Legislature(2013 - 2014)BUTROVICH 205

03/13/2014 01:30 PM TRANSPORTATION


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Public Testimony <Time Limit May Be Set> --
*+ SB 94 RIGHTS-OF-WAY TELECONFERENCED
Heard & Held
*+ SB 197 NATURALLY OCCURRING ASBESTOS TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 178 PASSENGER VEHICLE RENTAL TAX TELECONFERENCED
Heard & Held
                     ALASKA STATE LEGISLATURE                                                                                 
             SENATE TRANSPORTATION STANDING COMMITTEE                                                                         
                          March 13, 2014                                                                                        
                             1:30 p.m.                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Dennis Egan, Chair                                                                                                      
Senator Fred Dyson, Vice Chair                                                                                                  
Senator Anna Fairclough                                                                                                         
Senator Click Bishop                                                                                                            
Senator Hollis French                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 178                                                                                                             
"An Act relating to the application of the passenger vehicle                                                                    
rental tax; and providing for an effective date."                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 94                                                                                       
"An Act vacating a portion of the Copper Center - Valdez right-                                                                 
of-way; relating to rights-of-way acquired under former 43                                                                      
U.S.C. 932 that cross land owned by a private landowner; and                                                                    
relating to the use of eminent domain to realign a right-of-                                                                    
way."                                                                                                                           
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 197                                                                                                             
"An  Act  extending  the  termination  date  of  the  Department  of                                                            
Transportation    and    Public    Facilities'    interim    project                                                            
authorization   regarding   naturally    occurring   asbestos;   and                                                            
providing for an effective date."                                                                                               
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 178                                                                                                                  
SHORT TITLE: PASSENGER VEHICLE RENTAL TAX                                                                                       
SPONSOR(s): SENATOR(s) BISHOP                                                                                                   
                                                                                                                                
02/18/14        (S)       READ THE FIRST TIME - REFERRALS                                                                       
02/18/14        (S)       TRA                                                                                                   
02/25/14        (S)       TRA AT 1:30 PM BUTROVICH 205                                                                          
02/25/14        (S)       Heard & Held                                                                                          
02/25/14        (S)       MINUTE(TRA)                                                                                           
03/04/14        (S)       TRA AT 1:30 PM BUTROVICH 205                                                                          
03/04/14        (S)       -- MEETING CANCELED --                                                                                
03/11/14        (S)       TRA AT 1:30 PM BUTROVICH 205                                                                          
03/11/14        (S)       Scheduled But Not Heard                                                                               
03/13/14        (S)       TRA AT 1:30 PM BUTROVICH 205                                                                          
                                                                                                                                
BILL: SB  94                                                                                                                  
SHORT TITLE: RIGHTS-OF-WAY                                                                                                      
SPONSOR(s): SENATOR(s) OLSON                                                                                                    
                                                                                                                                
03/29/13        (S)       READ THE FIRST TIME - REFERRALS                                                                       
03/29/13        (S)       TRA, JUD                                                                                              
02/26/14        (S)       SPONSOR SUBSTITUTE INTRODUCED-REFERRALS                                                               
02/26/14        (S)       TRA, JUD                                                                                              
03/13/14        (S)       TRA AT 1:30 PM BUTROVICH 205                                                                          
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
BRITTANY HUTCHISON                                                                                                              
Staff to Senator Click Bishop                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Explained the draft committee substitute                                                                  
(CS) to SB 178(), version 28-LS1406\C.                                                                                          
                                                                                                                                
DOUG JOHNSON, CFO                                                                                                               
Tyler Rental, Inc.                                                                                                              
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 178.                                                                                         
                                                                                                                                
RUDI VONIMHOF                                                                                                                   
Delta Leasing                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 178.                                                                                         
                                                                                                                                
JOHN COOK, CFO                                                                                                                  
Airport Equipment Rentals                                                                                                       
Brice Enterprise                                                                                                                
POSITION STATEMENT: Supported CSSB 178.                                                                                       
                                                                                                                                
SAM BRICE, President                                                                                                            
Brice Enterprises, Inc.                                                                                                         
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 178.                                                                                         
                                                                                                                                
JOHANNA BALES, Deputy Director                                                                                                  
Tax Division                                                                                                                    
Alaska Department of Revenue (DOR)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Explained how the tax provisions in SB 178                                                                
worked.                                                                                                                         
                                                                                                                                
DAVID SCOTT, staff to Senator Donald Olson                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Explained SB 94 for the sponsor.                                                                          
                                                                                                                                
JOE BOVEE, Vice President                                                                                                       
Land and Resources                                                                                                              
Ahtna Incorporated                                                                                                              
Glennallen,  Alaska                                                                                                             
POSITION STATEMENT: Supported SB 94.                                                                                          
                                                                                                                                
GEORGE HELMS, representing himself                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 94.                                                                                          
                                                                                                                                
NICOLE BORROMEO, General Council                                                                                                
Alaska Federation of Natives (AFN)                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 94.                                                                                          
                                                                                                                                
RANDLE MAULDIN, representing himself                                                                                            
Birchwood, Alaska                                                                                                               
POSITION STATEMENT: Supported SB 94.                                                                                          
                                                                                                                                
