chair MacKinnon CLOSED public testimony for the bill.
2:17:01 PM
Co-Chair MacKinnon asked about Section 29.49.070 of the
bill, and whether community members were required to be in
good standing with regard to their credit rating. She had
observed there were some parameters, but did not notice one
in relation to credit rating. Mr. Therriault did not think
there was a specific requirement related to credit rating,
and inquired if Co-Chair MacKinnon's concern pertained to
securing a source of funds in the bond market or related to
the credit rating of the individual property owner.
Co-Chair MacKinnon commented that there was no language
pertaining to good standing, and expected that a business
owner should be in good credit standing in order to enter
into a relationship with the municipality. She discussed
other funds she had reviewed while chairing the Legislative
Budget and Audit Committee, and wondered if there should be
good standing language in the bill in order to be assured a
business was handling its finances well. Mr. Therriault
thought that there was language somewhere in the bill
intended to make sure that businesses were in good standing
and not in arrears, delinquent, or in bankruptcy; but was
unable to point it out at the moment. He agreed to work
with Co-Chair MacKinnon's staff to point out the relevant
text in the bill.
2:18:48 PM
Co-Chair MacKinnon asked about AS 29.49.090, dealing with
review requirements of the loan; and wondered whether there
was a savings requirement or specific efficiency for a
business to project in order to qualify. Mr. Therriault
relayed that there was a requirement that a business get an
energy audit, then show a plan demonstrating estimated
savings after improvements. He highlighted the importance
of a business showing it was capable of repayment through
the savings.
Co-Chair MacKinnon elaborated that PACE was an optional
program; and observed that in the "green" programs she had
reviewed, it had been beneficial to set a minimum energy
efficiency level. She thought people could start borrowing
funds for improvements at a lower cost than was provided
through the bill, resulting in increased debt for
municipalities. She hoped that after the municipality
incurred debt through the program, the goal of energy-
efficient buildings would be met.
Mr. Therriault remarked that the bond owners would evaluate
the savings achieved through the program to assess that the
funds would pay back the revenue bond. He pointed out that
the bill language specifically prohibited the funds from
becoming a general obligation of the government, and the
repayment stream for the loans were actually the repayment
for the bonds.
2:21:16 PM
Senator Olson found it unusual that a mortgage holder would
agree to be listed as a secondary. He thought that most
banks wanted to retain the primary position, and wondered
what would happen in the eventuality of a downturn in the
economy. Mr. Therriault stated that individual banks would
have to consider the factors, and would have the decision-
making power to deny requests if the economy was not
favorable. He clarified that PACE would still be available
to any business that had no outstanding mortgage.
Mr. Therriault referred back to Co-Chair MacKinnon's
question regarding the verification of good standing of the
property owner, and pointed out the relevant text on the
bottom of page 6 and the top of page 7 of the bill:
(b) The method for ensuring a demonstration of
financial ability under (a)(9) of this section must be
based on appropriate underwriting factors, including
(1) providing for verification that
(A) the property owner requesting to
participate under the program is
(i) the legal owner of the benefited
property;
(ii) current on mortgage and property
tax payments; and
(iii) not insolvent or in bankruptcy
proceedings; and
Ms. Ford added that bill also required an appropriate ratio
between the assessed value of the property and the proposed
improvements.
Co-Chair MacKinnon asked about AS 29.49.140 regarding bonds
under notes. She inquired if municipalities would access
the state municipal bond bank to provide backing for the
loans. Mr. Therriault did not believe so, and clarified
that the revenue bonds were backed by the program they were
operating, rather than being a general obligation of the
municipality.
Mr. Therriault relayed that the bill sponsors had worked
with members of the other body on "small tweaks" to the
bill, and advised that he would be amenable to working with
Co-Chair MacKinnon's staff to make recommendations as she
considered any changes to the bill. He agreed to provide
the changes in writing.
SB 56 was HEARD and HELD in committee for further
consideration.
SENATE CONCURRENT RESOLUTION NO. 1
Relating to a legislative task force on civics
education.
2:24:42 PM
Co-Chair MacKinnon stated that SCR 1 was previously heard
and the public testimony had been opened and closed.
Vice-Chair Micciche discussed FN 2, explaining that there
was a zero fiscal note on operating from FY 16 through FY
21. He explained that this revised fiscal note differed
from the previous in that the $5.9 thousand dollars in
travel costs requested on the previous note would be
absorbed, and it was truly a zero fiscal note.
