Legislature(1997 - 1998)

04/28/1998 01:35 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
           SENATE TRANSPORTATION COMMITTEE                                     
                    April 28, 1998                                             
                      1:35 p.m.                                                
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Senator Jerry Ward, Chairman                                                   
Senator Gary Wilken, Vice Chair                                                
Senator Lyda Green                                                             
Senator Rick Halford                                                           
Senator Georgianna Lincoln                                                     
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
None                                                                           
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
CS FOR HOUSE BILL NO. 373(RES)                                                 
"An Act making changes to the Forest Resources and Practices Act;              
classifying anadromous streams and tributaries; relating to the                
designation of riparian areas; establishing buffers and slope                  
stability standards on certain streams; and requiring retention of             
low value timber along certain water bodies where prudent."                    
                                                                               
     - MOVED SCSCS HB 373(HES)am OUT OF COMMITTEE                              
                                                                               
CS FOR HOUSE BILL NO. 239(FIN)                                                 
"An Act relating to the liability of motor fuel dealers for payment            
of tax imposed on certain credit transactions involving motor fuel             
sales or transfers that become worthless debts or on sales or                  
transfers to persons who declare bankruptcy; and providing for an              
effective date."                                                               
                                                                               
     - MOVED SCSCS HB 239(RES) OUT OF COMMITTEE                                
                                                                               
CS FOR HOUSE BILL NO. 290(TRA)                                                 
"An Act relating to motor vehicle license plates for ranchers,                 
farmers, and dairymen."                                                        
                                                                               
     - MOVED SCSCS HB 290(TRA) OUT OF COMMITTEE                                
                                                                               
SENATE BILL NO. 352                                                            
"An Act relating to international airports revenue bonds; and                  
providing for an effective date."                                              
                                                                               
     - MOVED SB 352 OUT OF COMMITTEE                                           
                                                                               
CS FOR HOUSE BILL NO. 386(FIN)                                                 
"An Act relating to the financing authority, programs, operations,             
and projects of the Alaska Industrial Development and Export                   
Authority; and providing for an effective date."                               
                                                                               
     - HEARD AND HELD                                                          
                                                                               
OVERSIGHT HEARING ON MEDICAID TRANSPORT ON RURAL AIRLINES                      
                                                                               
PREVIOUS SENATE ACTION                                                         
                                                                               
HB 373 - See Resources minutes dated 3/11/98, 3/20/98 and 4/6/98.              
                                                                               
HB 239 - No previous Senate action.                                            
                                                                               
HB 290 - No previous Senate action.                                            
                                                                               
HB 386 - No previous Senate action.                                            
                                                                               
SB 352 - No previous Senate action.                                            
                                                                               
WITNESS REGISTER                                                               
                                                                               
Pat Springer                                                                   
Legislative Aide to Speaker Gail Phillips                                      
Alaska State Capitol                                                           
Juneau, Alaska  99801-1182                                                     
POSITION STATEMENT:  Presented HB 373 for sponsor                              
                                                                               
Jeff Jahnke                                                                    
Division of Forestry                                                           
Department of Natural Resources                                                
400 Willoughby, 3rd Floor                                                      
Juneau, Alaska  99801-1724                                                     
POSITION STATEMENT:  Supports HB 373                                           
                                                                               
Marty Welbourn                                                                 
Division of Forestry                                                           
Department of Natural Resources                                                
3601 C St., Suite 1034                                                         
Anchorage, Alaska  99503-5937                                                  
POSITION STATEMENT:  Supports HB 373                                           
                                                                               
Representative Gary Davis                                                      
Alaska State Capitol                                                           
Juneau, Alaska  99801-1182                                                     
POSITION STATEMENT:  Sponsor of HB 239                                         
                                                                               
Bob Bartholomew                                                                
Income & Excise Audit Division                                                 
Department of Revenue                                                          
P.O. Box 110420                                                                
Juneau, Alaska  99811-0420                                                     
POSITION STATEMENT: Answered questions about the fiscal note for HB
290                                                                            
                                                                               
Jeff Logan                                                                     
Staff to Representative Joe Green                                              
Alaska State Capitol                                                           
Juneau, Alaska  99801-1182                                                     
POSITION STATEMENT:  Testified for sponsor of HB 290                           
                                                                               
Sally Ellis                                                                    
Yute Air                                                                       
4706 Herding Drive                                                             
Anchorage, Alaska  99519                                                       
POSITION STATEMENT: Discussed problems with Medicaid Transportation            
on Rural Airlines                                                              
                                                                               
Mike Hageland                                                                  
P.O. Box 220610                                                                
Anchorage, Alaska  99522                                                       
POSITION STATEMENT: Discussed problems with Medicaid Transportation            
on Rural Airlines                                                              
                                                                               
Darrell Nagel                                                                  
First Health Services                                                          
4411 Business Park Boulevard                                                   
Anchorage, Alaska  99503                                                       
POSITION STATEMENT: Answered questions regarding Medicaid                      
Reimbursement to Rural Airlines                                                
                                                                               
Fran Collins                                                                   
First Health Services                                                          
4411 Business Park Boulevard                                                   
Anchorage, Alaska  99503                                                       
POSITION STATEMENT:  Answered questions regarding Medicaid                     
Reimbursement to Rural Airlines                                                
                                                                               
Teri Kekiak                                                                    
Division of Medical Assistance                                                 
Department of Health and Social Services                                       
4501 Business Park Boulevard                                                   
Anchorage, Alaska  99503                                                       
POSITION STATEMENT: Answered questions regarding Medicaid                      
Reimbursement to Rural Airlines                                                
                                                                               
Bob Labbe                                                                      
Division of Medical Assistance                                                 
Department of Health & Social Services                                         
P.O. Box 110660                                                                
Juneau, Alaska  99811-0660                                                     
POSITION STATEMENT:  Answered questions regarding Medicaid                     
Reimbursement to Rural Airlines                                                
                                                                               
Nancy Weller                                                                   
Division of Medical Assistance                                                 
Department of Health & Social Services                                         
P.O. Box 110660                                                                
Juneau, Alaska  99811-0660                                                     
POSITION STATEMENT:  Answered questions regarding Medicaid                     
Reimbursement to Rural Airlines                                                
                                                                               
Representative John Cowdery                                                    
Alaska State Capitol                                                           
Juneau, Alaska  99801-1182                                                     
POSITION STATEMENT:  Discussed SB 352                                          
                                                                               
Marco Pignalberi                                                               
Staff to Representative Cowdery                                                
Alaska State Capitol                                                           
Juneau, Alaska  98901-1182                                                     
POSITION STATEMENT:  Answered questions regarding SB 352                       
                                                                               
Morton Plumb, Jr.                                                              
Director, Anchorage International Airport                                      
P.O. Box 196960                                                                
Anchorage, Alaska  99519-6960                                                  
POSITION STATEMENT:  Answered questions about SB 352                           
                                                                               
Lydia Jones                                                                    
Senate Transportation Committee Staff                                          
Alaska State Capitol                                                           
Juneau, Alaska  98901-1182                                                     
POSITION STATEMENT:  Explained the provisions of SCSCSHB 386(TRA)              
                                                                               
Dave Eberle                                                                    
Director, Construction and Operations                                          
P.O. Box 196900                                                                
Anchorage, Alaska  99519-6900                                                  
POSITION STATEMENT:  Answered questions about SB 352                           
                                                                               
Keith Laufer                                                                   
Alaska Industrial Development & Export Authority (AIDEA)                       
480 West Tudor Road                                                            
Anchorage, Alaska  99503-6690                                                  
POSITION STATEMENT:  Answered questions about, and supports, HB 386            
                                                                               
Roger Head                                                                     
Hatcher Pass Development Corporation                                           
                                                                               
POSITION STATEMENT: Supports SCSCSHB 386 (TRA)                                 
                                                                               
Kyle Randish                                                                   
Hatcher Pass Development Corporation                                           
                                                                               
POSITION STATEMENT: Described the Hatcher Pass Project                         
                                                                               
Paul Fuhs                                                                      
Consultant, City of Nome                                                       
10652 Porter Lane                                                              
Juneau, Alaska  99801                                                          
POSITION STATEMENT:  Described the Port of Nome Project                        
                                                                               
Charlotte Maccay                                                               
Cominco, Inc.                                                                  
1133 West 15th Avene                                                           
Anchorage, Alaska  99501                                                       
POSITION STATEMENT:  Supports SCSCSHB 386(TRA)                                 
                                                                               
Mr. Mike Scott                                                                 
Mat-Su Borough                                                                 
350 East Dahlia                                                                
Palmer, Alaska  99645                                                          
POSITION STATEMENT:  Supports SCSCSHB 386(TRA)                                 
                                                                               
ACTION NARRATIVE                                                               
TAPE 98-7, SIDE A                                                              
                                                                               
CHAIRMAN WARD called the Senate Transportation Committee meeting to            
order at 1:35 p.m.  Present were Senators Green, Wilken, Lincoln,              
and Chairman Ward.  The first order of business before the                     
committee was HB 373.  Chairman Ward noted the arrival of Senator              
Halford.                                                                       
                                                                               
                CSHB 373(RES) - FOREST RESOURCES                               
                                                                               
PAT SPRINGER, legislative aide to Speaker Gail Phillips, sponsor of            
HB 373, read the following statement on behalf of Speaker Phillips.            
     "I am pleased to bring before you today a bill that will                  
     greatly enhance protection of Alaska's salmon resources and               
     water quality.  Thanks to a major cooperative effort between              
     timber and fishing industries, environmental groups, and state            
     agencies, we have proposed legislation designed to improve                
     present Forest Practices Act safeguards.  This cooperation                
     represents the commitment from these groups to periodically               
     reevaluate the Forest Practices Act protections for Alaskan               
     streams.  In February, 1996, the Board of Forestry heard                  
     reports from state agencies regarding the Act's effectiveness.            
     The Board found that indeed the Act generally was working well            
     in protecting salmon habitat and water quality but concluded              
     that there were some areas needing further review.  The Board             
     then established a science and technical committee to                     
     recommend modifications.  This group included scientists from             
     timber, commercial fishing, and environmental communities, as             
     well as federal and state research agencies.  After intensive             
     review, the committee identified opportunities to strengthen              
     habitat and wildlife protection.  A stakeholder committee                 
     convened to incorporate these findings into recommendations               
     for the Board of Forestry, which in turn endorsed a series of             
     amendments to the Act.  These amendments have broad consensus             
     support from all the participants.  The cooperation shown by              
     the Board members and the implementation group is indeed                  
     laudable, and as a result, we are now looking forward to                  
     better protections for our valuable salmon resources without              
     unreasonable costs to industry or private owners.  The State              
     of Alaska has one of the most effective forest practices acts             
     in the nation.  I believe the collaborative process undertaken            
     by the stakeholders in defining and agreeing to necessary                 
     protections is extremely valuable.  It's the first step                   
     forward in our continued path toward managing our marketable              
     resources while protecting our natural resources for future               
     generations.  Thank you for your consideration."                          
                                                                               