KENT SULLIVAN, Assistant Attorney General                                                                                       
Civil Division                                                                                                                  
Natural Resources Section                                                                                                       
Alaska Department of Law (DOL)                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Stated that the department/administration                                                                 
didn't have a position on SB 94 and explained some of his                                                                       
concerns with it.                                                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:30:22 PM                                                                                                                    
CHAIR  DENNIS  EGAN   called  the  Senate  Transportation   Standing                                                          
Committee  meeting to  order at  1:30 p.m.  Present at  the call  to                                                            
order were Senators Bishop, Dyson and Chair Egan.                                                                               
                                                                                                                                
                SB 178-PASSENGER VEHICLE RENTAL TAX                                                                         
                                                                                                                                
1:31:58 PM                                                                                                                    
CHAIR EGAN announced SB 178 to be up for consideration.                                                                         
                                                                                                                                
1:32:06 PM                                                                                                                    
BRITTANY  HUTCHISON, staff  to Senator Click  Bishop, explained  the                                                            
draft  committee   substitute   (CS)  to  SB   178(),  version   28-                                                            
LS1406\C.  Language in  section 1  on page 1,  line 4, consolidates                                                             
two sections  regarding  the terms  "recreational"  and "passenger"                                                             
for  better organization  of  the  statute and  except  for the  tax                                                            
rates,  the  factors  are  the same  for  both  types  of  vehicles.                                                            
Section  2 on  page 1,  line 10,  reduces  the rental  term from  90                                                            
days to  30 days  for which  a vehicle  is exempt.  An extension  of                                                            
the contract  is  also exempt  as long  as the  extension is  agreed                                                            
upon  before the  expiration  of the  initial 30-day  period.  There                                                            
is  no  break  between   the  initial  period  and   the  period  of                                                            
extension.                                                                                                                      
                                                                                                                                
1:33:25 PM                                                                                                                    
Section  3 on page  2, line 6,  consolidates  the terms "passenger"                                                             
and "recreational."  It  states that  passenger  vehicles are  taxed                                                            
at a  total of 10  percent of  all fees and  costs and recreational                                                             
vehicles  are taxed at  30 percent.  That has  not changed from  the                                                            
original statute.                                                                                                               
                                                                                                                                
1:34:43 PM                                                                                                                    
Section  4  on  page   2,  line  13,  amends  the  term   "passenger                                                            
vehicle"  to  specify  that   it is  for  the  primary   purpose  of                                                            
transporting  passengers.  This is  done to  help  clarify that  the                                                            
tax applies  only to  passenger vehicles  and not  to vehicles  that                                                            
have  another purpose.  Section  4(f) on  page 2,  line 28,  reduces                                                            
the gross  vehicle weight  from 8,500  lbs. to  6,500 lbs. in  order                                                            
to better  define what  size of  trucks the  legislature intends  to                                                            
be taxed.                                                                                                                       
                                                                                                                                
Section  5  on page  3,  line  7, repeals  AS  43.52.030  and  .040,                                                            
because  they are  no longer  needed since  they  have already  been                                                            
consolidated  in sections 1  and 3. The original  version of  SB 178                                                            
had a  section regarding  retroactivity,  and the  CS does not  have                                                            
that. But  to address  that issue  they drafted  a letter of  intent                                                            
which  says  the  passenger   vehicle  rental  tax   should  not  be                                                            
applied  to Alaskan  businesses doing  business  with other  Alaskan                                                            
businesses  and  that  tax  should  not  be applied  retroactively.                                                             
However,  if DOR  is able  to determine  that a  business  collected                                                            
the tax  but did not remit  the tax to DOR,  then DOR should  charge                                                            
back taxes, penalties and/or interest on those unpaid taxes.                                                                    
                                                                                                                                
She explained that  in 2003, the legislature passed  House Bill 271,                                                            
a  passenger  vehicle rental  tax  intended  to raise  revenue  from                                                            
tourists renting passenger vehicles so  that they could help pay for                                                            
the wear and tear they  inflict on the State's publically-maintained                                                            
roads.                                                                                                                          
                                                                                                                                
1:35:05 PM                                                                                                                    
SENATOR FAIRCLOUGH joined the committee.                                                                                        
                                                                                                                                
1:35:15 PM                                                                                                                    
MS. HUTCHISON  continue  to explain  that  since the  passage of  HB
271, AS  43.52 has been amended  three times;  two of which  were to                                                            
exempt  Alaskan  businesses   doing  business  with   other  Alaskan                                                            
businesses. The third time was to exempt motorcycles.                                                                           
                                                                                                                                
1:35:55 PM                                                                                                                    
SENATOR DYSON moved to adopt CSSB 178(), version\C.                                                                             
                                                                                                                                
CHAIR EGAN objected for discussion purposes.                                                                                    
                                                                                                                                
MS.  HUTCHISON  said  the intent  of  SB  178 is  to  clarify,  once                                                            
again,  which rental  vehicles  are to  be covered  by  the tax  and                                                            
which are  not. It  is the committee's  intent  that only  passenger                                                            
rental  cars, as  described  in section  4 of  CSSB  178, should  be                                                            
taxed under AS 43.52.010.                                                                                                       
                                                                                                                                
SENATOR DYSON asked if there is a fiscal note.                                                                                  
                                                                                                                                
MS. HUTCHISON answered not yet for the CS.                                                                                      
                                                                                                                                
