Legislature(2009 - 2010)BELTZ 105 (TSBldg)
02/04/2010 02:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Overview of Economic Development in Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 4, 2010
2:05 p.m.
MEMBERS PRESENT
Senator Joe Paskvan, Chair
Senator Joe Thomas, Vice Chair
Senator Bettye Davis
Senator Kevin Meyer
Senator Con Bunde
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
Overview of Economic Development in Alaska
- HEARD
PREVIOUS COMMITTEE ACTION
No Previous Action to Report
WITNESS REGISTER
ERIN HARRINGTON
Staff to Representative Austerman
State Capitol
Juneau, AK
POSITION STATEMENT: Commented on economic development in Alaska.
CURTIS THAYER, Deputy Commissioner
Department of Commerce, Community & Economic Development (DCCED)
POSITION STATEMENT: Commented on economic development in Alaska.
TED LEONARD, Executive Director
Alaska Industrial Development and Export Authority (AIDEA)
POSITION STATEMENT: Commented on economic development in Alaska.
MARK DAVIS, Economic Development Officer
Alaska Industrial Development and Export Authority (AIDEA)
POSITION STATEMENT: Commented on economic development in Alaska.
WAYNE STEVENS, President and CEO
Alaska State Chamber of Commerce
POSITION STATEMENT: Commented on economic development in Alaska.
DAVID LAWER, Sr. Vice President and General Council
First National Bank of Alaska (FNBA)
POSITION STATEMENT: Commented on economic development in Alaska.
ACTION NARRATIVE
2:05:29 PM
CHAIR JOE PASKVAN called the Senate Labor and Commerce Standing
Committee meeting to order at 2:05 p.m. Present at the call to
order were Senators Meyer, Davis, Bunde and Paskvan.
^Overview of Economic Development in Alaska
Overview of Economic Development in Alaska
2:06:08 PM
CHAIR PASKVAN said the purpose of today's meeting is the
overview of economic development in Alaska. He applauded the
First National Bank of Alaska's effort in educating the public
on economic issues by distributing the displayed pamphlets. He
said he thinks it is important for the state government to be
responsive to and supportive of the private sector whenever
possible while still being efficient.
2:08:29 PM
ERIN HARRINGTON, staff to Representative Austerman, said she was
here today to give them a quick overview of a document that
Representative Austerman and his staff prepared to engender some
discussion around economic development in state government. She
said this document was presented to the House Community and
Regional Affairs Committee in early December.
SENATOR THOMAS joined the committee.
2:09:25 PM
MS. HARRINGTON said that prior to joining Representative
Austerman's staff she worked for four years as a consultant to
the McDowell Group with a focus on economic development issues
in Alaska, particularly in fisheries, and on her own for a
little while before coming to work for the legislature.
The document was entitled "Economic Development in State
Government." She said it provides a bulleted overview of some of
the things they learned when they began to investigate the way
the state engages in economic development activities. This issue
came to Representative Austerman's attention through his
chairmanship of the House Finance Subcommittee Department of
Commerce, Community & Economic Development (DCCED) budget.
MR. HARRINGTON said a starting point for the conversation was
the need to differentiate between the state's investments in
economic development and its investments in community
development. Those two are intrinsically linked, but they are
also essentially different. Economic development is the effort
the state goes through to support and allow investments to occur
by the private sector that hopefully results in the creation and
retention of wealth and the rising of living standards for
Alaskans. Community development is putting down the kind of
infrastructure to support that kind of investment and includes
things like telephone wires, streets, and schools. Community
development is closely linked to the quality of life that allows
economic development to happen, but their focus was on the
economic development portion.
2:12:10 PM
She emphasized that many entities in the state government work
on economic development, and as a legislator, Representative
Austerman felt his responsibility related to what the state does
because that is where the legislature has some authority and
influence. One of the entities in Alaska is the Office of
Economic Development (OED) within the Department of Commerce,
Community & Economic Development (DCCED). This division has a
leader plus 11 employees that work in five subprograms that are
largely statutorily defined: the film office, business
development, Office of Fisheries, Office of Mineral Development
and tourism.