MS. SPRINGER introduced the state forester, Jeff Jahnke.                       
                                                                               
Number 080                                                                     
                                                                               
JEFF JAHNKE, Director of the Division of Forestry in the Department            
of Natural Resources (DNR), and the presiding officer for the Board            
of Forestry, gave the following testimony in support of HB 373 on              
behalf of the Administration and the Board of Forestry.  This bill             
is the result of a carefully crafted consensus following two years             
of effort by many people in the fishing, forestry and environmental            
communities, and the agencies associated with implementing the Act.            
Key points related to the development of this legislation are:                 
     -the process of resulting recommendations was based on the                
     best available scientific information;                                    
     -the process was open to the public throughout;                           
     -many different interests were involved in each step along the            
     way                                                                       
     -the results were supported by a wide range of interests; and             
     -the interests represented by the Board of Forestry include               
     commercial fishing, forest industry, Native corporations,                 
     environmental organizations, mining, fish and wildlife                    
     biologists, professional foresters, and recreationists.                   
                                                                               
MR. JAHNKE noted Marty Welbourn, who was involved with the                     
development of this legislation over the last two years, was                   
available to speak on the specifics of the Act.                                
                                                                               
Number 117                                                                     
                                                                               
MARTY WELBOURN, Chief of Forest Resources for the Division of                  
Forestry, and Co-chair of the Science and Technical Committee, made            
the following comments.  When the Science and Technical Committee              
reviewed the Forest Practices Act in 1996 and 1997, it found that              
the Act was sound and needed few changes.  The proposed changes in             
HB 373 only affect the part of the Act that addresses stream                   
classification and riparian management on private land in Region 1,            
which includes the coastal forest in Southeast Alaska, Prince                  
William Sound, the eastern part of the Kenai Peninsula, and Kodiak.            
It also includes Mental Health Trust land within that region.                  
Under the existing Forest Practices Act, about 20 percent of                   
streams, including some anadromous streams, are unclassified and               
have no designated riparian protection area therefore requirements             
to maintain some tree cover along stream banks do not apply to                 
unclassified streams.  Tree cover provides woody debris for fish               
habitat, stabilizes stream banks to control erosion, and provides              
nutrients to the stream.                                                       
                                                                               
MS. WELBOURN described the two recommendations made by the                     
committee that require statutory changes.  The first recommendation            
is to classify all anadromous streams, and all tributaries to                  
anadromous streams, and to provide appropriate riparian                        
protections.  Abundant scientific literature exists on the value of            
stream buffers for the protection of fish habitat in anadromous                
streams.   The second recommendation is to provide for more woody              
debris in Type B streams (anadromous streams with rocky banks or               
steep gradients).  Woody debris is needed for fish habitat within              
those streams, to control sedimentation, and as a source of debris             
for downstream Type A channels.  Type A channels are the most                  
productive of the salmon streams; woody debris washes downstream               
from Type B channels into Type A channels.                                     
                                                                               
MS. WELBOURN continued.  HB 373 contains numerous recommendations              
from the Board of Forestry that respond to the Science and                     
Technical Committee's findings.  First, the bill changes the stream            
classification system and riparian management standards, so that               
all anadromous waters and their tributaries will be classified and             
have appropriate protection measures.  All anadromous streams                  
(salmon streams) would be classified as Type A or Type B, depending            
on the slope and the type of bank.  All salmon streams would have              
a buffer, and slope stability standards would apply to those                   
streams.  Stability standards are special requirements for road                
construction and timber yarding to prevent erosion.  They include              
a requirement to retain low value timber at the operator's                     
discretion where it is feasible to do so.  Under the existing Act,             
only Type A streams have a buffer.  These low gradient streams are             
the most highly productive.  HB 373 adds stability standards to                
those streams to 100 feet from the stream, or to the slope break,              
whichever comes first.  On Type B streams, the bill would add a                
buffer out to 66 feet or to the slope break and, in many cases, the            
buffer would be narrower than 66 feet.   The bill would classify               
all tributaries to anadromous streams as Type B or D, based on                 
their steepness, and slope stability standards would apply.  No                
buffer would be required.  On Type B streams, slope stability                  
standards would apply up to 100 feet from the stream or to the                 
slope break, whichever comes first, and on Type D streams it would             
apply up to 50 feet or the slope break.  The bill also strengthens             
the timber retention standards around larger tributaries.  It                  
requires the operator to retain low value timber where prudent                 
within a minimum of 25 feet from the stream, depending on the                  
particular stream characteristics.  These changes help ensure that             
the goals of the Act, to provide adequate protection of fish                   
habitat and water quality and to support the continuation of                   
healthy timber and fishing industries, are met.  These changes also            
help ensure that the Forest Practices Act continues to satisfy the             
requirements for nonpoint source pollution prevention under the                
federal Clean Water Act and the Coastal Zone Management Act.  The              
Forest Practices Act provides one-stop shopping for the timber                 
industry with respect to state and federal nonpoint source                     
pollution and coastal management standards.                                    
                                                                               
Number 192                                                                     
                                                                               
SENATOR HALFORD asked whether roads that are built with public                 
funds or credits on public lands and continue as a public asset,               
remain open for use.                                                           
                                                                               
MR. JAHNKE replied DNR evaluates each road individually to                     
determine whether leaving it open for public use will affect the               
protection of water quality, fisheries, and other values.  He                  
believed the process is similar for federal land.  He stated that              
use of roads generates maintenance needs, so the cost of                       
maintenance to protect those values is also considered.                        
                                                                               
SENATOR HALFORD questioned whether the state gives dollars or                  
credits for the construction of roads.                                         
                                                                               
MR. JAHNKE did not believe it does.                                            
                                                                               
SENATOR HALFORD stated his concern is that the roads remain open               
unless there is some resource reason to close them.                            
                                                                               
Number 222                                                                     
                                                                               
CHAIRMAN WARD said he agreed, and that is one reason why the                   
committee requested the bill.  He expressed concern that people be             
able to use logging roads with their four-wheelers.  He asked Mr.              
Jahnke if the procedure used to determine whether a road will                  
remain open is in regulation.                                                  
                                                                               
MR. JAHNKE repeated DNR looks at each road, and in its                         
responsibility to protect the resources of the State of Alaska, it             
makes a determination as to whether leaving the road open will have            
a negative impact on the resources.                                            
                                                                               
CHAIRMAN WARD asked how many miles of logging roads DNR has opened             
up to the public in the last 10 years.                                         
                                                                               
MR. JAHNKE offered to get that information to the committee.                   
                                                                               
MS. WELBOURN said she could not provide the specific number of                 
miles, but in the Tanana Valley, most of the logging roads stay                
open because they are long term management roads.  In other areas,             
logging roads have been closed because of particular concerns about            
long term erosion resulting from a lack of maintenance on those                
roads.                                                                         
                                                                               
Number 248                                                                     
                                                                               
CHAIRMAN WARD asked Ms. Welbourn to elaborate on closures in the               
other areas of the state.                                                      
                                                                               
MS. WELBOURN said most of the roads built in the Kenai Peninsula               
are temporary spur roads, and the main access road actually crosses            
private land.  DNR does not have the option to decide whether those            
roads will remain open because the private land owners control                 
access across their land.  Similarly, in Southeast Alaska, most of             
the main roads have already been built by the Forest Service.  The             
roads in the Haines State Forest were built by the State, and those            
roads typically stay open.                                                     
                                                                               
CHAIRMAN WARD stated one of his original concerns and reasons for              
requesting this bill was due to inquiries about non-access to                  
logging roads on the Kenai Peninsula.                                          
                                                                               
MS. WELBOURN repeated that most of the access to the logging roads             
is through private land, therefore access to that land is                      
controlled by the land owner.                                                  
                                                                               
CHAIRMAN WARD asked if DNR's policy is to close the public roads if            
they can only be accessed through private land.                                
                                                                               
MS. WELBOURN repeated that typically the private land owners have              
the more accessible land.                                                      
                                                                               
Number 262                                                                     
                                                                               
SENATOR HALFORD asked if the public roads are open once a person               
gets to them.                                                                  
                                                                               
MS. WELBOURN replied they are open where they are maintained.  Some            
of the roads follow seismic lines or existing trails, and those                
would remain open.  Other roads that are built as temporary spur               
roads, typically on the Kenai, are not maintained, and have not                
been left open because of concerns about impacts on wildlife and               
fisheries.                                                                     
                                                                               
CHAIRMAN WARD asked whether DNR is maintaining the roads in the                
Interior.                                                                      
                                                                               
MS. WELBOURN said it does.                                                     
                                                                               
CHAIRMAN WARD asked if the criteria is to close a logging road                 
unless it is maintained.                                                       
                                                                               
MS. WELBOURN stated that is correct if there is a hazard of                    
erosion.  She added if a road is built in such a way that it would             
be fatal to use without maintenance, it is closed, otherwise the               
road building costs would be much more expensive.                              
                                                                               
Number 271                                                                     
                                                                               
CHAIRMAN WARD asked if the fact that DNR considers the roads as                
logging trails plays into any of the scenarios.                                
                                                                               
MS. WELBOURN stated logging roads are typically built to the lowest            
standards possible because of the cost of road building.                       
                                                                               
CHAIRMAN WARD reiterated that people on the Kenai were refused                 
access to logging roads on four wheelers which is what prompted his            
questions.                                                                     
                                                                               
MS. WELBOURN asked whether those people were on state or private               
land.                                                                          
                                                                               
CHAIRMAN WARD said they were on state land.                                    
                                                                               
MS. WELBOURN said she was not aware of any specific cases but would            
look into the problem for Chairman Ward.                                       
                                                                               
SENATOR HALFORD asked Chairman Ward if he received a copy of the               
legal opinion on the short title for HB 373.                                   
                                                                               
SENATOR WARD said he did.                                                      
                                                                               
SENATOR HALFORD said the problem is technical and, according to the            
drafter, a section should be inserted that reads, "This chapter may            
be cited as the Forest Resources and Practices Act."                           
                                                                               
SENATOR WARD asked where that line should be located in the bill.              
                                                                               