1:37:44 PM                                                                                                                    
DOUG  JOHNSON,   CFO,  Tyler   Rental,   Inc.,  Ketchikan,   Alaska,                                                            
supported  SB  178.  He said  they  have  been in  business  for  25                                                            
years  and  operates from  five  different  locations  in  Southeast                                                            
Alaska with  58 Alaskan  employees. Tyler  never received notice  of                                                            
this tax  from the  state. Their  core business  is rental of  large                                                            
equipment  to  the  construction,  timber  and  mining, industries.                                                             
They rent  half-ton and  large pickups to  support contractor  needs                                                            
such  as at  the Kensington  Mine  and Greens  Creek  Mine that  are                                                            
not on the state highway system.                                                                                                
                                                                                                                                
MR. JOHNSON  said  Tyler just  became aware  of  the rental  vehicle                                                            
tax from  another  Alaska-based equipment  rental  company and  have                                                            
filed their  fourth quarter  2013 return  to the  DOR and paid  this                                                            
tax under  protest on  the basis  that they were  never informed  of                                                            
this  tax requirement.  This  general lack  of notice  to  equipment                                                            
rental  companies and  their inability  to bill  customers for  this                                                            
tax from prior periods is why they support SB 178.                                                                              
                                                                                                                                
1:40:50 PM                                                                                                                    
RUDI  VONIMHOF,  Delta  Leasing,  Anchorage,  Alaska,  supported  SB
178.  He said  they  are  based out  of  Prudhoe  Bay with  a  small                                                            
office  in  Anchorage   and  a  big  chunk  of  their   business  is                                                            
equipment leasing similar to Tyler Rentals.                                                                                     
                                                                                                                                
MR.  VONIMHOF  became involved  with  Delta  Leasing in  2007;  they                                                            
have 28  Alaska employees.  Their primary office  and 95 percent  of                                                            
their  business   is  in   Prudhoe  Bay   with  oil  field   service                                                            
contractors.  They lease  half-ton  and three-quarter  ton  vehicles                                                            
to the  customers  who request  them.  Their insurance  limits  them                                                            
to doing  business  with business  entities,  so they  can't do  any                                                            
business with consumers.                                                                                                        
                                                                                                                                
1:42:11 PM                                                                                                                    
SENATOR FRENCH joined the committee.                                                                                            
                                                                                                                                
MR. VONIMHOF  said they  first became  aware of  the rental  car tax                                                            
in  2010 when  they  received  a notification   from the  DOR.  They                                                            
then  exchanged  two  letters  with the  department;  the  last  one                                                            
asked to  see a copy  of several  of their leases,  which they  sent                                                            
along  with an  offer to  answer any  questions.  An earlier  letter                                                            
to the department  said they  did not feel  this tax was  applicable                                                            
to  their operations,  because  they  are  in the  heavy  industrial                                                            
rental business in Prudhoe Bay to business entities.                                                                            
                                                                                                                                
Going  forward  three  years,  Mr. Vonimhof  said,  on  November  6,                                                            
2013  a  criminal  search  warrant  was  served  on them  by  a  DOR                                                            
criminal  investigator who  had tried  to rent  a three-quarter  ton                                                            
truck  from  them  and  was  refused  rental.  Then  he  obtained  a                                                            
fictitious  business license  posing as a  construction entity,  and                                                            
after  showing them  his business  license,  he was  granted  credit                                                            
with  the  company.  Apparently  that  transaction  enabled  him  to                                                            
obtain  a search  warrant.  The truck  had  a gross  vehicle  weight                                                            
(GVW) rating  in excess of  8,500 lbs., which  is an exempt  vehicle                                                            
class under  existing statute,  so he didn't  know how that  enabled                                                            
his business to be searched.                                                                                                    
                                                                                                                                
Nevertheless,   DOR  agents  simultaneously   showed  up   at  their                                                            
Anchorage  office and  at their Prudhoe  Bay office.  At least  four                                                            
armed  DOR  agents  were  in  their  Prudhoe   Bay  office  for  the                                                            
majority  of the  day and  between the  two offices  the  department                                                            
confiscated  approximately 70  banker's boxes  consisting of  all of                                                            
their  accounting  hard  files as  well  as their  asset  files  and                                                            
computers.  That was  the first  time they  had heard  from the  DOR                                                            
since the  2010 correspondence  and that was  a fairly shocking  way                                                            
to be notified.                                                                                                                 
                                                                                                                                
Since  that time  Mr.  Vonimhof  said they  had put  a  lot of  time                                                            
into  this  issue. He  wrote  a letter  to  Commissioner  Rodell  in                                                            
late  December asking  how  they could  interpret  their company  as                                                            
falling   under  the  existing   law  since   there  are  no   state                                                            
maintained  roads in  Prudhoe  Bay. State  maintenance  ends at  the                                                            
end  of  the Dalton  highway  and  all  of  their  activities  occur                                                            
beyond  that  point.  Their customers   lease vehicles  for  use  on                                                            
their  oil   field  exploration  sites   that  are  behind   guarded                                                            
security  check points.  There  is no  way that  this  could by  any                                                            
means  fall within  the realm  of a  public right-of-way,  at  least                                                            
by their legal council's opinion.                                                                                               
                                                                                                                                