The Alaska Industrial Development and Export Authority (AIDEA)
is another entity and its primary role is financing economic
development projects. The Alaska Division of Investments
administers and services 12 state loan programs that are all in
the DCCED. Because of statutory history, the bulk of its
programs are focused on the commercial fishing industry. This
division also assists AIDEA with the administration of a couple
of other investment programs. The 12 non-governmental resources
are the Alaska Regional Development Organizations (ARDORs) that
were created through statute and work in regions around the
state.
2:14:43 PM
She said the University of Alaska has the Center for Economic
Development that works with organizations in municipalities and
the small business development centers that work with individual
entrepreneurs. Other departments within the University support
the development of business and the economy.
She said on pages 4-6, the report's brief bullet points explain
how other states are doing economic development. Many states
generated successes in broad economic development as a result of
creating mechanisms that allowed the private sector to have
insight, guidance or even authority over the actions of state
agencies. This has been accomplished in different ways. The
State of Wyoming, for instance, put the functions of economic
development into a public corporation with a board of directors,
and this arrangement is a bit more responsive to the business
community.
2:16:50 PM
Another approach in North Dakota and South Dakota created an
economic development foundation that has the ability to collect
funds to support commerce activities. The foundation has a board
that provides strategic guidance to guide the state's activities
on economic development. She said that state government can't
set a strategic plan for economic development, because that is a
private sector function by its very definition; but the state
can deploy its resources strategically.
2:17:46 PM
MS. HARRINGTON said their research has identified several areas
of discussion for the Legislature and many of those have already
been initiated in one form or another. First was the possibility
of restructuring economic development functions within state
government under alternate models. She noted that Mark Davis,
Economic Development Officer, AIDEA, comprehensively reviewed
what other states had done and went far beyond their report.
A second possibility for discussion was whether or not creating
a non-governmental private sector group to oversee or provide
input for coordination of deployment of state resources with
private sector actions.
A third discussion point the research revealed is the need to
establish or reestablish incentive programs in state government
and to fund them - to allow the private sector to have tools.
For instance, Ms. Harrington said a bill creating a business
development incentive fund was passed in the early 2000s, but it
wasn't ever funded.
Other points of discussion might be to review the budgets of the
University and ARDOR programs that support economic development
for adequacy. Another is the establishment of additional loan
programs to support small business economic development. Also,
there is the possibility of having oversight hearings to get
this conversation going.
MS. HARRINGTON said in November she attended an Institute for
the North and Federal Reserve Bank of San Francisco conference
that had "outstanding" private sector turn out (unlike most
conferences); it also was really focused on small business and
entrepreneurship. People met in a round table forum and
identified means that would help them get their small businesses
off the ground, and there she heard people ask for smaller loan
programs to help support the micro-level investments for the
start-up phase of some companies. Those kinds of conversations
are generating even more ideas.
2:21:31 PM
SENATOR THOMAS said economic development is such a large issue
and every department in government deals with it in some
respect, but deals with it separately rather than coming
together. So, he appreciated the restructuring aspect as an area
of discussion for the Legislature. He remarked that Alaska is
different from most other states in that it doesn't have
infrastructure. Roads need to be built and permits are needed,
and federal regulations have to be complied with. It all takes
time, planning and money.
2:23:17 PM
SENATOR BUNDE said it is not only necessary for the state to
promote economic development and provide subsidies, but it needs
to be aware of what the net return is for those efforts. He said
a report on that should be out relatively soon and he encouraged
her to include that on her list of items for discussion.
2:24:12 PM
CHAIR PASKVAN asked her idea of strategy for deployment of state
resources.