SENATOR HALFORD answered on page 3, line 31.  He explained,                    
according to the legal opinion, the Legislature has not officially             
denominated a specific act as the Forest Resources and Practices               
Act, hence the title of the bill is over-inclusive.                            
                                                                               
SENATOR HALFORD moved to amend the bill to add the language, "This             
chapter may be cited as the Forest Resources and Practices Act" on             
page 3, line 31 and explained the amendment is not substantive.                
                                                                               
There being no objection, the motion carried.                                  
                                                                               
SENATOR GREEN moved SCSCS HB 373(TRA) from committee with                      
individual recommendations and its accompanying zero fiscal note.              
There being no objection, the motion carried.                                  
    CSHB 239(FIN) - MOTOR FUEL TAX CREDIT:TAX NOT PD BY USER                   
                                                                               
REPRESENTATIVE GARY DAVIS, sponsor of HB 239, stated the bill is an            
attempt to resolve a problem brought to his attention several years            
ago.  A fuel distributor was owed an excessive amount of taxes from            
a purchaser.  The purchaser went bankrupt leaving the distributor              
unable to collect the motor fuel tax that the distributor paid on              
that delivery.  Current statute requires the buyer to pay motor                
fuel tax when the distributor delivers the fuel.  HB 239 allows the            
distributor to claim a credit for $500 or more in fuel taxes paid              
to the state that the distributor cannot recover through no fault              
of his/her own.  The legislation establishes guidelines under which            
the Department of Revenue will establish regulations.  The credit              
will only apply to aggregate amounts of taxes paid of $500 or more             
before it goes into effect.  The Department of Revenue proposed an             
amendment to clarify existing language on page 2, lines 5 and 6.               
                                                                               
SENATOR WARD asked Representative Davis to explain the amendment.              
                                                                               
REPRESENTATIVE DAVIS explained the Department of Revenue believes              
the existing language on page 2, lines 5-6, is awkward.  That                  
language reads, "(1) under this chapter, the sales or transfers                
result in a tax liability, in the aggregate, on the transactions of            
$500 or more; and."  The amendment deletes the words, "on the                  
transactions" for the purpose of simplification.                               
                                                                               
SENATOR GREEN moved to adopt the amendment.  There being no                    
objection, the motion carried.                                                 
                                                                               
SENATOR HALFORD questioned why the Department of Revenue submitted             
a zero fiscal note that states it is not feasible to estimate the              
revenue loss, but includes estimates.  He maintained that it is bad            
policy to submit zero fiscal notes that include amounts in the                 
explanation, and he does not think the Legislature should let the              
Administration get away with doing so.                                         
                                                                               
Number 376                                                                     
                                                                               
CHAIRMAN WARD asked Senator Halford if he would like the Senate                
Transportation Committee to do a separate fiscal note.                         
                                                                               
SENATOR HALFORD suggested that the committee request the Department            
of Revenue to reflect its best estimate in the fiscal note.  He                
added that the Department of Revenue should not deny the statutory             
requirement to estimate the cost of the bill just because it is not            
easy to do.                                                                    
                                                                               
CHAIRMAN WARD asked Representative Davis if he has discussed the               
fiscal note with the Department of Revenue.                                    
                                                                               
REPRESENTATIVE DAVIS said he has discussed the explanation section             
and he understands their unwillingness to put an actual dollar                 
figure on the fiscal note.                                                     
                                                                               
Number 388                                                                     
                                                                               
BOB BARTHOLOMEW, Assistant Director of the Income and Excise Tax               
Division of the Department of Revenue, stated the department does              
not know what, if any, bad debt is in the industry related to motor            
fuel sales.  The department called other states to find out their              
experiences and from those discussions, came up with an estimate of            
.01 percent.  He did try to give some sense of the financial impact            
to the committee but did not include it in the fiscal note because             
of the uncertainty of it actually happening.                                   
                                                                               
SENATOR GREEN indicated the two page attachment to the fiscal note             
was not actually attached to it, which may have created some                   
confusion.                                                                     
                                                                               
SENATOR WILKEN expressed concern about the basis of the legislation            
because the state will be subsidizing bad debt that could be taken             
care of through normal business practices, and this bill might set             
a precedent.  He stated, to give an example, Petro, one of the                 
state's biggest fuel customers, might do $45 million per year in               
business, so if Petro is losing $4500 per year, that does not seem             
important enough to begin the process of subsidizing businesses                
that go bankrupt.  He noted indications of bankruptcy come far                 
ahead of the actual event.                                                     
                                                                               
Number 428                                                                     
                                                                               
REPRESENTATIVE DAVIS said he appreciates the discussion, but does              
not believe that Petro Marine would not find that amount of debt to            
be a hardship, but would support this idea on principle.  Current              
law requires the distributor to pay the tax when fuel is delivered,            
therefore the distributor is paying in advance, and betting that               
the customer will reimburse the expense.                                       
                                                                               
SENATOR HALFORD pointed out the fiscal note requirements in Title              
24 require that a fiscal note shall contain an estimate of the                 
amount of appropriation increase or decrease that will result from             
enactment of the bill.  If the bill has no fiscal impact, a                    
statement to that effect shall be attached.  The fiscal note for HB
239 says that its enactment will cost money but contains zeroes, so            
it does not meet the law.  He expressed concern that this                      
Administration is submitting more and more of these fiscal notes.              
                                                                               
CHAIRMAN WARD asked Mr. BARTHOLOMEW if he is familiar with that                
requirement.                                                                   
                                                                               
MR. BARTHOLOMEW said he has not read that portion of Title 24 but              
is familiar with the requirement to do fiscal notes.  He stated he             
does not believe the department would have a problem with putting              
the estimate contained on page three on the fiscal note.                       
                                                                               
Number 456                                                                     
                                                                               
SENATOR LINCOLN suggesting changing the fiscal note in committee to            
reflect the actual estimate.                                                   
                                                                               
SENATOR HALFORD moved HB 239 from committee with the attached                  
fiscal note, and a note to the Senate Finance Committee indicating             
that the fiscal note does not reconcile with the legislation.                  
                                                                               
There being no objection to the motion, HB 239 moved to the Senate             
Finance Committee.                                                             
                                                                               
   CSHB 290(TRA) - LICENSE PLATES: RANCHES, FARMS, AND DAIRY                   
                                                                               
JEFF LOGAN, legislative assistant to Representative Joe Green,                 
sponsor of HB 290, explained the measure as follows.  HB 290                   
broadens the definition of who can qualify as a person for the                 
purpose of qualifying for an agricultural license plate.  Language             
on lines 12-13 refers to AS 01.10.060, which defines a person as a             
corporation, company, partnership, firm, association, organization,            
and a few other entities.  HB 290 was introduced at the request of             
one of Representative Green's constituents.  The constituent was a             
farmer who formerly qualified for the agricultural license plates              
by registering his vehicles under his company name.  The Division              
of Motor Vehicles (DMV) changed its interpretation of the statute              
and required that people registering under the company name pay the            
more expensive commercial fees.  To pay the less expensive                     
agricultural fees, he would have to register the vehicles under his            
personal name.  Representative Green believes it is not up to any              
state agency to tell any Alaska business how it will organize the              
business, whether it be a corporation, sole proprietorship, etc.,              
in order to get something that the business owner previously got               
anyway.  After about one year of trying to get DMV to change its               
procedures, Representative Green introduced the bill.                          
                                                                               
SENATOR HALFORD stated he agrees with Representative Green's                   
intent, but he noted this restriction is abused in another area                
which could be fixed under this bill.  He explained that farmers               
who have a bad year and seek seasonal employment elsewhere are                 
forced to register their farm vehicles outside of the agricultural             
program if they did not earn their primary source of income from               
farming during the year.  Senator Halford said he would like to see            
the language that requires the person's primary source of income be            
from farming deleted so that the statute would read, "vehicles                 
under 16,000 pounds, owned by a person deriving income from the                
operation of a ranch, farm, or dairy where the person resides full             
time ...."  He thought farm vehicles should not all of a sudden                
become illegally registered because the farmer took winter work.               
                                                                               
MR. LOGAN pointed out that agricultural vehicles are not on the                
road as often as commercial vehicles, as they are seasonal                     
vehicles.                                                                      
                                                                               
CHAIRMAN WARD asked if the sponsor would object to Senator                     
Halford's proposed amendment.                                                  
                                                                               
MR. LOGAN said he did not think the proposed amendment is                      
inconsistent with the goal of the legislation.                                 
                                                                               
SENATOR HALFORD moved to delete the words, "the person's primary               
source of" on line 7.                                                          
                                                                               
SENATOR LINCOLN questioned whether anyone who gets any income from,            
and lives on, a farm or ranch would be eligible to get license                 
plates for a lower fee.                                                        
                                                                               
Number 520                                                                     
                                                                               
SENATOR HALFORD explained the requirement is still restrictive in              
that a person can register a vehicle under the agricultural                    
provision provided the vehicle is used exclusively to transport the            
person's own ranch, farm or dairy products to and from market, or              
to transport supplies, commodities or equipment to be used on a                
person's ranch, farm or dairy.                                                 
                                                                               
SENATOR LINCOLN said that section would also allow a person with a             
few chickens on his/her land to register any vehicle used to                   
transport chicken feed as agricultural.  She objected to the motion            
because she stated the current language requires the person's                  
primary source of income to be from agriculture, but not one's                 
exclusive source of income. She believed the amendment would open              
up the reduced fee provision to many it is not intended for.                   
                                                                               
MR. LOGAN showed committee members a picture of a 16,000 pound                 
vehicle and stated, in regard to Senator Lincoln's concern, that it            
would not be necessary to use a 16,000 pound vehicle to transport              
chicken feed.                                                                  
                                                                               
SENATOR LINCOLN clarified the bill requires vehicles to not exceed             
16,000 pounds, therefore a person could be using a regular pick-up             
truck.  She maintained her objection to the amendment.                         
                                                                               
The motion to adopt Senator Halford's amendment carried with                   
Senators Halford, Wilken, Green, and Chairman Ward voting for the              
motion, and Senator Lincoln voting against it.                                 
                                                                               
SENATOR LINCOLN commented HB 290 is accompanies by a zero fiscal               
note that contains an asterisk signifying an indeterminate cost.               
She echoed Senator Halford's concern about not knowing the actual              
cost of a piece of legislation.                                                
                                                                               
SENATOR GREEN questioned whether the definition in the bill of                 
"agricultural" includes greenhouse nurseries.                                  
                                                                               