Co-Chair MacKinnon asked for confirmation that the bill
would be of no additional cost to the state.
TIM LAMKIN, STAFF, SENATOR GARY STEVENS, explained that FN
2 was indeed a zero fiscal note and the bill would have
zero cost.
Senator Dunleavy stated that he had heard the bill in the
Senate Education Committee and thought it was a good
approach to trying to deal with an issue of civics that
seemed to be a growing problem in the United States. He
supported the legislation.
2:26:53 PM
Senator Olson wondered if the bill would be viewed by
educators as an unfunded mandate. Mr. Lamkin related that
it was not the intent of the sponsor to increase mandates
or obligations for school districts. He thought the task
force would be sensitive to the issue of unfunded mandates.
Senator Olson wondered if the sponsor had heard from any of
the school districts as to whether they were in favor of
the bill. Mr. Lamkin did not have anything in writing to
demonstrate such support, but noted that school board
members were listed in the resolution as part of the task
force.
Vice-Chair Micciche MOVED to REPORT CSSCR 1(EDC) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSSCR 1(EDC) was REPORTED out of committee with a "do pass"
recommendation and with one new zero fiscal note from the
Senate Finance Committee for the Legislature.
2:28:44 PM
AT EASE
2:30:38 PM
RECONVENED
SENATE JOINT RESOLUTION NO. 2
Proposing an amendment to the Constitution of the
State of Alaska relating to contracting state debt for
postsecondary student loans.
2:30:50 PM
KRISTEN PRATT, STAFF, SENATOR ANNA MACKINNON, explained
that she was available to go over the resolution or answer
any questions from the committee.
2:31:32 PM
AT EASE
2:31:56 PM
RECONVENED
Senator Dunleavy discussed the fiscal note. He explained
that the bill would put a constitutional amendment on the
ballot, and the fiscal note was estimated at $1500 to print
ballots. He thought that the two page fiscal note indicated
the cost could go up to $22 thousand [he later corrected
himself].
2:32:34 PM
AT EASE
2:33:15 PM
RECONVENED
Senator Dunleavy corrected himself and explained that there
was a zero fiscal note.
Co-Chair MacKinnon confirmed that the fiscal note was zero.
She remarked that passage of the resolution would require a
constitutional amendment to appear on the 2016 general
election ballot.
Senator Dunleavy MOVED to REPORT SJR 2 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
SJR 2 was REPORTED out of committee with a "do pass"
recommendation and with one previously published zero
fiscal note: FN1 (GOV).
2:34:01 PM
AT EASE
2:36:39 PM
RECONVENED
SENATE BILL NO. 22
"An Act relating to the collection costs for the
municipal motor vehicle registration tax; and
providing for an effective date."
2:36:47 PM
SENATOR CATHY GIESSEL, SPONSOR, introduced the bill. She
explained that since the inception of the motor vehicle
registration tax system in 1993, the cost to the state (in
collecting taxes for municipalities) had been reduced
considerably, while the rate charged to communities had
not. SB 22 proposed to reduce the amount that the state
collected from each community that signed on to the
program. She directed attention to the second page of FN 1,
and discussed the list of communities in which local motor
vehicle taxes were collected and 8 percent was retained by
the state. She pointed out that the communities did not
incur 8 percent cost to conduct the tax collecting
activity, and the bill proposed to reduce the
administrative fee to 5.5 percent. The proposed amount was
more closely calculated to the actual cost for the Division
of Motor Vehicles (DMV). She emphasized that there were no
new costs or fees to the state, and the bill left more
money in the communities.
Co-Chair MacKinnon OPENED public testimony.
2:39:35 PM
DANIEL MOORE, TREASURER, MUNICIPALITY OF ANCHORAGE,
ANCHORAGE (via teleconference), testified in support of the
bill. He related that in 2012, the Municipality of
Anchorage increased its rate schedule for the motor vehicle
registration program, almost doubling the rates to match
the rates of Mat-Su. He described the disproportionate
administrative costs of the tax collection after the
dramatic increase in fees, despite the fact that the scope
of work was unchanged. He estimated that the Municipality
of Anchorage was paying the DMV about $500,000 more per
year than it had in prior years. He added that the
Anchorage area had 45 percent of all registered vehicles in
the state, and prior to 2012 it paid 45 percent of the
administrative cost to DMV. Due to the rate schedule
update, the municipality currently paid 59 percent of the
administrative cost. By changing the statutory rate from 8
percent to 5.5 percent, the new payment amount would be
proportionate and benefit the participating communities. He
estimated the each community would gain about 3 percent
additional revenue if the bill successfully passed into
law.