MS. HARRINGTON answered that neither she nor Representative
Austerman had identified a single model at this time. They do
see a need to integrate private sector advice into actions the
government takes. The corporate approach is intriguing - ASMI
and AIDEA are examples - but that is not the only way to do it.
2:27:31 PM
SENATOR MEYER said some people think Alaska is closed to
business or anti-business, and he thought the best way to help
small business is to first help big business like oil and
tourism. Is that her attitude? He asked how Alaska can create a
friendlier investment climate.
MS. HARRINGTON said she wasn't equipped to discuss the oil and
gas industry, but Alaska is open for business - the work they
are doing is a result of that. But other states are more
aggressively showing it by having people ready to respond and
coordinate state resources when an opportunity for success
presents itself.
In Alaska the resources that have been put toward this goal have
been somewhat limited and have been eroded over recent years
until just fragments are left. Ms. Harrington said that Oregon
identified "economic clusters" that presented opportunities for
their state; and in addition to putting resources behind them in
terms of people and development strategy, Oregon developed an
"Oregon Open for Business" website. Alaska has to demonstrate
that it has focus; we have to pull together what have into a
concise picture.
SENATOR MEYER said he thought having a webpage would "go a long
ways."
2:33:12 PM
SENATOR BUNDE said that ACES is working well for the small
companies, but not the legacy fields, and asked her if the state
has an outreach program that would indicate that Alaska is
somewhat user-friendly for the petroleum industry.
MS. HARRINGTON said she didn't know that Department of Natural
Resources (DNR) was doing anything, but DCCED is doing what it
can with staff and statutory obligations in terms of
coordinating outreach for doing business in Alaska.
2:35:44 PM
CURTIS THAYER, Deputy Commissioner, Department of Commerce,
Community & Economic Development (DCCED), said Governor Parnell
and his administration is "working hard to change the direction
of state government and to position Alaska for economic growth."
He believes the best thing government can do is "to know when to
lend a hand and when to get out of the way." Developing Alaska's
energy and other resources, enhancing transportation systems,
improving workforce development and removing barriers that
inhibit opportunity and growth are all goals. The Governor knows
that jobs are a fundamental part of the quality of life for
Alaskan families, so he has made job creation a focus of his
administration. To do this, he has reached out to leaders in
every sector of the state's economy to better understand unique
challenges and perspectives.
MR. THAYER said he has compiled 70 potential projects, both
large and small, from across the state that have been on the
shelf for years and were never advanced - for some reason. They
include hydroponics, fuel storage, and mariculture to name a
few. He has been charged with identifying these projects and
finding what the department can do to advance them. He is in the
process of hiring a specialist to engage the private sector and
has several dynamic candidates who would like to lead the Office
of Economic Development.
2:40:02 PM
MR. THAYER said he would review the Agricultural Revolving Loan
Program, along with the Division of Investments, International
Trade Office, the Alaska Grown Program. Additionally, he said he
is proposing a small business loan program, something that
Alaska has lacked and that has proven to be a huge boon for
small businesses development in other states. He also shared the
Governor's vision for supporting AIDEA and its renewed emphasis
on economic development.
MR. THAYER said the Governor believes that citizens should be
free to create economic wealth and experience a high quality of
life, but the government should not be the primary economic
planner; rather it should be a participant. To this end, he has
committed senior staff and financial support to "Alaska
Forward," a comprehensive economic development strategy. Funding
was also provided by the Denali Commission as well as
leadership by the Alaska Partnership.
2:42:23 PM
SENATOR THOMAS asked what he thinks is the number-one stumbling
block in economic development.
MR. THAYER responded that he has been trying to figure out
exactly what the state is doing now, and then seeing what can be
done to bring different agencies together to coordinate their
efforts. He said ironically, the Office of Economic Development
has a budget of $3.3 million out of the DCCED's budget of $200
million - and only $300,000 of that is from the general fund.