He  said  that basically  they  have  had  very  little interaction                                                             
with  the DOR  over  the past  four  months and  have  more or  less                                                            
written  off  their  confiscated  computers  and  bought  new  ones,                                                            
although  keeping their  business going  for a couple  of weeks  was                                                            
quite  a  scramble  without access  to  their  electronic  or  paper                                                            
records.  Just selling  a vehicle when  you don't  have a title  for                                                            
it  is  problematic.  In  summary  he  said  SB  178  clarifies  the                                                            
intent of the original legislation, and he urged its passage.                                                                   
                                                                                                                                
SENATOR DYSON asked if the DOR agents had search warrants.                                                                      
                                                                                                                                
MR. VONIMHOF answered yes.                                                                                                      
                                                                                                                                
SENATOR DYSON asked how long it took to get their property back.                                                                
                                                                                                                                
MR.  VONIMHOF  replied  that they  had  not received  any  of  their                                                            
files or computers back.                                                                                                        
                                                                                                                                
1:50:19 PM                                                                                                                    
SENATOR DYSON  noted that  public safety  police officers  regularly                                                            
have  equipment  that  can  quickly   copy  hard  drives,  and  they                                                            
passed  a bill  to get  property  returned.  Also, the  law  clearly                                                            
provides  ways  for  them  to  copy  and  establish   the  chain  of                                                            
custody and  get the property  back to citizens.  He found  this all                                                            
very alarming and he was sorry they had to go through it.                                                                       
                                                                                                                                
1:50:49 PM                                                                                                                    
MR.  VONIMHOF  clarified that  the  department  did not  take  their                                                            
server,  and they returned  the  electronic files  with credit  card                                                            
numbers.  They had  received  one  or two  of their  key  computers,                                                            
but zero on the paper files.                                                                                                    
                                                                                                                                
1:51:35 PM                                                                                                                    
SENATOR FAIRCLOUGH  asked  if they could  go into executive  session                                                            
to speak with the administration and their attorneys about this.                                                                
                                                                                                                                
CHAIR EGAN said he thought that could be arranged.                                                                              
                                                                                                                                
SENATOR  DYSON said he  had been  around long  enough to know  there                                                            
are  always at  least two  sides to  every  story and  he wanted  to                                                            
hear the department's take on this case.                                                                                        
                                                                                                                                
1:52:50 PM                                                                                                                    
JOHN  COOK,  CFO,  Airport  Equipment  Rentals,  Brice   Enterprise,                                                            
supported  CSSB  178. He  supported  many  of  the comments  of  the                                                            
previous  testifier regarding  the tax. But  he wanted to point  out                                                            
that there  is a  difference  in interpretation  between  businesses                                                            
and  the department  on  what the  current  exemption  of 8,500  GVW                                                            
means  and the  CS clears  that  up. Secondly,  the  department  has                                                            
never provided  any reason  as to why vehicles  rented on the  North                                                            
Slope  are   defined  as  passenger   vehicles.  AS  43.52.099   (2)                                                            
defines a  passenger vehicle  as a motor vehicle  that is driven  on                                                            
a highway  or  a public  right-of-way;  clearly activities  off  the                                                            
Dalton  Highway  are not  conducted  on  either  of those  types  of                                                            
roadways.  They   believe  this  bill  will  clarify   the  original                                                            
intent  and clear up  the disagreement  between  the private  sector                                                            
doing business with businesses in Alaska and the department.                                                                    
                                                                                                                                
1:54:27 PM                                                                                                                    
SAM BRICE,  President, Brice  Enterprises,  Inc., supported  SB 178.                                                            
His  is  a  50-year  old Alaskan   construction  business  that  was                                                            
bought by  the Chulista Corporation  four years  back. They  have up                                                            
to  60  full-time  employees  and  200  seasonal  employees.   Brice                                                            
Equipment  Rental is  a subsidiary  of their  company,  and it  is a                                                            
small equipment  rental company  based on the  North Slope.  A small                                                            
part of  heavy equipment  rental business is  pickup rental  for the                                                            
North Slope  producers and  service companies  as well as their  own                                                            
construction company, mainly in rural Alaska.                                                                                   
                                                                                                                                
He related  that they  received a  letter making  them aware  of the                                                            
tax in  November 2013;  the letter  invited them  to file  quarterly                                                            
tax  returns  for all  quarters  back  to  2004  in which  they  had                                                            
vehicle  rental income.  They questioned  the  applicability of  the                                                            
tax on  their use of  pickups on  surface roads  on the North  Slope                                                            
and  with other  Alaska businesses.  Their  liability  goes back  to                                                            
2010,   their  first   year  of   light  vehicle   rental,  and   is                                                            
approximately  $31,000;  they wrote  the check  so as  not to  incur                                                            
further  penalties.  They feel  this bill  clarifies  the intent  of                                                            
law.                                                                                                                            
                                                                                                                                
SENATOR FRENCH  asked Johanna  Bales to explain  how the  department                                                            
settled  the  problem of  back  taxes  several  years ago  with  the                                                            
motorcycle rentals bill.                                                                                                        
                                                                                                                                