2:42:02 PM
Co-Chair MacKinnon CLOSED public testimony.
Co-Chair MacKinnon reiterated that the committee was
working on the capital budget, and would stand in recess
until later in the day.
SB 22 was HEARD and HELD in committee for further
consideration.
2:42:55 PM
RECESSED
8:50:51 PM
RECONVENED
SENATE BILL NO. 26
"An Act making appropriations, including capital
appropriations and other appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
8:51:19 PM
Vice-Chair Micciche MOVED to ADOPT the committee substitute
for SB 26, Work Draft 29-GS1781\I (Martin, 4/9/15). Co-
Chair MacKinnon OBJECTED for discussion.
LAURA PIERRE, STAFF, SENATOR ANNA MACKINNON, explained the
difference between the proposed committee substitute (CS)
and the previous version of the bill, detailing that the
committee cut the governor's proposed capital budget by $40
million for a total capital budget of $1,500,829,300. She
specified that the budget was broken into an Unrestricted
General Fund (UGF) total of $108,318,036, a Designated
General Fund (DGF) total of $56,325,100, an "Other" fund
total of $61,233,800, and $1,274,952,400 in Federal
Receipts.
Ms. Pierre discussed the changes reflected in the CS. The
new bill consolidated the allocations for the Municipal
Harbor Facility Grant Fund, which would give the Department
of Transportation and Public Facilities (DOT) more
flexibility in how it could disperse the funds to
municipalities and complete projects. She continued that
the new bill funded the Alaska Donor Services Program for
operational costs in the amount of $75,000; and in order
for the program to access the funds an allocation in the
capital budget was required. The bill added a
reappropriation of legislative appropriations in the amount
of $211,000 for the Senate Special Committee on the Arctic,
for work to be conducted during the 29th Alaska State
Legislature. Additionally, reappropriations were added to
the Alaska Housing Capital Corporation (AHCC) account,
brought forward by members who were lapsing.
Ms. Pierre continued that a $45 million fund transfer was
removed from the Alaska Capital Income Fund to the AHCC
account. As a result, $43,237,400 was added to the School
Construction Grant Fund to build a new school for Kivalina
per the consent decree and settlement agreement from the
Kasayulie lawsuit [a 2011 settlement for the 1997 case of
Kasayulie vs. State of Alaska pertaining to equity in
education].
8:54:38 PM
Ms. Pierre specifically thanked Hilary Martin from the
Legislative Legal Department and staff from the Legislative
Finance Division.
Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO
further OBJECTION, it was so ordered.
Co-Chair MacKinnon MOVED to ADOPT Amendment 1, 29-
GS1781/I.1, Martin, 4/9/15 (copy on file):
Page 33, following line 18:
Insert a new subsection to read:
"(e) The amount necessary for Dalton Highway disaster
emergency repairs, not to exceed $5,000,000, is
appropriated from the general fund to the Department
of Transportation and Public Facilities for that
purpose."
Vice-Chair Micciche OBJECTED for discussion.
Co-Chair MacKinnon explained that the amendment had been
brought to the committee by the administration. She
mentioned that there was an emergency happening on the
Dalton Highway.
8:56:01 PM
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, explained Amendment 1. She stated
that on March 13, 2015; there was an ice jam on the Sag
River (mile 390 to 410 of the Dalton Highway near
Deadhorse) which created an ice floe/flood over the road
and stopped traffic. The road had been closed for some time
and when open was limited to one lane of traffic. She
recounted that she had shared photos of the ice jam and
highway blockage with Co-Chair MacKinnon's office earlier
in the day. She related the DOT Commissioner Marc Luiken
was on site, and highlighted the importance of getting the
road open. She continued that industry members had been
working closely with state personnel to provide contractors
to help clear the road. The previous day there was a
disaster declaration for the flooding on the road, which
put the state into a faster procurement role. She furthered
that the amendment would provide up to $5 million to
continue to mitigate flooding and keep traffic passing
through the area.
Vice-Chair Micciche wondered if there was any potential for
federal aid to offset the costs of cleanup and repairs. Ms.