One thing he has discovered is that the state is its own worst
enemy. One state agency or division can hold up economic
development and a couple of phone calls later, something gets
moved. It shouldn't be that way and he is trying to figure out
where some of those barriers can be removed.
2:44:15 PM
SENATOR THOMAS said it seems every time he turns around, when he
is talking to resource developers around the state, the issue
that comes up first is energy, and it just seems that support
for small to medium efforts doesn't exist, especially in the
rural areas and Fairbanks. He has been told that it is hard to
attract interest from outside the state of Alaska - not because
it's an unfriendly place to do business, but simply doesn't it
doesn't allow them to build the facilities they want to build
while having reliance on a long-term energy or heating source.
MR. THAYER agreed; Southcentral has had long-term, stable and
cheap energy for many years and now energy is going to market
prices. Box stores want to come into Fairbanks, but until it has
stable natural gas they don't want to invest there; the same
thing for attracting manufacturing to Anchorage.
2:46:59 PM
In Kenai, he related that a third party wanted to put a gas
storage facility in an empty well. It was in the process of
buying 40 acres from the University and needed an adjoining 8
acres, which was owned by the city. The city was willing to sell
it, but it had a conservation easement that the state agency was
not willing to let go. A call from the Governor changed that and
all of a sudden the project could move forward.
2:48:04 PM
CHAIR PASKVAN said people know Alaska has limited resources and
the Legislature is trying to develop a strategy for their
deployment for at least 50 years out. What would be the best
structure to think about?
MR. THAYER said other states have done some good things that
Alaska can look at, but the department has to keep Alaska's
uniqueness in mind. For instance, some of the other states'
economic development is stealing businesses from across the
river, the border, or from across the highway; but Alaska is
1500 miles away from moving a business!
He said that right now he is taking "a hard look" at how the
Office of Economic Development can better partner with the
Division of Investments and AIDEA and to identify loan programs
that to see if existing programs can be incorporated into a
model. He said he needs a little bit of time to do this. Someone
who is connected to AIDEA needs to go out into the business
community to look for what is needed - sort of like an
ombudsman.
2:51:19 PM
CHAIR PASKVAN said the Labor and Commerce Committee is tasked
with making sure the state's resources are used in the most
efficient manner, and when he hears "uncoordinated resources"
that says they need to think more about what to do and develop
strategies that focus these uncoordinated resources. He urge the
department to keep it in the loop.
2:52:55 PM
SENATOR BUNDE said he liked the idea of streamlining, but
accountability is needed. He was interested in when the report
on the net return to the state from subsidizing development
efforts would come out.
MR. THAYER said an economist is working on those numbers, but
without a sales or income tax, net return is hard to calculate.
He wants each area to develop a business plan with goals, a
strategy for getting there, and a way to measure the results.
2:54:37 PM
SENATOR THOMAS asked if he feels his job is to identify and
prioritize the larger issues that create difficulty for
development in the state.
MR. THAYER answered yes; he wants make sure that government
agencies are coordinated so that his list of projects have
adequate resources to move forward. The legislature can help
prioritize the projects.
2:56:50 PM
TED LEONARD, Executive Director, Alaska Industrial Development
and Export Authority (AIDEA), related that it has been engaged
in developing a long-term comprehensive, strategic process and
plan since the fall of 2008. An "environmental scan" was part of
the part of this effort and it showed that the Authority has
tools in place that can be used to enhance statewide economic
development. However it also showed that stakeholders viewed
AIDEA as being "reactive" and felt that it should take a more
"proactive" role in promoting economic development. He said that
AIDEA's programs from financing and project development to
commercial lending provide the potential for such an expanded
role; and based on this planning effort, AIDEA's board modified
its mission statement to be: "Promote, develop, and advance
economic growth and diversification in Alaska by providing
various means of financing and investment." Consistent with this
new mission statement and as well as with the feedback from
their stakeholders to be more proactive, he said: "AIDEA's
strategic vision is to actively partner with Alaskans as a
dynamic resource in statewide economic development."