JOHANNA  BALES, Deputy  Director,  Tax Division,  Alaska  Department                                                            
of Revenue  (DOR), explained  that they worked  with the  individual                                                            
companies  and  most of  them  did  pay. Capturing  back  taxes  was                                                            
limited  through  an  agreement  with the  Department  of  Law,  but                                                            
they  were  required  to  pay  taxes that  were  due  prior  to  the                                                            
change.                                                                                                                         
                                                                                                                                
SENATOR FRENCH asked what the time was limited to.                                                                              
                                                                                                                                
MS.  BALES  explained that  they  had  done this  type  of  limiting                                                            
back  taxes with  taxpayers  who come  forward and  cooperated  with                                                            
them, and their general timeframe is three to five years.                                                                       
                                                                                                                                
1:58:41 PM                                                                                                                    
SENATOR  FAIRCLOUGH   asked  if  there  is  a  requirement  for  the                                                            
department  to notify taxpayers  when taxes  are going to be  placed                                                            
against a business.                                                                                                             
                                                                                                                                
MS.  BALES answered  no.  In fact,  they  do not  tell corporations                                                             
coming  to Alaska that  they are  subject to  corporate income  tax.                                                            
But  whenever  a new  tax or  statute  is  implemented  they try  to                                                            
reach  out to  all affected  companies  that they  believe could  be                                                            
subject  it, but  they  also  rely on  those  companies  to try  and                                                            
look out  for themselves and  reach out to  the taxing authority  or                                                            
business  licensing  agent  to  try to  get  information  about  any                                                            
regulations, taxes, fees, that they might be subject to.                                                                        
                                                                                                                                
2:00:16 PM                                                                                                                    
At ease from 2:00 to 2:02 p.m.                                                                                                  
                                                                                                                                
2:02:51 PM                                                                                                                    
CHAIR EGAN called the meeting back to order.                                                                                    
                                                                                                                                
SENATOR DYSON  moved to hold  SB 178 until  next Tuesday and  to ask                                                            
DOR  and DOL  to attend  an executive  session  on  the bill.  There                                                            
were no objections and it was so ordered.                                                                                       
                                                                                                                                
SENATOR FAIRCLOUGH  said Delta  Leasing was  the second constituent                                                             
that  said  the  DOR seized  their  property;  the  other  was  Ryan                                                            
Peterkin with Maytech Alaska.                                                                                                   
                                                                                                                                
CHAIR EGAN held SB 178 in committee.                                                                                            
                                                                                                                                
                       SB  94-RIGHTS-OF-WAY                                                                                 
                                                                                                                                
2:05:05 PM                                                                                                                    
CHAIR EGAN  announced  SB 94 to  be up for  consideration [SSSB  94,                                                            
version 28-LS0516\C was before the committee].                                                                                  
                                                                                                                                
2:05:43 PM                                                                                                                    
DAVID  SCOTT, staff  to  Senator Donald  Olson,  sponsor  of SB  94,                                                            
explained  that SB  94 offers  ease of  mind to  private  landowners                                                            
that have  RS-2477s (public  access easements)  going through  their                                                            
properties.  Section  1 deals  with a  specific RS-2477  that  would                                                            
be explained  later. Section  2 limits RS-2477s  that cross  private                                                            
lands  to a 60  ft. width  and for  the purpose  of transportation.                                                             
Another   subsection   allows   the   state   to   perform   routine                                                            
maintenance,  repair, and  make necessary  improvements to  preserve                                                            
the  transportation   use  of  the   right-of-way  (ROW).   It  also                                                            
requires  the  state  to  consult  and  gain   permission  from  the                                                            
private  land  owner   prior  to  making  improvements   other  than                                                            
routine  maintenance   and  repair.  It  allows  for   mediation  of                                                            
disputes  between the  state and a  private land  owner and  it also                                                            
requires  the state  to consult  with the  land owner  who owns  the                                                            
underlying  land  if the  ROW has  been  damaged beyond  repair  and                                                            
needs  to be realigned.  The  eminent domain  section  of law is  in                                                            
that same  section (page  3, line  5) AS 09.55.240  - AS  09.55.460.                                                            
The bill has a zero fiscal note.                                                                                                
                                                                                                                                
2:08:29 PM                                                                                                                    
SENATOR  FAIRCLOUGH  directed  attention  to page  2 of  the  fiscal                                                            
note  that  indicated  the  loss of  value  of  these  routes  would                                                            
exceed  $48.5 million,  assuming  a $1,000  per acre  base cost  for                                                            
the land  along the  public access.  She asked if  there is  any RS-                                                            
2477 access on the TAPS.                                                                                                        
                                                                                                                                
MR. SCOTT said he didn't know.                                                                                                  
                                                                                                                                
SENATOR FAIRCLOUGH asked if there is any RS-2477 in Parks.                                                                      
                                                                                                                                
MR. SCOTT said he knew of some in the Wrangell St. Elias Park.                                                                  
                                                                                                                                
SENATOR  DYSON asked  what  happens on  page  2, line  14. It  says,                                                            
"before  improvements  other  than  routine  maintenance  the  state                                                            
shall  consult  with  and gain  permission  from  the  private  land                                                            
owner."  Taken in  isolation,  that would  seem that  they  couldn't                                                            
go  forward  without permission,   but then  line  25 says  if  they                                                            
don't  come  to  agreement  then  there  is  mediation.  He  thought                                                            
things stopped  without the  agreement of the  land owner,  but they                                                            
don't, and he wanted to know what was going on.                                                                                 
                                                                                                                                