Pitney replied that she was optimistic that the federal
government would offer financial aid based on the state's
disaster declaration. She related that the Federal Highway
Administration (FHWA) would be coming to assess the
flooding to determine whether it fit within the rules for
federal response. She specified that if criteria were met,
some of the federal response would be funded at 100
percent, and other work would be funded at the 90 - 10
federal rate. There were items that would not qualify for
federal response, however the administration was
"cautiously optimistic" that there would be some federal
aid. She reiterated the importance of getting the road
open, and estimated that at a minimum the state would be
responsible for $700,000 in up-front costs. She explained
that until the threshold was passed, there would be no
sharing of costs.
8:59:19 PM
AT EASE
8:59:44 PM
RECONVENED
Vice-Chair Micciche wondered if the funds in the amendment
were only a contingency, and the state would not end up
using the $5 million being requested. Ms. Pitney replied
that there would be a minimum of $700,000 used. She agreed
to share Commissioner Luiken's eyewitness account of with
Vice-Chair Micciche after the meeting; and related that the
commissioner was optimistic there would be federal funding.
She related that the commissioner had been amazed by the
size and amount of ice.
Co-Chair MacKinnon wondered if there was any comment from
DOT/PF with regard to use of the funds, and perhaps
assurance as to how they would be used.
MARY SIROKY, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, shared
that DOT had officially notified FHWA of the intent to seek
emergency response funding. The department had various
conversations with regional federal representatives, and
she thought there had also been conversations at a higher
level. She shared that the department was optimistic that
FHWA would participate in the disaster relief efforts. She
discussed the concern over what the FHWA would consider
"fundable" and what the state considered necessary to get
the road open. She remarked that there may be more severe
infrastructure damage to the road, once the flooding was
under control and ice was removed.
Ms. Siroky continued that the department had a plan in
place, had contractors on site, and hoped to have at least
one lane open by the following day.
9:02:39 PM
Senator Olson wondered if any occurrences of the same
magnitude had happened in the area in the past. Ms. Siroky
replied that there had never been anything of the same
magnitude before. She described photos of the site as
amazing, and stated that it was impossible to discern where
the overflow ice started and ended. She reiterated that
Commissioner Luiken had been astounded at the sight.
Senator Olson asked if there were plans in place to prevent
a recurrence. Ms. Siroky replied that there were already
two projects for raising the roadbed on the Dalton Highway
that were already in the funding queue. She added that the
projects were anticipated to start the following summer.
9:04:00 PM
Co-Chair MacKinnon WITHDREW her OBJECTION to Amendment 1.
There being NO further OBJECTION, Amendment 1 was ADOPTED.
Senator Olson MOVED to ADOPT Amendment 2 (copy on file).
Co-Chair MacKinnon OBJECTED for discussion.
Senator Olson explained the amendment, which would fund the
Kivalina road at $2.5 million. He remarked that there was
funding in the budget for the Kivalina school for
approximately $43 million, but a road was needed before the
school could be built. He remarked that there were several
estimates on the cost for the road. The $2.5 million in the
amendment would provide seed money in order to try and
secure federal funding from the Bureau of Indian Affairs
(BIA), Indian Reservation Roads Program (IRR). He commented
that the governor was in support of the amendment. He and
pointed out that the amendment in no way obligated the
state to fund the remainder of the road, and referred to a
relevant memo from the Division of Legal and Research
Services dated April 9, 2015 (copy on file).
Senator Dunleavy also objected to the amendment. He
remarked that there were various issues with moving the
amendment forward. He did not think the state should get
involved in building a road that may lead to later
obligations of moving the town of Kivalina [as erosion
would necessitate]. He did not feel that the state should
take on the construction of the road.
Co-Chair MacKinnon handed the gavel to Vice-Chair Micciche.
9:06:53 PM
AT EASE
9:07:19 PM
RECONVENED
Co-Chair MacKinnon shared that the committee was currently
reviewing several pieces of correspondence from Department
of Education and Early Development (DEED) Commissioner
Michael Hanley regarding the litigation associated with the
Kivalina school, and did not believe that the road was part
of the resultant Kasayulie settlement.
Senator Dunleavy MAINTAINED his OBJECTION.
Senator Olson shared that the amendment had been an element
of concern due to costs associated with the road. He
discussed the Kasayulie settlement, and recognized the need
for the road. He referred back to the letter from the legal
department that indicated that the state was not
necessarily liable for its construction. He asked for
support of the amendment.