MR. LOGAN replied under the definition given in AS 29.45.060(c),               
greenhouses are included.                                                      
                                                                               
SENATOR GREEN moved SCSHB 290(TRA) from committee with individual              
recommendations and its accompanying fiscal note, and a letter to              
the Senate Finance Committee asking it to request an updated fiscal            
note.  There being no objection, the motion carried.                           
                                                                               
     OVERSIGHT HEARING ON MEDICAID TRANSPORT IN RURAL AREAS                    
                                                                               
SALLY ELLIS, representing Yute Air Alaska, discussed billing                   
problems the airline has had with First Health.  One problem is                
with prior authorization.  An airline must have a prior                        
authorization number in order to get reimbursed for Medicaid                   
passengers.  A physician or public health nurse is supposed to call            
First Health to get a prior authorization number, put the number on            
the travel form and sign off on it.  In turn, the airline bills                
First Health and is supposed to be reimbursed in a timely manner.              
The problem is that Yute Air Alaska has been denied reimbursement              
for claims because the prior authorization number on the travel                
form is invalid.  Yute Air has no way to determine whether the                 
number is invalid prior to providing passenger travel, therefore it            
does not know for which passengers it will get reimbursed.                     
                                                                               
CHAIRMAN WARD asked how much money Yute Air has carried.                       
                                                                               
MS. ELLIS replied Yute Air Alaska has billed over $50,000 which is             
over 120 days past due.                                                        
                                                                               
SENATOR HALFORD asked for clarification on how the system works.               
                                                                               
CHAIRMAN WARD stated representatives from the Department of Health             
and Social Services (DHSS) would address the committee shortly.                
                                                                               
TAPE 98-7, SIDE B                                                              
Number 573                                                                     
                                                                               
SENATOR GREEN asked what medical conditions most patients are being            
transported for.                                                               
                                                                               
MS. ELLIS replied many people are flying from the smaller villages             
to Bethel, or into surrounding villages, such as Aniak, to go to a             
hospital to get better health care.                                            
                                                                               
CHAIRMAN WARD asked if the lack of payment by First Health is                  
causing a reduction in air service.                                            
                                                                               
MS. ELLIS answered not that she is aware of.                                   
                                                                               
Number 564                                                                     
                                                                               
SENATOR HALFORD asked how much travel is provided for Medicaid or              
Indian Health Service (IHS) patients, and how the provider bills               
for services.                                                                  
                                                                               
MS. ELLIS explained Yute Air gets First Health forms from the                  
physician or Public Health nurse in the village as a form of                   
payment.  The form contains a prior authorization number which                 
guarantees Yute Air payment.                                                   
                                                                               
SENATOR HALFORD questioned whether First Health is a contractor for            
IHS.                                                                           
                                                                               
MS. ELLIS believed First Health is a contractor for the Medicaid               
program.                                                                       
                                                                               
SENATOR HALFORD asked how the IHS fits in.                                     
                                                                               
MS. ELLIS was not sure.                                                        
                                                                               
Number 553                                                                     
                                                                               
MIKE HAGELAND, owner of Hageland Aviation Services, an air carrier             
in Western Alaska, made the following comments.  He noted the forms            
presented to the airlines also contain dates that may be changed               
without the airlines' knowledge.  When those forms are submitted,              
the claims are denied because the services took place outside of               
the time frame for travel.  He thought DHSS contracts with First               
Health for Medicaid services.  He stated the form is burdensome.               
                                                                               
BOB LABBE, Director of the Division of Medical Assistance,                     
explained Medicaid is a $350 million program; payment for medical              
transportation represents about three percent of the budget. In-               
state and out-of-state air transportation is provided for medical              
purposes, and is an expensive issue in Alaska.  Because of the                 
potential for high expense, air transportation costs need a certain            
amount of controls.  First, DHSS needs to be assured that the                  
travel is being provided for a medical purpose, which is the reason            
for the prior authorization.                                                   
                                                                               
CHAIRMAN WARD asked if the controls are in place because of ongoing            
abuse or past abuse.                                                           
                                                                               
MR. LABBE said the requirement was put in place when the program               
began to prevent abuse, and a similar requirement is in place in               
most states.  National alerts were publicized because abuses                   
occurred elsewhere.  Alaska has avoided some of the experiences                
other states have had.                                                         
                                                                               
CHAIRMAN WARD asked why the airlines are not being reimbursed.                 
                                                                               
NANCY WELLER, Division of Medical Assistance,  stated she received             
a phone call from another legislative office earlier this session              
regarding the problems Yute Air has experience.  She alerted the               
division's Anchorage office, and First Health has been working with            
that office for about two months to clean up the errors that                   
occurred in claim processing.  At this time, DHSS computer records             
show that Yute Air has billed DHSS $13,000 more than it has been               
paid.  The claims were not paid for a number of reasons such as                
data entry problems.                                                           
                                                                               
CHAIRMAN WARD questioned the discrepancy between Yute Air's claim              
that $50,000 is outstanding and DHSS's claim that $13,000 is                   
outstanding.  He asked Ms. Weller if Yute Air has actually billed              
DHSS for the entire $50,000.                                                   
                                                                               
MS. WELLER stated Yute Air bills consistently and just submitted               
hundreds of claims last week electronically.  First Health is                  
working with the division diligently to make sure that the errors              
in the claims are cleared up.                                                  
                                                                               
CHAIRMAN WARD asked if the same activity is taking place on behalf             
of Hageland Air Services.                                                      
                                                                               
MS. WELLER said she had no information on Hageland Air Services.               
                                                                               
SENATOR HALFORD asked for further clarification of the billing                 
procedure for IHS.                                                             
                                                                               
MS. WELLER stated IHS has very little transportation money and many            
of the IHS clients, particularly in the Bethel region, are Medicaid            
eligible, so Medicaid pays for their approved transportation.                  
                                                                               
SENATOR HALFORD asked how the priority of eligibility works.                   
                                                                               
MS. WELLER said the Medicaid program is a prior payer to IHS under             
federal law, meaning that Medicaid pays first.                                 
                                                                               
SENATOR HALFORD asked if the entire Medicaid system is a prior                 
payer to the IHS system.                                                       
                                                                               
MS. WELLER said that is correct for all health care services.  If              
an Alaska Native is eligible for Medicaid, his/her services are                
paid for by Medicaid.   Medicare or insurance companies are prior              
payers to DHSS but IHS is an exception.                                        
                                                                               
MR. LABBE added if an IHS program provides a service, it can bill              
DHSS for a Medicaid client.  In those situations, DHSS turns around            
and collects 100 percent of that payment from the federal                      
government.  Each state's Medicaid program may vary, but under                 
federal law, each state treats Medicaid like a third party for                 
purposes of IHS programs.  IHS is limited to reimbursement only for            
services provided under Medicaid, i.e. if adult dental services are            
not provided under Medicaid, IHS would not be reimbursed for                   
providing those services.                                                      
                                                                               
Number 437                                                                     
                                                                               
CHAIRMAN WARD asked what the Legislature has to do to resolve the              
airline reimbursement problem.                                                 
                                                                               
MS. ELLIS commented that Yute Air Alaska is billing according to               
recommendations made by First Health. Yute Air bills electronically            
on a weekly basis, but she is spending hours researching problems              
associated with a $100 claim, and the number of claims gets                    
backlogged.  She said she has reviewed all of the claims with Fran             
Collins of First Health and has billed for the entire $50,000.                 
                                                                               
CHAIRMAN WARD asked DHSS to explain its method of dispute                      
resolution.                                                                    
                                                                               
SENATOR LINCOLN asked Ms. Ellis what kind of research she has to               
do.                                                                            
                                                                               
MS. ELLIS responded it depends on the reason a claim was rejected.             
She noted DHSS has 999 rejection codes.  She stated the first                  
rejection code applies to problems with the prior authorization                
number.  Yute Air Alaska has no way of knowing when a doctor of                
Public Health nurse applies the correct prior authorization number             
with the date of travel.  The Medicaid recipient brings the form to            
the counter after it has been signed by the doctor.  Yute Air ends             
up being penalized by a claim rejection when it has no way to                  
determine whether the number is legitimate.                                    
                                                                               
SENATOR LINCOLN asked Ms. Ellis to provide the committee with other            
examples of rejection codes.                                                   
                                                                               
MS. ELLIS explained Yute Air often bills for one-way tickets                   
because a lot of customers prefer to return on a different airline             
because the schedule is more convenient.  Yute Air's claim will be             
rejected if Hageland Air already billed for its one-way portion.               
Yute Air then has to fill out an adjustment form and resubmit the              
claim, which is time consuming.  Yute Air bills approximately 100              
claims each Friday, and the adjustments take between 2 and 3 hours             
per week.                                                                      
                                                                               
CHAIRMAN WARD asked whether the procedure or lack of funds causes              
the delay in claim processing.                                                 
                                                                               
MR. LABBE replied the problem is not funding, it is more likely                
procedural, especially in the area of data entry.  He thought First            
Health staff could better respond to that question, but added the              
claims are paid every week and the turnaround time is fairly quick.            
                                                                               
CHAIRMAN WARD asked how this problem can be resolved.                          
                                                                               
MS. WELLER answered DHSS provides training on a regular basis.  The            
First Health staff have been working with Yute Air staff on a                  
weekly basis for the past two months to help them understand how to            
do the claims data entry so that the claims can be paid.                       
                                                                               
CHAIRMAN WARD asked if the problem is that Yute Air is not billing             
correctly.                                                                     
                                                                               
MS. WELLER responded the problem is a lack of understanding of the             
procedures.                                                                    
                                                                               
CHAIRMAN WARD said if the citizens of the state cannot perform a               
service because the state procedures are so complicated, then DHSS             
needs to cease contracting or change its procedures.                           
                                                                               
MR. LABBE said he is more than willing to review the procedures and            
was glad to hear the comments today.  He stated most of the                    
problems are procedural, not regulatory.                                       
                                                                               
Number 364                                                                     
                                                                               
SENATOR WARD asked Mr. Labbe if he has reviewed and approved all of            
the rejection codes.                                                           
                                                                               
MR. LABBE said he has not.                                                     
                                                                               
CHAIRMAN WARD suggested there only be four or five rejection codes,            
rather than 999.                                                               
                                                                               
SENATOR HALFORD asked if First Health has discussed its analysis of            
the problem.                                                                   
                                                                               
Number 350                                                                     
                                                                               
DARRELL NAGEL, First Health, stated only a small percentage of the             
999 rejection codes apply to transportation providers.  Some are               
very specific to particular types of providers.  He believed                   
limiting the number of codes to a few would dilute their meaning.              
                                                                               