2:12:01 PM                                                                                                                    
JOE   BOVEE,   Vice    President,   Land   and   Resources,    Ahtna                                                            
Incorporated,  Glennallen,  Alaska, supported  SB  94. He  explained                                                            
that basically  that meant  notification of  the land owner  for any                                                            
improvements   where   they  would   be   widening   the  road   and                                                            
installing  bridges  and culverts,  something  outside  the 60  ft.,                                                            
but  if  they  couldn't  come  to  terms  of  agreement  in  working                                                            
outside the ROW, then they would go into mediation.                                                                             
                                                                                                                                
SENATOR  DYSON  asked  if they  could  go  to court  if  they  don't                                                            
agree at the end of mediation.                                                                                                  
                                                                                                                                
MR. BOVEE said that is the idea.                                                                                                
                                                                                                                                
SENATOR  DYSON  asked what  problem  they  are  trying to  solve  in                                                            
that section.                                                                                                                   
                                                                                                                                
MR.  BOVEE said  he had  a power  point that  might  answer some  of                                                            
his questions.                                                                                                                  
                                                                                                                                
SENATOR BISHOP  asked if  there is a dispute  resolution process  if                                                            
an agreement can't be reached under mediation.                                                                                  
                                                                                                                                
MR. BOVEE didn't know how that would go.                                                                                        
                                                                                                                                
2:14:34 PM                                                                                                                    
At ease from 2:14 to 2:17 p.m.                                                                                                  
                                                                                                                                
2:17:58 PM                                                                                                                    
CHAIR  EGAN  called  the  meeting  back to  order  and  invited  Mr.                                                            
Bovee to present his power point.                                                                                               
                                                                                                                                
MR. BOVEE  explained  that the  RS-2477  is an obscure  1866  mining                                                            
law  statute  that was  prepared  for  the western  states  and  the                                                            
Alaska  Territory  to  encourage  development.  The  word  "highway"                                                            
was  historically  used  to refer  to  "foot  trails,  pack  trails,                                                            
sled dog  trails, crudely  built  wagon roads,  and other  corridors                                                            
for  transportation."  Most  of  the  RS-2477s  in  the  state  were                                                            
developed  either  as  Indian  and  mining  trails   and  eventually                                                            
became  some of the  state's major  highways, such  as the  Farmer's                                                            
Loop Rd. in Fairbanks and the Debarr Rd. in Anchorage.                                                                          
                                                                                                                                
2:19:26 PM                                                                                                                    
In 1998,  the Alaska  Legislature  provided for  the public's  right                                                            
to use  these  historic access  easements,  and that  "every  effort                                                            
should  be  made  to   minimize  the  effect  on  private   property                                                            
owners."  The intent  was for the  agencies  and the administration                                                             
to  work with  the private  land  owners.  Currently  there are  669                                                            
RS-2477s; out of those, 142 are located in the Ahtna region.                                                                    
                                                                                                                                
SENATOR  DYSON asked if  most of the  lands on  his map were  Native                                                            
held lands.                                                                                                                     
                                                                                                                                
MR. BOVEE  answered  yes; Ahtna lands  contain 402  linear miles  of                                                            
RS-2477-classified  roads.  If  the  ROWs  are 100  ft.,  which  the                                                            
state is  encouraging  them to be,  over 9,000  acres of Ahtna  land                                                            
would be  consumed.  Ahtna lands also  contain 221  linear miles  of                                                            
17(b)   easements,  required   under   the  Alaska   Native   Claims                                                            
Settlement  Act (ANCSA)  allowing  travel  across private  lands  to                                                            
public  lands  on the  other  side. There  are  520 miles  worth  of                                                            
17(b) easements that are duplicative of RS-2477s.                                                                               
                                                                                                                                
SENATOR FAIRCLOUGH  pointed  out that bullet  2 said, "proposed  100                                                            
ft. right-of-ways" and asked why the word "proposed" was used.                                                                  
                                                                                                                                
MR.  BOVEE  answered  that  there  is a  real  loose  definition  of                                                            
these  RS-2477s and  this bill  is trying  to define  and  interpret                                                            
the  regulations.   Even   today  it  is   uncertain  who   has  the                                                            
authority over RS-2477s, the feds or the state.                                                                                 
                                                                                                                                
2:23:03 PM                                                                                                                    
He  showed  several  slides of  easements.  One  was  Cantwell,  the                                                            
access  into  Denali  National  Park  referred  to  as  Windy  Creek                                                            
Trail.  He stated  that  RS-2477s  are a  burden on  the  underlying                                                            
landowner.  They  are  never   really  described  in  a  deed  or  a                                                            
patent,  and  it's   hard  to  find  out.  Often  the   trails  were                                                            
constructed as the shortest point between point A and point B.                                                                  
                                                                                                                                
2:25:06 PM                                                                                                                    
As a solution  they propose  limiting the scope  of use of  RS-2477s                                                            
to transportation  purposes  only across  private  lands as well  as                                                            
limiting  the  physical  width of  the  ROW to  the  established  or                                                            
historical  use of the route.  (An Assistant  Attorney General  said                                                            
that   these  trails   would   be  defined   with   their   previous                                                            
historical  use whether they  were 25 ft. or  150 ft. as on  some of                                                            
the  state  highways).  They  also  propose  to  limit  the  state's                                                            
authority  to  maintain,  repair  and improve  the  ROW;  the  state                                                            
would still  have the authority  to do the  maintenance within  a 60                                                            
ft.  ROW, but  for anything  outside  of  that permission  from  the                                                            
underlying private land owner would be needed.                                                                                  
                                                                                                                                