A roll call vote was taken on the motion to adopt Amendment
2.
IN FAVOR: Olson
OPPOSED: Kelly, Bishop, Dunleavy, Hoffman, Micciche,
MacKinnon
The MOTION FAILED (6/1).
Senator Dunleavy MOVED to ADOPT Conceptual Amendment 3. He
described the amendment as legislative intent regarding the
Kivalina School:
a. The legislature declines to fund the Kivalina K-12
School renovation/addition under the 2011 consent
decree and settlement agreement in Kasayulie vs. State
(3AN-97-3782CIV September 1st, 1999) because of
concerns about erosion and viability of the school
site.
b. The legislature declines to fund a Kivalina
replacement school at the new school site because of
concerns about erosion and viability of the new school
site.
c. The settlement terms of the January 7, 2015 letter
from the Citizens for the Educational Advancement of
Alaska's Children are unacceptable to the legislature.
Senator Dunleavy explained that the amendment would remove
the funding for the Kivalina School project. He argued that
the decree specifically provided for the legislature to
decline funding which would not trigger a reopening of the
case. The amendment also put the findings on permanent
record as to avoid future misunderstanding.
9:11:00 PM
AT EASE
9:11:42 PM
RECONVENED
Co-Chair MacKinnon brought up the aforementioned legal memo
pertaining to the Kivalina School construction, and shared
that she would speak in opposition to Conceptual Amendment
3 based on advice from the Attorney General's office, as
well as the memo. It was her belief that the state was
responsible for some amount of money to Kivalina, although
the matter was still in dispute and not final as to whether
the project should be a renovation (for much less funds) or
a new school entirely.
Senator Olson referred to the consent decree and stated
there was strong evidence that it was not up to the
legislature to fund or not fund; rather, the funding had
been mandated and therefore he wondered about the validity
of the conceptual amendment to withstand legal challenge.
9:13:32 PM
AT EASE
9:17:28 PM
RECONVENED
Vice-Chair Micciche queried what conditions were on the
previously appropriated funds for the Kivalina School. Co-
Chair MacKinnon replied that there was a direct
appropriation for the Kivalina School in compliance with
the settlement.
Ms. Pierre announced that the appropriation was to the
School Construction Fund, and would lapse after five years
if unspent (like any other capital project).
9:19:00 PM
Senator Dunleavy directed the committee's attention to page
1, second paragraph of the memo. He read the passage:
Note, as a preliminary matter, that the consent decree
specifically provides that the parties cannot bind the
legislature.
Senator Dunleavy pointed out the words "legislature" and
"state", and reminded the committee that the legislature
was the fiduciary or funding arm of state government.
Senator Dunleavy directed the committee's attention to page
2, first paragraph of the memo. He read the passage:
(Consent decree, p. 6.) The consent decree is slightly
ambiguous in this regard…
Senator Dunleavy remarked that he was attempting to clear
up any ambiguity, so that the legislature (as opposed to
the state) was not liable for future obligations toward the
"whole Kivalina concept."
9:20:49 PM
Senator Dunleavy directed the committee's attention to page
2, second paragraph of the memo. He read the passage:
The consent decree requires that the state include the
"Kivalina K-12 school renovation/addition" in the
governor's proposed capital appropriations budget
bill. (Id.) The consent decree also provides that "if
the Legislature declines to fund, or places
contingencies on the Kivalina school project because
of concerns about erosion or viability of the school
site, the lack of funding or contingencies will have
no effect on the settlement, and cannot be used by
plaintiffs to reopen the litigation."
Senator Dunleavy stated there was an issue with the
terminology used in the memo, and considered the use of
"legislature" and "state" to be incorrectly differentiated.
He argued that the legislature was part of the state. He
suggested that the administration had put the legislature
in an obligation, to some degree, regarding the school. He
recognized that there was a legitimate issue in the
Northwest Arctic in the town of Kivalina. He pointed out
that the project had originally been a settlement on a
school to do a renovation on-site, starting with a cost $14
million. He expressed concern that the state inadvertently
would be responsible for a much larger obligation.
Senator Dunleavy referred back to the legal memo, and
pointed out that the document referred to "state" and
"legislature" and rarely mentioned "administration."
Senator Dunleavy directed the committee's attention to page
2, third paragraph of the memo. He read the passage:
Further, under the consent decree, the legislature can
decline to fund the Kivalina K-12 school project if it
has concerns about erosion or viability of the
existing school site.