CHAIRMAN WARD asked if 999 rejection codes exist, but the air                  
carriers only need four.                                                       
                                                                               
THERESA KEKIAK, Division of Medical Assistance - Anchorage, stated             
DHSS has about 900 codes but they do not all apply to every single             
provider.  The different types of providers are broken into claim              
types and they are of different dispositions, meaning some are                 
denied automatically, i.e. a claim would automatically be denied if            
a client was not eligible.   Other rejection codes specifically                
require prior authorization.                                                   
                                                                               
CHAIRMAN WARD asked how DHSS measures the effectiveness of First               
Health.                                                                        
                                                                               
MS. WELLER replied the contract DHSS has with First Health contains            
performance standards that pertain to claim turnaround time, among             
other things.                                                                  
                                                                               
CHAIRMAN WARD asked if First Health has paid all claims within the             
proper time frame.                                                             
                                                                               
MS. WELLER said First Health has met the performance standards in              
the contract.                                                                  
                                                                               
CHAIRMAN WARD commented DHSS's measurements must be flawed if there            
is a problem.  He asked why there is such a large discrepancy in               
the amount of claim reimbursements that have not been paid.                    
                                                                               
FRAN COLLINS, First Health, stated $13,000 of the total amount                 
billed has not been paid to date, or has been denied for a                     
verifiable, or correctable, reason.                                            
                                                                               
SENATOR HALFORD commented AS 37.05.285 requires payment by state               
agencies to occur within 30 days.  He asked if that standard                   
applies to DHSS.                                                               
                                                                               
Number 297                                                                     
                                                                               
MS. KEKIAK replied DHSS's payment standard is 21 days for a "clean"            
claim which is a claim containing no errors.                                   
                                                                               
MR. LABBE added that the federal standard for Medicaid payments                
requires states to process 90 percent of "clean" claims within 30              
days, and DHSS far exceeds that standard.                                      
                                                                               
SENATOR LINCOLN questioned what DHSS's time frame is for responding            
to claims with problems.                                                       
                                                                               
MS. WELLER explained the error codes are used to inform the                    
provider of why the claim was not paid, i.e., an error code may                
tell the provider the claim was not paid because it is a duplicate             
or the recipient was not eligible.  Those error codes are to                   
provide specific information to the provider so that the provider              
can fix the claim and get reimbursed.                                          
                                                                               
CHAIRMAN WARD stated there seems to be the perception that there is            
an unnecessary delay in reimbursements.                                        
                                                                               
SENATOR LINCOLN asked Ms. Ellis if she has further problems once               
she responds to the error code or whether the problem is the amount            
of time it takes to research information to respond to the error               
code.                                                                          
                                                                               
MS. ELLIS stated she began researching the problems associated with            
the error codes with Ms. Collins and Ms. Weller about two months               
ago, and in that time, Yute Air has only been reimbursed for about             
$5,000 of the $50,000 billed.                                                  
                                                                               
SENATOR LINCOLN asked Ms. Ellis if she feels she has responded to              
all of the requests surrounding the $50,000 in claims.                         
                                                                               
MS. ELLIS answered she has tried.                                              
                                                                               
SENATOR LINCOLN asked what DHSS's turn around time is for                      
reimbursement of corrected claims.                                             
                                                                               
MR. NAGEL responded the adjusted claims are worked immediately.                
                                                                               
SENATOR LINCOLN asked what the time frame is.                                  
                                                                               
MS. COLLINS replied, for the most part, a paper claim can be turned            
around in one to two weeks if there is no reason for further review            
of the claim or attachments.  Electronically submitted claims can              
be processed and paid within the same week of submission.  "Clean"             
claims, submitted by noon on Tuesday, can be paid by Friday.                   
Adjustments and voided claims take two to three weeks, depending on            
the division's work load and the amount of research the claim                  
requires.                                                                      
                                                                               
Number 184                                                                     
                                                                               
SENATOR HALFORD said state law requires a payment of interest of               
1.5 percent per month for non-paid debts over 30 days.  He asked if            
DHSS ever pays interest on claims that were wrongly denied.                    
                                                                               
CHAIRMAN WARD asked if that amount is deducted from payments made              
to the contractor.                                                             
                                                                               
MS. WELLER said DHSS exceeds the 30 day payment requirement, but               
the issue is whether a claim is submitted in a condition to be                 
paid.                                                                          
                                                                               
SENATOR HALFORD asked whether interest is paid if the error is on              
DHSS's part.                                                                   
                                                                               
CHAIRMAN WARD asked if DHSS pays interest if it is in error in any             
of its programs.                                                               
                                                                               
MS. WELLER stated to her knowledge, DHSS does not, and she was                 
unsure whether DHSS could do so under federal law.                             
                                                                               
SENATOR WILKEN suggested that the Senate write a letter to First               
Health to ask it to straighten out the problem, and he suggested               
that Mr. Labbe report back to the committee on the resolution of               
this problem.                                                                  
                                                                               
CHAIRMAN WARD stated the committee would take care of the                      
appropriate letter and would schedule a follow-up meeting.                     
                 SB 352 - AIRPORT REVENUE BONDS                                
                                                                               
REPRESENTATIVE COWDERY, sponsor of a House bill identical to SB
352,  discussed the measure as follows.  Five hearings were held in            
House committees.  Ten percent of the Anchorage workforce is                   
airport related, therefore this bill is very important to                      
Anchorage.  The interest rates on bonds are very favorable at this             
time.  The project will be sized to where 15 to 20 contracts will              
be let.                                                                        
                                                                               
MARCO PIGNALBERI, staff to Representative Cowdery, joined committee            
members at the table.                                                          
                                                                               
JOHN STEINER, representing the Attorney General's Office, was                  
available to answer questions via teleconference.                              
                                                                               
Number 119                                                                     
                                                                               
MR. PIGNALBERI discussed the bill further.  Existing statute                   
provides authorization to sell $100 million in bonds to be repaid              
by the International Airport Revenue Fund.  The sole purpose of SB
352 is to increase the $100 million to $180 million for the                    
exclusive purpose of airport improvements envisioned by the project            
at Anchorage International Airport.  In addition to the $180                   
million, approximately $26 million in federal highway funds, and               
upwards of $25 million in Federal Aviation Administration (FAA)                
funds, will be available.  The total project cost is estimated at              
$230 million.                                                                  
                                                                               
CHAIRMAN WARD asked Mr. Pignalberi to inform committee members of              
the Air Carriers vote.                                                         
                                                                               
MR. PIGNALBERI stated an Air Carrier Committee at the Anchorage                
International Airport exists.  Two-thirds of the member carriers               
are required to reject a proposal.  Approximately 85 percent of the            
revenue producing carriers voted in favor of this project, which               
exceeded the one-third approval rate required by the nature of                 
their agreement.                                                               
                                                                               
Number 085                                                                     
                                                                               
SENATOR HALFORD asked if the Air Carrier Committee agrees to a                 
project unless two-thirds of the group says no.                                
                                                                               
MR. PIGNALBERI said that is correct.                                           
                                                                               
SENATOR LINCOLN asked about the 85 percent of revenues referred to             
by Mr. Pignalberi.                                                             
                                                                               
MR. PIGNALBERI stated the carriers who voted in favor of the                   
project constitute the carriers who provide 85 percent of the                  
revenue generating capacity at the airport.  He added there are a              
total of 15 votes but he was not sure how many voted each way.                 
                                                                               
SENATOR HALFORD asked what the actions were of ERA, Peninsula Air,             
Reeves Airlines, and Southcentral Airlines.                                    
                                                                               
REPRESENTATIVE COWDERY stated many hearings were held to give ERA,             
Northern Air Cargo, and every carrier that wanted to testify the               
chance to do so.  Basically, all approved of a project but some of             
the smaller carriers expressed concerns about downsizing.  The                 
original plan was reduced by $25 million and the project contains              
enough contingencies to assure that there will be no reduction in              
the size of the airport or the construction of it.                             
                                                                               
SENATOR HALFORD asked how the carriers pay off the bond.                       
                                                                               
REPRESENTATIVE COWDERY said the money will come from land rent,                
landing fees, fuel charges, and vendor leases.                                 
                                                                               
SENATOR GREEN questioned if the land rent is from the airport                  
complex itself.                                                                
                                                                               
MR. PIGNALBERI explained it includes land rentals for the whole                
Anchorage International Airport, for example, the FedEx project,               
and ERA on the Southern end of the airport.  The airport revenue               
fund includes all revenues that come to the state from airport                 
operations.                                                                    
                                                                               
CHAIRMAN WARD asked how many meetings occurred to consider this                
project.                                                                       
                                                                               
REPRESENTATIVE COWDERY replied five public meetings were held which            
amounted to over eight hours of testimony.  The hearings                       
accommodated everyone who wanted to speak, for as long as they                 
wanted to speak.  The bill contains a spending plan that requires              
the group to report to the Legislature about how it is spending the            
money each year.                                                               
                                                                               
TAPE 98-8, SIDE A                                                              
                                                                               
SENATOR WILKEN asked why the language change on lines 13-14 of page            
1 of the bill was proposed and whether the project could occur                 
without that change.                                                           
                                                                               
MR. PIGNALBERI explained that language was provided by the legal               
drafters for stylistic consistency.  The change is not substantive.            
                                                                               
Number 980                                                                     
                                                                               
SENATOR WILKEN stated the sponsor statement refers to this airport             
project as the largest public works project ever undertaken by the             
state.  He noted the revenue flow over 25 years is of concern to               
him.  He questioned whether the $180 million will also provide for             
construction of roads leading to the airport.                                  
                                                                               
MR. PIGNALBERI answered the $180 million figure is the cost of the             
airport project and the financing cost, the two-year capitalization            
of interest.                                                                   
                                                                               
SENATOR WILKEN asked if we are going to finance $180 million for 25            
years and back it up with landing fees, fuel flowage fees, and                 
rents.  He asked if any new sources of revenue are anticipated that            
are not in effect today.                                                       
                                                                               
MR. PIGNALBERI stated all of those fees will increase by some                  
increment.                                                                     
                                                                               
SENATOR WILKEN said what bothers him is on page 5 of the special               
review, the possibility is raised that an increase in landing fees             
and fuel flowage fees may render the Anchorage airport non-                    
competitive and may affect air traffic.                                        
                                                                               