2:26:30 PM                                                                                                                  
SENATOR  FRENCH asked  who pays  to maintain  that trail  [referring                                                            
to the Parks Highway, mile 228].                                                                                                
                                                                                                                                
MR. BOVEE  answered  that it  also serves  as an  access for  Golden                                                            
Valley Electric  Association,  and their agreement  with them  is to                                                            
"backplate."  Primarily   that  trail  is  used  only  for  hunting,                                                            
horse travel and light-use ATVs.                                                                                                
                                                                                                                                
SENATOR  FRENCH asked  if the  maintenance  was paid  for by  Golden                                                            
Valley.                                                                                                                         
                                                                                                                                
MR.   BOVEE  responded   that   was   another   consideration   with                                                            
establishing  all these  RS-2477s; there  is no  management plan  or                                                            
money  to development   or maintain  them.  A  DOTPF representative                                                             
told  him  that  there are  10,000  miles  of  RS-2477s  across  the                                                            
state on private lands. Local people take care of them.                                                                         
                                                                                                                                
SENATOR  FRENCH asked  if it  was fair to  say that  he didn't  know                                                            
who pays to maintain that road.                                                                                                 
                                                                                                                                
MR.   BOVEE  said   there   are  no   maintenance   funds  at   all.                                                            
Occasionally,  the  BLM  (since  this  is  duplicative  of  a  17(b)                                                            
trail)  does  some,  but mostly  the  owners  do  what they  can  to                                                            
maintain  roads or  trails, because  it  keeps people  off of  their                                                            
property.                                                                                                                       
                                                                                                                                
2:28:19 PM                                                                                                                    
SENATOR FAIRCLOUGH asked if a 17(b) easement is BLM property.                                                                   
                                                                                                                                
MR.  BOVEE  replied  that  17(b)   is a  provision   in  ANCSA  that                                                            
provides  a  federal   easement  across  private  ANCSA   land  from                                                            
public   land  to  public   land.   The  owner   of  the  trail   is                                                            
technically  Ahtna,  Inc. and  BLM through  the  federal  government                                                            
is  supposed  to  allocate  funds  to  maintain  these,  which  they                                                            
haven't.  So, he  cautioned,  if the  state  exerts a  lot of  these                                                            
RS-2477s  across  the state,  someone  is  going to  be responsible                                                             
for maintaining  them,  but eventually  the  state would  be on  the                                                            
hook.                                                                                                                           
                                                                                                                                
SENATOR  BISHOP  asked  if he  knew  how  many 3  ft.  wide  walking                                                            
trails have been identified.                                                                                                    
                                                                                                                                
MR. BOVEE  didn't  know, because  the state  asserts  that they  are                                                            
all 100  ft. He  said Ahtna  signed an  MOU with  the DOTPF,  ADF&G,                                                            
and DNR  last year to meet  quarterly, so  issues could be  resolved                                                            
early.  He stated  that Ahtna  is not  trying to  stop development,                                                             
but  wants  to  do  it  in a  "good  stewardship"   and sustainable                                                             
fashion.  Specifically,  the  Klutina  Lake  Road  that  travels  up                                                            
from the  Richardson Highway  to the head of  Klutina Lake  not only                                                            
crosses  Ahtna  property   for  about  22  miles,  it  also  crosses                                                            
private non-ANCSA properties.                                                                                                   
                                                                                                                                
He  said  people  have  been  developing  places  to  recreate,  but                                                            
there is  no management  plan in place  for what  to do when  people                                                            
come there:  how to  take care of  the trash and  to put out  fires.                                                            
It's good to have the discussion now.                                                                                           
                                                                                                                                
2:32:50 PM                                                                                                                    
SENATOR  BISHOP  said  he  had  also  experienced   the maintenance                                                             
problems and understood what he was talking about.                                                                              
                                                                                                                                
2:34:15 PM                                                                                                                  
GEORGE HELMS,  representing  himself, Anchorage,  Alaska,  supported                                                            
SB 94 in  its current version.  He was one  of the private  property                                                            
owners affected  by this  bill. When the  state exerted [sic]  these                                                            
rights  in his  area, they  picked  the route  and  didn't give  the                                                            
property  owners any  say. The  100 ft.  route will  encompass  man-                                                            
made  development that  currently  exists including  cabins,  decks,                                                            
and  sheds. This  bill  will help  limit  the use  of  that to  just                                                            
transportation.   He  had   suffered  losses   from  break-ins   and                                                            
malicious  behavior. He was  also hearing  that the department  will                                                            
take  not only  the RS-2477s  but the  potential  for arterials  for                                                            
which the state could take more land.                                                                                           
                                                                                                                              