Senator Dunleavy further explained Conceptual Amendment 3.
He reiterated that the purpose would be to remove the
school funding, and stated that he would not have objected
to funding the school and having the funds be put into
escrow or contingency funds that isolated the monies
specifically for the Kivalina School. He hoped the end
result was that the funding would remain school-focused
rather than being used for road or town site projects,
which he thought should be separate discussions. He thought
there were ambiguities (as the letter mentioned) and that
the legislature was singled out as not being obligated to
fund the school. He continued that there was discussion in
the memo implying that the state was obligated. He
reiterated that the purpose of the amendment was to isolate
the school funding to keep it designated only for the
particular school.
9:25:32 PM
AT EASE
9:26:00 PM
RECONVENED
Senator Dunleavy asked for the support of the committee for
Conceptual Amendment 3.
Co-Chair MacKinnon directed the committee's attention to
page 3, paragraph 4 of the legal memo. She read the
passage:
Failure to appropriate any funding does not, however,
resolve the state's constitutional obligations.
Co-Chair MacKinnon MAINTAINED her OJECTION.
A roll call vote was taken on the motion to adopt
Conceptual Amendment 3.
IN FAVOR: Dunleavy
OPPOSED: Olson, MacKinnon, Bishop, Hoffman, Micciche, Kelly
The MOTION FAILED (6/1).
9:27:09 PM
Senator Dunleavy offered Conceptual Amendment 4:
Any funds appropriated for this project shall be
placed in a joint escrow account to be spent only for
direct construction/design for a school structure
serving Kivalina. These funds shall automatically,
without further action by either party, be swept back
into the state general fund if construction is not yet
commenced prior to April, 2022.
Senator Dunleavy characterized the amendment as an attempt
to safeguard the public funds for the issue of the Kivalina
School. He reiterated that the idea was to focus solely on
funding the school rather than a road, relocation, or a new
site.
Co-Chair MacKinnon OBJECTED for discussion.
Co-Chair MacKinnon found the amendment to be "intriguing"
and thought that it had merit. She remarked that the
previous amendment also had merit for the purposes of
discussion and reducing the state's liability in a piece of
legislation and litigation that was before the legislature.
She expressed a commitment to working towards making sure
the children of Kivalina saw direct benefit from the
appropriation and allocation being considered for the
Kivalina School. She opposed the amendment and believed the
committee should work with the legislative legal department
to ensure there was compliance with the decree. She wanted
to review the relevant language and work with Senator
Olson.
Senator Olson inquired how Senator Dunleavy came up with a
construction commencement deadline of 2022.
9:29:40 PM
AT EASE
9:29:50 PM
RECONVENED
Senator Dunleavy explained that the date specified in the
amendment was an estimate based on seven consecutive
construction seasons.
Senator Dunleavy WITHDREW Conceptual Amendment 4. There
being NO OBJECTION, it was so ordered.
Senator Dunleavy MOVED Conceptual Amendment 5. He explained
that the amendment would remove all references to the
figure of $43,237,400 for the Kivalina School and replace
it with $14,724,714 [the original capital improvement
project (CIP) amount for major maintenance] adjusted for
present day value from July 1, 2012. He explained that the
amounts in question pertained to language in the decree on
the CIP list when the funds were earmarked for that date
for renovation of the school.
Co-Chair MacKinnon OBJECTED for discussion.
9:31:12 PM
Vice-Chair Micciche stated that he supported $43,237,400 in
school funding for Kivalina in order to prevent the state
from being at risk for litigation being reopened and
subsequently being responsible for the purchase of an
entire school at a much higher cost (nearing $100 million).
Vice-Chair Micciche referred to page 5 of the legal memo,
which discussed a limit to the state's liability. He
specified that the cost of the replacement school for
Kivalina was based off of the 2013 CIP process. He referred
to the second paragraph on page 5, and read the following
passage:
Because the consent decree specifically provides that
the amount of the appropriation would be determined
through the 2013 CIP process, the consent decree
places the risk of a project that exceeds the budget
on Kivalina. If the project exceeds the costs
estimated in the 2013 CIP, the state may not be
required to provide additional funding. If the
legislature takes this approach, the state will have
met its obligations and CEAAC would not have a strong
argument for reopening the litigation.
Vice-Chair Micciche reiterated his concern that the state
could be responsible for greatly increased costs if it did
not meet its responsibility to fund the school as planned.