2:59:13 PM
MR. LEONARD said, therefore, AIDEA has embarked on the following
initiatives:
1. Diversify and grow AIDEA's assets to support economic
development.
2. Improve AIDEA's existing programs and add targeted new
economic development financing tools.
3. Expand the development and impact of AIDEA's economic
development financing.
2:59:47 PM
MR. LEONARD said the results of meeting their initiative is that
AIDEA will: increase its visibility, ensure its decision-making
processes will be driven by database decisions instead of
decisions based on individual "intuition," plan for success by
turning the planning process into an effective accurate forecast
of future events, and also create a culture that is performance-
based on shared accountability and adaptability to changing
economic conditions. In conformity with this vision, AIDEA is
adding staff and reorienting itself to become a more proactive
partner with the private sector, the DCCED, ARDORS, APED, local
governments and other stakeholders. Their main goal is simply to
become a strong resource for Alaska in promoting economic
development.
3:00:55 PM
MR. LEONARD said that one of the key items they are working on
this fiscal year is the development of systems for the rapid and
efficient intake and assignment to pertinent staff of economic
development financing opportunities. They believe the larger
projects will take more than just AIDEA's capacity to finance
them. Internally, AIDEA will create a business and technical
advisory committee to guide the efficient use of its resources
and capabilities and to provide more private sector input.
Externally, they will create the capacity for increased
financial and economic review of potential economic development
projects. AIDEA is also examining the use of financing
opportunities that arise under the American Recovery and
Reinvestment Act (ARRA) that include several new types of
financing bonds: Build America Bonds and Recovery Zone Economic
Development Bonds. They are working to get that information out
to the private sector, other development agencies, and
communities.
MR. LEONARD concluded that a constant theme for Alaskans today
is the high cost of energy, both to the consumers and for
commercial applications. So AIDEA in partnership with AEA is
looking at the Department of Energy's (DOE) loan guarantee
program for projects that employ new or significantly improved
energy technologies.
3:03:02 PM
MARK DAVIS, Economic Development Officer, Alaska Industrial
Development and Export Authority (AIDEA), elaborated that said
they are working with DOE as a development finance organization
on structured energy loans under which the DOE would guarantee a
portion of a project. He said that $50 billion is available for
that program and they are 1 of 23 development finance
organizations that generally have accepted applications before
DOE.
Finally, he said that AIDEA is adopting best practices used by
other state development agencies in developing a matrix for its
performance and goals. The result is that AIDEA is poised to
dovetail with and support economic development plans and
processes put forward by the administration and the legislature
for the benefit of all the regions in the state.
3:04:32 PM
CHAIR PASKVAN asked where AIDEA wants to diversify and how much
it wants to grow.
MR. DAVIS responded that AIDEA has programs that allow for
loans, bonds and direct financing. The state is facing a
recession and typically looks at traditional industries along
with targeted sectors that export out of the state to create
jobs. Also, CPI figures indicate an inflation rate of .20
percent, largely in heating and electrical generation. So they
are actively looking to arrange financing for projects within
the sectors that should improve the situation. Diversification
will take them from the shipyard they are involved with now and
mining to other sectors of the economic.
MR. LEONARD added that they are also going to add one to three
projects per year to AIDEA's portfolio and invest up to $250
million in the next three years. They will look at 12 projects a
year to find two or three that are going to be successful.
3:07:09 PM
WAYNE STEVENS, President and CEO, Alaska State Chamber of
Commerce, said their top mission in recent years has been to
promote business in Alaska. He said at some point Alaskans won't
be able to continue receiving state services and that a plan
needs to be developed to get us to the future and that plan has
to include a transition period until the gas flows.