MR. PIGNALBERI said the conclusion of the report is that the                   
airport can afford the project.  He added an additional revenue                
source will be created sooner or later, and that is the passenger              
facility charge which the FAA is strongly recommending but no one              
wants to approach before November.  He noted the amount of revenue             
is estimated at $5 to $7 million per year.                                     
                                                                               
SENATOR WILKEN asked whether that amount is projected in the 25                
year revenue stream.                                                           
                                                                               
MR. PIGNALBERI said it is not.                                                 
                                                                               
REPRESENTATIVE COWDERY said he talked to Reeves and was told one               
employee does nothing but separate the passenger facility charges              
and sends the money to Seattle and Portland.                                   
                                                                               
SENATOR WILKEN repeated this bonding package is not based on                   
passenger facility charges.                                                    
                                                                               
MR. PIGNALBERI said that is correct.                                           
                                                                               
SENATOR WILKEN stated he is concerned the state will be spending               
$180 million and two years after the project is completed, the                 
airport will need another four gates, and in the year 2010, another            
four gates.  He questioned whether this project will need to be                
expanded as soon as it is finished.                                            
                                                                               
DAVE EBERLE, Director of Construction and Operations for the                   
Department of Transportation and Public Facilities, answered that              
the facility is being built according to the current projected                 
needs through the year 2005, and to correct the current                        
deficiencies at the airport.  To try to size the project larger                
would be somewhat speculative, so the plan is to take a wait and               
see approach to review passenger growth and other factors to                   
prevent over-building at this stage.  In the initial analysis of               
projection load growth, DOTPF projected there may be a need for an             
initial four gates in the year 2010.  Future expansion will be                 
evaluated on its own merits at a future date.                                  
                                                                               
SENATOR WILKEN asked if DOTPF based its projections on the graph               
named Enplanement Forecast which looks like a 20 year projection at            
4.65 percent.                                                                  
                                                                               
MR. EBERLE said he could not speak to the revenue in total.  DOTPF             
had an economic forecast and model of revenues done by a person who            
works with bonding issues.  Various factors were included in the               
model.  The assumed passenger load growth was around 4.2 percent.              
Several load growth scenarios were reviewed in the needs                       
assessment.                                                                    
                                                                               
SENATOR WILKEN suggested developing these questions further for the            
Finance Committee to review.  He expressed concern that we are                 
planning to build a very nice airport, maybe more than what is                 
needed, and that if we cannot support that airport ten years from              
now, given the current projections, the rates will have to be                  
raised in both Anchorage and Fairbanks.  Fairbanks does not want to            
do anything to upset the balance in fuel flowage or other fees,                
which is very delicate.                                                        
                                                                               
SENATOR HALFORD asked what the interest rate will be on the bonds.             
                                                                               
ROSS KINNEY, Deputy Commissioner of the Department of Revenue,                 
informed committee members the fiscal note attached to the bill                
shows three interest rates: a low rate; a mid-rate; and a high                 
rate.  If the bonds were issued today, the true interest cost would            
be in the neighborhood of 5.4 percent.  With credit enhancement,               
which is the purchase of an insurance policy, the interest rate                
could be lowered to about 5.15 percent.  The Department of Revenue             
feels extremely confident that the rates are as low as they have               
been in 20 years, and it believes the time is right to provide the             
funding for this project through a bonding mechanism simply because            
it is going to the be the cheapest money the airport providers will            
have access to.                                                                
                                                                               
REPRESENTATIVE COWDERY asked Mr. Kinney to elaborate on the                    
insurance policy.                                                              
                                                                               
MR. KINNEY said the Department of Revenue would like to credit                 
enhance any kind of a bond issue provided that the cost of the                 
premium to buy the insurance provides a reduction in the interest              
rate that is greater than the cost of the premium itself.  By                  
purchasing the policy, the bondholders are assured they will get               
paid.  If, for some reason, the airport did not make a timely                  
payment, the insurance company would make the payment to the                   
bondholders and would then look to the airport system for                      
reimbursement.                                                                 
                                                                               
SENATOR HALFORD asked if the project is carried forward with a six             
percent interest rate, what the range of a proposed increase in                
landing fees and comparable lease rates would be.                              
                                                                               
MR. EBERLE replied the informational packet should show it would               
not exceed 93 cents in the high year of around 2000, and that                  
number would be less with the reduction to $180 million.                       
                                                                               
SENATOR HALFORD asked what the percentage of that increase is.                 
                                                                               
MR. EBERLE replied, from his recollection, the basic rate was done             
on around 72 cents, and the high year was 93 cents in the year 2000            
and it comes down for a blend of 79 cents over the life of the                 
bond.  He offered to get that information to the committee.                    
                                                                               
SENATOR HALFORD asked if the increase was less than ten percent and            
the increase in landing rates is comparably less than ten percent.             
                                                                               
MR. EBERLE said he did not want to speculate.  He added one of the             
people who testified before the committee discussed the econometric            
models and that the fuel costs have a much greater impact than the             
landing fees.                                                                  
                                                                               
REPRESENTATIVE COWDERY said an increase in fuel costs by one cent              
per gallon would have a major impact.                                          
                                                                               
SENATOR HALFORD questioned whether that increase would have the                
same impact proportionally on small carriers and large carriers.               
                                                                               
REPRESENTATIVE COWDERY answered he is sure it would.  He added the             
landing fees are based on gross weight of the plane.                           
                                                                               
SENATOR HALFORD asked how many gates are at the Anchorage                      
International Terminal.                                                        
                                                                               
MR. PLUMBER said the International Terminal has 8 gates.                       
                                                                               
SENATOR HALFORD asked how many flights go through that terminal                
each day.                                                                      
                                                                               
MR. PLUMBER said approximately 50 to 70 passenger flights use that             
terminal per week.  The number per day varies.  In the master plan             
forecast up to the year 2012, Lee Fischer projected that the                   
traffic would not exceed 362,000, yet there were 700,000 last year.            
That forecast did not anticipate the return of some of the                     
international traffic, nor did it anticipate the use of the                    
international terminal for charters or as a place to put some of               
the cargo aircraft.                                                            
                                                                               
SENATOR WILKEN asked if the one cent change in the fuel flowage fee            
will have a significant impact on the carriers.                                
                                                                               
MR. PLUMBER replied the fuel flow charge is currently around two               
cents per gallon for signators and 2.03 cents for non-signatories.             
An increase in fuel flow costs of one cent would be a significant              
increase.                                                                      
                                                                               
SENATOR WILKEN asked if an increase of one cent would be able to               
support a certain debt load, but that one cent is a 50 percent                 
increase in existing costs at the current terminal.                            
                                                                               
MR. PLUMBER said he is not anticipating any increase in the fuel               
flow charge and such an increase has not been in any of the                    
calculations.  He clarified he was talking about the cost of fuel              
per gallon.  The cost of gas has dropped close to 30 percent in the            
last year.                                                                     
                                                                               
SENATOR WILKEN questioned whether a one cent increase per gallon in            
the wing is also significant.                                                  
                                                                               
MR. PLUMBER said that is correct.                                              
                                                                               
SENATOR WILKEN commented we should not think that a one cent                   
increase here and there should pay this off because those increases            
threaten Alaska's geographic advantage.                                        
                                                                               
SENATOR WILKEN moved to report SB 352 out of committee with                    
individual recommendations and the attached fiscal note.  There                
being no objection, the motion carried.                                        
                                                                               
    CSHB 386(FIN) - RE AK INDUS. DEVELOP & EXPORT AUTHORITY                    
                                                                               
SENATOR GREEN moved to adopt SCSCSHB 386(TRA) as the working                   
document before the committee.  There being no objection, the                  
motion carried.                                                                
                                                                               
LYDIA JONES, Senate Transportation Committee Aide, explained the               
committee substitute as follows.  HB 386 was introduced to extend              
the life of the Alaska Industrial Development and Export Authority             
(AIDEA) which is scheduled to sunset this year.  The Senate                    
Transportation Committee substitute extends AIDEA's bonding                    
authority to July 1, 2000.  A number of projects for which                     
legislative approval is requested are contained in the bill.  Among            
those are the Red Dog Mine and the port at the City of Nome.  The              
committee substitute added the issuance of bonds to finance the                
improvement and modification of existing facilities at the                     
Anchorage International Airport in the amount of $179 million;                 
bonds in the amount of $70 million to finance the design and                   
construction of a port at Pt. MacKenzie to be owned by Authority;              
issuance of bonds not to exceed $70 million to develop a railroad              
right-of-way and utility corridor to gain northern access to Denali            
National Park; issuance of bonds to finance improvement and                    
expansion of the port facilities at the City of Seward for $20                 
million; and bonds to finance the construction and improvement of              
the Hatcher Pass Ski Resort, phase one, located in the Mat-Su                  
Borough, not to exceed $15 million; and Section 25 provides                    
detailed information about the right-of-way for the railroad and               
utility corridor.                                                              
                                                                               
CHAIRMAN WARD asked about the expiration date.                                 
                                                                               
MS. JONES answered the expiration date of AIDEA's bonding authority            
was amended to the year 2000 because, while AIDEA has an excellent             
track record with its projects, the Legislature would like to have             
oversight of those projects and be informed of how they are                    
proceeding.                                                                    
                                                                               
SENATOR LINCOLN asked Ms. Jones to expand on Section 25 in relation            
to Kantishna Holdings, Inc.                                                    
                                                                               
MS. JONES noted that Mr. Joe Fields of Kantishna, Inc. was                     
participating via teleconference.  She explained Kantishna, Inc. is            
developing a project to gain northern access to Denali National                
Park.                                                                          
                                                                               
SENATOR LINCOLN asked Mr. Fields to describe the area referred to              
in the bill and how vast that area is.                                         
                                                                               
MR. FIELDS replied this land extends into Denali National Park to              
the West of Healy.  The description in the bill is a portion of the            
townships in that area which contain the most likely final right-              
of-way for the Denali railway system.                                          
                                                                               
SENATOR LINCOLN asked Mr. Fields how many miles this area will                 
extend.                                                                        
                                                                               
MR. FIELDS answered the area will extend, from the Alaska Railroad,            
about 20 miles to the West, to the eastern boundary of Denali                  
National Park.                                                                 
                                                                               
SENATOR LINCOLN asked who is involved in Kantishna Holdings, Inc.              
                                                                               
MR. FIELDS replied Kantishna Holdings, Inc. is an Alaskan                      
corporation that has proposed the development of the Denali Railway            
System.  It currently holds an access permit across some of the                
lands in this area, and it has made a petition to the Secretary of             
the Interior for the balance of a right-of-way to the Kantishna-               
Wonder Lake area.                                                              
                                                                               