Senator Olson agreed with Vice-Chair Micciche that there
was a possibility of litigation over the Kivalina School
being reopened. He respectfully asked Senator Dunleavy to
withdraw his amendment.
Senator Dunleavy expressed appreciation for Senator Olson's
words, but wanted the committee to vote on Conceptual
Amendment 5.
9:33:41 PM
Co-Chair MacKinnon expressed appreciation for an
opportunity to discuss the issue and the children of
Kivalina, who had waited for 15 years while the issue of
the school was debated. It was her view that the state
should meet its obligation to take care of the children and
students of Kivalina.
A roll call vote was taken on the motion to adopt
Conceptual Amendment 5.
IN FAVOR: Dunleavy
OPPOSED: Micciche, Olson, Kelly, Bishop, Hoffman, MacKinnon
The MOTION FAILED (6/1).
9:34:24 PM
Senator Dunleavy expressed appreciation for the discussion.
He agreed with Co-Chair MacKinnon that the children of
Kivalina deserved a school and a great education. He
reminded the committee that he had spent 13 years near
Kivalina, much of it as an educator and administrator. He
relayed that he had visited Kivalina on numerous occasions,
and looked forward to the fact that the children would be
getting a new school. He emphasized that he would like
continued discussion pertaining to constraining the funding
in some way so it did not morph into funding something
other than a school. He referred back to the legal memo,
and claimed it "betrays a weak link in our situation." He
opined that the state was responsible for things the
administration had agreed to, and for that reason he wanted
to pursue further discussion.
Co-Chair MacKinnon brought up the aforementioned letters
from DEED and concurred that the department had exceeded
its authority in some of the language that was used for the
Kivalina School appropriation.
Vice-Chair Micciche shared the concerns of Co-Chair
MacKinnon and Senator Dunleavy. He highlighted protecting
the state from additional expenses and possible reopening
of litigation over the Kivalina School.
9:37:28 PM
Co-Chair MacKinnon made a statement:
In 1999 Kasayulie vs. State a superior court found
that the legislature had not met its constitutional
obligations to maintain, by general law, a system of
public school open to all children of the state. In
response to the superior court order, and to meet the
state's obligation under the consent decree, we
entered in to resolve the litigation. The legislature
had previously provided appropriations for school
construction projects in Emmonak, Koliganek,
Nightmute, Kwethluk. Through the capital improvement
project grant program and passed legislation to
equalize funding for rural and municipal school
construction needs, in this budget the legislature is
appropriating $43,237,399 for school construction in
Kivalina. Kivalina is the last of the five-school
construction project the state agreed to request
funding for in the Kasayulie consent decree. By this
appropriation the state is providing rural schools
with the assurance of adequate facilities, funding
under the capital improvement project grant program
and meeting its constitutional obligations to
establish and maintain a system of public schools open
to all children in the state. With this appropriation,
the legislature intends to resolve the Kasayulie
litigation and further the goal of providing for equal
education opportunities and adequate facilities across
the state.
Vice-Chair Micciche MOVED to REPORT CSSB 26(FIN) out of
committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CSSB 26(FIN) was REPORTED out of committee with a "do pass"
recommendation.
9:39:53 PM
AT EASE
9:41:03 PM
RECONVENED
Senator Dunleavy thanked the committee for the discussion
and working hard on the budget. He referred back to the
Kivalina School, and foresaw the need for future discussion
about education and other items that were constitutionally
mandated by the state. He thought it was important to
ponder the different ways of doing education, and thought
it was possible to do it differently while providing a
quality education for all kids.
Senator Hoffman thanked Co-Chair MacKinnon and her staff
for providing leadership to continue to reduce the capital
budget. He stressed that many people in Alaska did not
fully comprehend the magnitude of the financial problems
the state was faced with. He recognized the needs of the
constituency, and the difficulty of trimming a budget
further than what the governor had proposed.
9:43:09 PM
Vice-Chair Micciche commended Co-Chair MacKinnon and the
co-chair of the operating budget for persevering in a
difficult and unpleasant process. He recognized the
pressure the co-chairs were under, and opined that Co-Chair
MacKinnon was consistent and fair.
Senator Bishop said "good job."
Co-Chair MacKinnon thanked the committee for their efforts.
ADJOURNMENT
9:46:24 PM
The meeting was adjourned at 9:46 p.m.