3:10:33 PM
MR. STEVENS said the Washington Business Plan, the Oregon
Business Plan, Enterprise Seattle, the Prosperity Partnership of
the Puget Sound Regional Council - all offer successful models
that Alaska can look at. The plan must focus resources on
deliberate and effective programs and projects that promote
resource development, a healthy statewide business climate, and
create a national and global competitive advantage for Alaska. A
strategic economic development plan should provide the framework
for Alaska's businesses and elected leaders to work together to
build a stronger more competitive state economy.
He said the plan should encompass four strategic components:
fiscal predictability and stability, workforce development -
identifying deficits in essential services, and education for
those skills and recruitment, leadership-ensuring policies, and
investment in transportation, energy communications and other
infrastructure that supports economic development. "We must be
known as open for business."
MR. STEVENS said that a mechanism is needed to weave all the
plans into a single shared vision and it needs the participation
and support of all three sectors to develop that shared vision
for the state's economic future.
3:12:27 PM
In 2008, he said, Governor Palin established the Legacy Plan;
its intent was to establish and prepare a framework for the
state's future economic growth by setting economic development
goals and missions. In the summer of 2009, Alaska's ARDORs
joined together under the banner of "Alaska Partners in Economic
Development" (APED) and have used a $50,000 grant from the
Denali Commission to build the beginning steps of a statewide
vision and plan. Four months ago APED partnered with a team of
nationally recognized consultants and embarked on a
comprehensive situational analysis of Alaska's economy and the
"Alaska Forward" initiative was borne. Their phase-one analysis
is soon to be delivered with the hope that phase two will begin
later this year. He said that Legacy and APED, while independent
efforts, are collaborating and poised to move forward as one.
CHAIR PASKVAN remarked that everyone can realize the potential
mixed message that can come out of uncoordinated activities, and
having a structure will help that success plan or strategy
"bubble to the surface."
3:17:34 PM
DAVID LAWER, Sr. Vice President and General Council, First
National Bank of Alaska (FNBA), said they are the oldest and
largest locally owned bank in Alaska. He said that FNBA has
initiated an effort to inform Alaskans about the fundamentals of
the Alaskan economy with their "Three-Legged Stool Campaign." In
large part the campaign began in response to their customers'
inquiries about their view of economic conditions in Alaska
compared to other state and their predictions about their
future.
He said FNBA knows that oil and gas exploration and development
is one of the three major sectors of Alaska's economy and that
at least one-third of all working Alaskans owe their livelihood
to oil; they also know that the number of jobs in Alaska related
to oil is dwindling. But these circumstances aren't commonly
known or accepted by a large number of Alaskans. Mr. Lawer said
that why FNBA began its informational campaign to educate as
many Alaskans as possible and to get them to ask their elected
representatives to focus on these issues now before the rate of
job loss in Alaska accelerates further.
At this point, Mr. Lawer said, the response to their campaign
had been "enormously successful." They have heard positively
from their customer base, oil producers and their contractors,
service providers, everyone. In fact, he said, of the more than
20,000 employers when they started their campaign only eight
have asked them to discontinue furnishing them information and
literature. A much greater number has asked them to increase the
volume of literature they distribute so they could furnish it to
their employees.
3:20:39 PM
MR. LAWER stated that economic development is the creation of
private wealth and it is a product of private capital
investment. "Quite simply, capital flows to competitive
advantage." The state can determine what it can do to offer
competitive advantage instead of some scheme to create private
wealth.
3:23:21 PM
CHAIR PASKVAN thanked everyone for their comments and adjourned
the meeting at 3:23 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Curtis Thayer Economic Development Remarks.pdf |
SL&C 2/4/2010 2:00:00 PM |
|
| AIDEA 2009-2010 Strategic Plan Final 01-22-10 w-outAppendices.pdf |
SL&C 2/4/2010 2:00:00 PM |
|
| Econ Dev in State Gov - Rep Austerman.pdf |
SL&C 2/4/2010 2:00:00 PM |