SENATOR LINCOLN asked who the board members are.                               
                                                                               
MR. FIELDS stated the Kantishna Holdings, Inc. board is comprised              
of Ken Murray, Jr. from Fairbanks, Lawrence Irving, Jack Williams,             
and himself.                                                                   
                                                                               
SENATOR LINCOLN asked if those four are the principal owners of                
Kantishna Holdings, Inc.                                                       
                                                                               
MR. FIELDS said they are.                                                      
                                                                               
KEITH LAUFER, Financial and Legal Affairs Manager of AIDEA, made               
the following comments.  AIDEA supports HB 386, which will extend              
AIDEA's funding authority and create new facilities and jobs and               
help diversify Alaska's economy.  AIDEA provided the committee with            
a detailed sectional analysis of the Finance Committee version of              
the bill.  The bill contains four major components.  The first                 
extends AIDEA's bonding authority, which would otherwise sunset                
July 1, 1998.  If AIDEA's authority was to sunset, AIDEA would be              
prevented from issuing development bonds under $10 million and from            
issuing conduit bonds.  Bonds in the amount of over $10 million                
always require legislative approval.  Conduit bonds can be issued              
without any credit implication to the state or to AIDEA but allow              
for tax exempt financing of qualified projects.  Again, AIDEA will             
be required to get legislative authorization of projects over $10              
million.                                                                       
                                                                               
MR. LAUFER continued.  The second major aspect of the bill is that             
it merges AIDEA's export guarantee program and its business                    
assistance guarantee program.  The ten year old export assistance              
program has never been used.  AIDEA commissioned a study to find               
out why that was the case and found that while exporting businesses            
are supported by other AIDEA programs, this program was not                    
effective because it was designed after other states' programs that            
have strong manufacturing bases and it had some requirements that              
did not work well.  For example, it had a 25 percent value-added               
component in Alaska which prevented the use of the program for                 
trans-shipment or other types of exports that are common.  The bill            
modifies the export program and merges it into the business                    
assistance program which has worked fairly well.  The program will             
cover services, not just manufacturing, and it covers distributors             
and trading companies.  It only requires export insurance at                   
AIDEA's discretion.  Currently export insurance is required for all            
transactions regardless of location.                                           
                                                                               
MR. LAUFER explained the third aspect of the bill is the                       
confidentiality provision.  AIDEA has no such provision right now.             
AIDEA is subject to the general rules under the Public Records Act             
which require AIDEA to release documents under the terms of the                
Act.  The default is that all records are public records; there is             
no exception for records submitted by applicants such as tax                   
returns, business plans and the like.  Instead, AIDEA must apply a             
Supreme Court test that requires it to balance the public's right              
to know versus the privacy interest of the applicant.                          
                                                                               
SENATOR GREEN asked where that language is contained in the bill.              
                                                                               
MR. LAUFER stated it is in Section 8 of the bill.  He stated the               
current bill contains a provision that specifies categories of                 
documents,  that if confidential when submitted to AIDEA, could be             
kept confidential at the applicant's request.  The Legislature and             
the Legislative Budget and Audit Division would always have access             
to all information.  The last aspect of the bill pertains to                   
project authorizations.  The Finance Committee's version of the                
bill contained two project authorizations; one for an expansion and            
modification of the port at the Red Dog Mine (the DeLong Mountain              
Transportation System) to provide a direct float-out facility.  At             
present, Cominco Alaska uses barges to lighter concentrates out to             
ocean going vessels.  The proposed project would extend the                    
existing pier about one-half mile, and provide for dredging so that            
ocean-going vessels could be directly loaded.  The project is very             
significant and will lower the costs of Cominco's operation thereby            
making Cominco's operation more secure in the state's investment.              
The project also has ancillary environmental benefits in that the              
concentrate will not have to be handled as often.  That project is             
in a very preliminary stage.  AIDEA believes the project to be a               
very good one.  AIDEA is concerned about its concentration of debt             
in one particular project; AIDEA has over $200 million currently               
invested in the facilities at the port.  This additional $80                   
million is a significant portion of AIDEA's $1.3 billion in assets.            
At present, AIDEA believes this project will be structured as a                
revenue financing, non-recourse to the Authority, based solely on              
Cominco's credit.  That method will alleviate much of AIDEA's                  
concentration concern as well as the rating agencies' and bond                 
insurers' concerns.                                                            
                                                                               
MR. LAUFER informed committee members the second project included              
in the House Finance Committee version of HB 386 is an expansion               
and modification project for the port at the City of Nome which                
provides for a new entrance channel to the harbor for safety and               
other reasons.  That $30 million project is in a preliminary stage.            
It appears that $26 million could be funded through Army Corps of              
Engineer funds, so a substantial portion of AIDEA's involvement in             
this project would be short term.  Again, there are a lot of due               
diligence and statutory requirements AIDEA would have to meet                  
before it would invest in this project, but it looks promising at              
this stage.                                                                    
                                                                               
SENATOR HALFORD stated he believes the Legislature should have                 
access to most of the confidential information if it is to be                  
effective in its oversight capacity.   He noted trade secrets and              
income tax returns of individuals are far different than business              
plans, credit reports, and other things the Legislature will need              
to have.                                                                       
                                                                               
MR. LAUFER responded AIDEA has been advised that the Legislature               
will continue to have access to all information.                               
                                                                               
SENATOR HALFORD stated the Legislative Budget and Audit Division               
will have such access, the Legislature will not.  He stated                    
legislators who are willing to keep the information confidential               
should have access.                                                            
                                                                               
CHAIRMAN WARD suggested Mr. LAUFER verify that the Legislature will            
have access with the Attorney General's Office.                                
                                                                               
SENATOR LINCOLN asked for clarification about the additional amount            
to be invested in the Red Dog Mine.                                            
                                                                               
MR. LAUFER replied $80 million.  The investment to date is about               
$230 million.                                                                  
                                                                               
SENATOR LINCOLN asked Mr. LAUFER if he had the opportunity to read             
the Senate Transportation Committee substitute prior to the                    
meeting.                                                                       
                                                                               
MR. LAUFER said he read it in the last few minutes.                            
                                                                               
SENATOR LINCOLN asked Mr. LAUFER if he had any comments he wanted              
to share on the version.                                                       
                                                                               
MR. LAUFER stated he does not know what a lot of the projects are              
about so it is difficult for him to comment on them.  He noted that            
typically, AIDEA has waited for projects to be further advanced                
before it got project authorization, because when AIDEA goes out               
into the bond financing market, that market treats all                         
authorizations as though the bonds will be issued.  When they look             
at AIDEA's finances, they will figure AIDEA will issue all of the              
bonds regardless of the stage of the project which will cause some             
difficulty.                                                                    
                                                                               
CHAIRMAN WARD asked if AIDEA has a mechanism in place to ensure                
that the public's interest is protected in the process.                        
                                                                               
MR. LAUFER replied AIDEA would have to meet a number of statutory              
requirements before it could invest in any of these projects.  He              
clarified he was addressing the financing concerns AIDEA may                   
experience when it goes to the financing markets.                              
                                                                               
CHAIRMAN WARD said he would hope AIDEA would take a prudent man                
rule and protect Alaska's interests.                                           
                                                                               
ROGER HEAD, principal of the Hatcher Pass Development Corporation,             
gave the following testimony in support of HB 386.  The Hatcher                
Pass development project has been seriously considered for about 15            
years, and AIDEA has reviewed previous proposals for the project.              
Both the Department of Natural Resources (DNR) and the Matanuska-              
Susitna Borough have put a high priority on this project.  The Mat-            
Su Borough believes that in the near term, Hatcher Pass is one of              
the major economic development projects available to the borough.              
DNR believes this project is part of an overall winter and summer              
tourism plan.  Previous proposals for the Hatcher Pass project were            
fairly grandiose in scale, and never reached fruition.  DNR                    
requested a proposal for a new lease in 1994.  The proposed                    
development that occurred as the result of that lease was a project            
estimated to cost about $25 million.  Hatcher Pass Development                 
Corporation, the Mat-Su Borough, and AIDEA reviewed the economic               
feasibility of that particular project and concluded that although             
the project offered great opportunities for both the state and the             
Mat-Su Borough, its size was too large to be feasible.  The lease              
was sold about 1+ years ago to Davis Constructors.  Davis                      
Constructors undertook a study to determine how the project could              
be changed to meet the objective of the Mat-Su Borough and the                 
State, which was to create a four season resort.  The project plan             
was also pared down so that the first phase was financially                    
feasible.  That work has been ongoing for the past year, and a                 
proposal was submitted to the National Bank of Alaska as the direct            
contact to use AIDEA's guarantee for financing.  At the beginning              
of this year, NBA indicated that the debt-equity ratio of 90:10 did            
not provide the security it required.  NBA recommended a debt                  
equity ratio in the neighborhood of 25 to 30 percent.  Since that              
time, four milestones have occurred.  The first is that DOTPF made             
the Hatcher Pass road improvement project one of its highest                   
priorities after the Mat-Su Borough contributed some funds to that             
project.  That road is an integral part of the project's                       
infrastructure.  The Matanuska-Susitna Electric Association found              
a way to reduce the cost, from $2 million to $.5 million, for                  
providing electricity to the project by using an overhead line and             
decided to participate and contribute to the project with its                  
development fund.  Third, the Mat-Su Borough reached an agreement              
with DNR whereby it will take over the lease property.  The lease              
funds will be injected by the Mat-Su Borough into the initial                  
development phase of the project.  Fourth, DNR is planning to                  
privatize Independence Mine.  The recent contributions are                     
narrowing the gap to where the Hatcher Pass Development Company                
believes it is very close to meeting the ratio requirement.  It                
believes undertaking financing with AIDEA is logical.  Ski areas               
tend to be a little bit more difficult to finance than other                   
developments.                                                                  
                                                                               
MR. KYLE RANDISH, Vice President of the Hatcher Pass Development               
Company, described the project for committee members with the use              
of charts.  When Hatcher Pass Development Company bought out the               
project, its goal was to down scale the project to make it                     
economically feasible.  It is proposing a four-phase development               
plan.  The first phase will be the development of a ski area.  The             
second phase will include infrastructure development for the ski               
area and to support the village.  The third phase is the village               
concept and the fourth phase will include more mountain                        
improvements.  The ski area will have two detachable chair quad                
lifts, a base facility, lighting on the mountain, and a snow making            
system at the lower elevations.  The goal of phase one is to                   
establish a skier experience equivalent to what is available in the            
market in an economically feasible manner. The chair lifts are                 
state-of-the-art.   During the second phase, power, gas, water, and            
other developments will take place to accommodate the village                  
scheme.  The village concept will be a four seasons resort                     
destination spot.  The complex will offer some small hotels, small             
retail stores, a convention center, a golf course, and some                    
residential development.  As the village concept is developed, more            
skier business should develop and the ski area size should                     
increase.                                                                      
                                                                               
SENATOR WILKEN thanked Mr. Head and Randish for attending the                  
meeting.                                                                       
                                                                               
PAUL FUHS, port consultant for the Port of Nome, described the Nome            
port project through the use of illustrations.  The existing port              
was built in 1917 by the U.S. Army Corps of Engineers.  The 75 foot            
jetty is too small for the equipment coming in to the port.                    
Because of the Community Development Quota Program, the number of              
fishing boats coming into Nome has increased.  Over the last ten               
years, ten people died trying to come in and out of the port                   
because of dangerous wave breaks in one spot.  The causeway was                
built during oil field development in Norton Sound, but was shut               
down due to litigation.  It contains cargo areas, but those areas              
are exposed to rough weather.  Nome is a trans-shipment port: it               
serves 23 villages in the area.   Senator Stevens and his staff met            
with the U.S. Army Corps of Engineers and negotiated an 18 month               
time frame to complete the project.  A new breakwater and channel              
entrance will be the main navigation features that improve the                 
safety and usability of the port.  The Port of Nome prefers AIDEA              
financing because if the Corps of Engineers and the federal                    
government do the procurement, it will take two years to get the               
project out to bid.  Using AIDEA (Section 204E) financing will save            
an entire construction season.  Also, if the federal government                
finances the project, the project would have to be done in one bid.            
By using AIDEA financing, the movement of the rock from Cape Nome,             
dredging, and other projects, can be completed using local                     
contractors.  With AIDEA financing, in the first year, 80 percent              
will be paid back to AIDEA and the community will take the rest of             
the debt ($5-6 million) as long term debt through AIDEA and pay                
that off with port revenues.                                                   
                                                                               
SENATOR HALFORD asked if the Corps of Engineers has the money                  
appropriated to do the project.                                                
                                                                               
MR. FUHS said that it does.                                                    
                                                                               
SENATOR HALFORD asked if the Corps of Engineers will pay AIDEA                 
back.                                                                          
                                                                               
MR. FUHS said it will pay AIDEA back 80 percent of the money as                
soon as it has certified that the project is complete.  The project            
is based on an 80-20 share; the local government has to come up                
with 20 percent of the money.  AIDEA will be reimbursed for roughly            
$20 million in the first year when the project is complete, and $6             
million will be financed long term.                                            
                                                                               
SENATOR HALFORD asked how $20 million will amount to 80 percent of             
the project's total cost of $30 million.                                       
                                                                               
MR.  FUHS said the total cost is estimated at $26 million but the              
figure is not exact yet.  The community might want to extend the               
seawall to protect the front end of the spit.  The dredged material            
will be used to fill in the jetty to make it usable property.                  
                                                                               
SENATOR WILKEN asked about the purple area of the chart.                       
                                                                               
MR. FUHS explained the purple notations are the bathometric                    
markings which show the surveys of the elevations in the area to               
ensure that the project will stand up to rough weather.  The                   
community spent $550,000 on a feasibility study to which the                   
federal government contributed a like amount.  $250,000 of that                
amount was spent on modeling the port in a wave tank against the               
conditions of the 1974 storm in Nome.                                          
                                                                               
MR. FUHS stated the Community Development Quota Program contributed            
$550,000 and the community put in the rest.  The only state money              
in the project is from a $200,000 community development block                  
grant.                                                                         
                                                                               
SENATOR HALFORD asked what the tide level is in that area.                     
                                                                               
MR. FUHS stated the tide is only about a meter; two at the maximum,            
but there is hold back from the storms because the area is so                  
shallow.                                                                       
                                                                               
SENATOR WILKEN asked if the docking facilities will be upgraded.               
                                                                               
MR. FUHS said they will in the small boat harbor area, however                 
those upgrades do not qualify for federal funding so they will be              
financed with local money.                                                     
                                                                               
SENATOR HALFORD asked who owns the spit.                                       
                                                                               
MR. FUHS replied it is owned by about 20 entities, among them the              
city and the Native corporation.  He added when this project got               
started, he was hired as the acting city manager of Nome, and the              
14C3 land reconveyance to the Native corporation was resolved.                 
                                                                               
SENATOR HALFORD commented this project will create a lot of high               
value downtown beachfront property.                                            
                                                                               
MR. FUHS agreed.  He noted a gold seam runs through part of the                
area where the Beema (ph) is working, and it contains arsenic.  The            
arsenic will be sealed into the bottom of the old channel so                   
technically one whole area will be a toxic waste dump with zero                
value as far as the federal government is concerned.                           
                                                                               
CHARLOTTE Maccay, Senior Administrator of Environmental and                    
Regulatory Affairs for Cominco Alaska's Red Dog operation, stated              
Cominco is asking the Legislature to approve the Red Dog portion of            
the AIDEA funding bill which provides for further upgrade of the               
DeLong Mountain transportation system port site by converting the              
lightering barge load-out facility to an ocean vessel direct                   
loading facility.  The direct loading facility will open the port              
to other regional uses and other future resource extraction                    
projects in the region.  It provides cleaner, and a reduced number             
of, transfers of materials from port to vessel; it reduces marine              
wildlife exposure to moving vessels; and it improves productivity              
while greatly reducing shipping costs.  Cominco has been successful            
in bringing economic development to rural Alaska and with NANA                 
shareholder and Alaska hire.  She noted she submitted detailed                 
written testimony to committee members and was available to answer             
questions.                                                                     
                                                                               
CHAIRMAN WARD thanked Ms. Maccay for the tremendous amount of                  
materials she supplied to the committee.                                       
                                                                               
JOHN KEY, General Manager of Cominco Alaska, stated he was also                
available to answer questions.                                                 
                                                                               
Committee members had no questions of Ms. Maccay and Mr. Key.                  
                                                                               
MIKE SCOTT, Manager of the Mat-Su Borough, stated his appreciation             
to committee members for hearing HB 386 and for including the                  
Hatcher Pass and Point MacKenzie projects.  The Hatcher Pass                   
development project has been in place for several years and is now             
close to becoming reality.  The Point MacKenzie project has been a             
borough priority for many years.  The Mat-Su Borough is the largest            
area of the state without a port.  At this point, some federal                 
funding for this project is working its way through Congress.                  
                                                                               
SENATOR HALFORD commented, regarding the confidentiality provision             
in the bill, he believes some things should be on the list but                 
others should be a matter of public record.  He believes income tax            
statements, cash flow statements, and trade secrets should not be              
a matter of public record, but financial statements, profit and                
loss statements, credit records, appraisals, if part of the                    
collateral,  marketing strategies, and market surveys should not be            
kept confidential.  He repeated the list is too expansive.                     
                                                                               
MR. LAUFER commented he was unable to get a representative from the            
Attorney General's Office to attend.  He stated the issue is the               
separation of what the Legislature should have access to and what              
information should be a matter of public record. AIDEA's                       
understanding was that any legislator would have access, providing             
the information was kept in confidence.  AIDEA would be in support             
of amending the bill to clarify that provision.  With respect to               
the specific items mentioned by Senator Halford, one of AIDEA's                
largest programs is its loan participation program in which AIDEA              
buys bank participation.  Under the laws that apply to banks, all              
of that information is required by law to be kept confidential.                
                                                                               
SENATOR HALFORD questioned how this system has been working for                
years.                                                                         
                                                                               
MR. LAUFER replied AIDEA gets requests regularly and goes through              
the Supreme Court balancing test: the privacy interest versus the              
public interest.  Generally, no one is happy with the decision                 
AIDEA makes so it tried to create, in the bill, a list to give                 
people guidance as to what information would be public and what                
would be confidential.  The original bill allowed AIDEA to                     
promulgate regulations.  Representative Therriault questioned why              
AIDEA did not want to put a list in statute.  AIDEA preferred                  
Representative Therriault's approach and the bill was amended.  The            
list is representative of the type of requests AIDEA receives and              
where the problems have occurred related to those requests.                    
                                                                               
SENATOR GREEN asked if the bill could contain a stipulation                    
requiring any person who plans to get an AIDEA loan through a bank             
to sign a waiver and comply with AIDEA's standards rather than the             
bank's.                                                                        
                                                                               
MR. LAUFER said certainly, and that has been the case up until now.            
The problem has been that AIDEA gets requests from competitors for             
information.  AIDEA is not allowed, under current law, to inquire              
as to motives or anything; the information is deemed public record.            
AIDEA was hoping, through the legislative process, to get clearer              
standards as to what information could be held in confidence.                  
AIDEA believes the list is representative of the kind of                       
information that is normally considered confidential.  The bill                
requires that the information be kept confidential before it is                
submitted, and often many of the borrowers' financial statements               
are already public at the time they are submitted.  The bill would             
not apply to any of that information.                                          
                                                                               
SENATOR HALFORD stated, as an example, a high profile airline got              
an AIDEA loan.  The airline had a lot of property listed at certain            
values and some of those properties had DEC problems.  That                    
information was generally public.  If this bill passes, that kind              
of information would not be public.  He believes the public has the            
right to know the appraised value of the collateral.                           
                                                                               
MR. LAUFER responded the appraisal item is a particularly sensitive            
one for banks because AIDEA has had cases where appraisals of                  
property were used by local assessors to reassess the property                 
value. The bill contains exceptions in the appraisal section                   
because AIDEA felt that certain appraisal information had to be                
public, but the banks were hesitant to allow the entire appraisal              
to be made public.                                                             
                                                                               
CHAIRMAN WARD asked if there was further testimony on SCSCSHB 386              
(TRA) at this time and noted his intention to pass the bill out of             
committee.  There was no further testimony.  CHAIRMAN WARD asked               
Senator Halford to work with the AIDEA representatives to prepare              
a committee substitute to be passed out of committee on Thursday.              
                                                                               
SENATOR HALFORD questioned whether the Chairman would like him to              
offer an amendment at this time.                                               
                                                                               
CHAIRMAN WARD said he also wanted to work with the group to remove             
some of the items that were included by the House Finance                      
Committee.                                                                     
                                                                               
There being no further business to come before the committee,                  
CHAIRMAN WARD repeated his intention to move the committee                     
substitute out of committee on Thursday, and adjourned the meeting             
at 4:17 p.m.                                                                   

Document Name Date/Time Subjects