2:36:29 PM                                                                                                                  
NICOLE  BORROMEO,  General  Council, Alaska  Federation  of  Natives                                                            
(AFN), Anchorage,  Alaska,  supported SB 94.  It generally  seeks to                                                            
remedy  the  effects  of  RS-2477s  that  threatens  to  thwart  the                                                            
effective  management  of  much of  Alaska's  lands due  to  several                                                            
uncertainties  including  which rights-of-way  were  accepted  prior                                                            
to  the act  repeal.  The remedy  in  SB  94 is  to narrow  the  ROW                                                            
widths and  confine them  to transportation  and emergency  purposes                                                            
and  to redefine  the state's  authority  to maintain,  repair,  and                                                            
improve them.                                                                                                                   
                                                                                                                                
2:38:11 PM                                                                                                                    
RANDLE   MAULDIN,    representing   himself,   Birchwood,    Alaska,                                                            
supported  SB 94. He  is a private  property owner  on Klutina  Road                                                            
and if they  were to widen  access along the  lake, it would  almost                                                            
take  out several  of his  cabins  and camp  sites.  The road  never                                                            
came as  far as his place  and stopped at  what is called  "The Boys                                                            
Camp,"  and   then  the   local  people  as   they  went  to   their                                                            
recreational  places  punched  a trail  to  bring materials  in.  He                                                            
has had  problems  with vandalism,  but he  put a gate  on the  road                                                            
and  stopped  it.  He said  an  easement  runs  around  the  private                                                            
properties  that the state  could use if it  wanted to make  a small                                                            
trail; it's what the property owners use for the ATVs.                                                                          
                                                                                                                                
2:40:50 PM                                                                                                                    
SENATOR  FRENCH  asked  whether  the  administration  supports  this                                                            
bill.                                                                                                                           
                                                                                                                                
KENT  SULLIVAN,   Assistant   Attorney  General,   Civil   Division,                                                            
Natural  Resources Section,  Alaska  Department of  Law (DOL),  said                                                            
the  department  didn't  have  a position  on  SB  94 and  had  some                                                            
concerns  with how it works.  One issue is  that this bill  attempts                                                            
to  very narrowly  tailor  the scope  of  rights the  state  already                                                            
possesses.  He explained  that  if  one would  think  of an  RS-2477                                                            
ROW  as  a  conglomeration  of  rights,  the  parts  include  width,                                                            
scope, the  modes of transportation,  the  types of activities  that                                                            
can  occur within  the ROW  and the  rights  the state  has to  make                                                            
improvements  and  perform  maintenance,  and  all of  those  things                                                            
are separate  sticks in a  big bundle of  sticks. Effectively,  this                                                            
bill  would strip  away many  of those  sticks from  that bundle  of                                                            
rights  the  state  currently   possesses  and  would  result  in  a                                                            
massive   give-away    of   state    property   interests    on   an                                                            
unprecedented  scale. That  is part  of the reason  the fiscal  note                                                            
is $48  million;  the state  would give  away $48  million worth  of                                                            
property  and only  from narrowing  the width  of the  ROW from  100                                                            
ft. to 60  ft. That doesn't  take into consideration  all the  other                                                            
impacts to the state of reducing the scope of use.                                                                              
                                                                                                                                
This bill  says these  ROWs are frozen  in place  as what they  were                                                            
at  the time  RS-2477  was  repealed  in  1976.  If there  are  ROWs                                                            
across  the state that  have not  yet been developed,  which  a very                                                            
high  percentage  of  them  would  qualify  for in  that  way,  that                                                            
would mean  they never could  be developed  any more than they  were                                                            
in 1976.  So,  a footpath  that existed  in  1976 will  always be  a                                                            
footpath,  to the extent that  Debarr Rd. and  Farmers Loop  Rd. are                                                            
frozen  in place  as they were  in 1976;  the Dalton  Highway  is an                                                            
RS-2477  and frozen  in place  as to what  can be  done and the  way                                                            
that it's shaped and maintained.                                                                                                
                                                                                                                                
2:45:19 PM                                                                                                                    
This  bill also  provides  that the  state,  to the  extent that  it                                                            
has  a broader  scope with  regards  to its  ROWs, and  it would  be                                                            
forced  to  buy that  broadened  scope  back  through condemnation;                                                             
effectively  the state  would be forced  to buy  back that which  it                                                            
presently possesses.                                                                                                            
                                                                                                                                
2:46:41 PM                                                                                                                    
Another  issue  with  the  bill  is  a  recent   decision  by  Judge                                                            
Beistline  that  indicates  the  state  can't  invoke  condemnation                                                             
proceedings  against  Native corporations  or Native  allotments  in                                                            
the State  of Alaska  now  that there  is no court  jurisdiction  to                                                            
do that.  So, this  bill creates a  mechanism for  the state  to buy                                                            
back through  condemnation  things that  it would  give away  by way                                                            
of this  bill, but it could  not do that  as to Native corporations                                                             
and Native allotment owners.                                                                                                    
                                                                                                                                
Finally,  Mr.  Sullivan  said,  with regards  to  the  Klutina  Lake                                                            
litigation,  this   bill  seeks  to  basically  do   away  with  the                                                            
state's rights  in the defense  it has asserted  in on going  active                                                            
litigation  against Ahtna  Corporation  over Klutina  Lake Rd.   The                                                            
bill  tries  to  make  RS-2477s  in  Alaska  synonymous  with  17(b)                                                            
easements,  which are  entirely  different. The  federal  government                                                            
owns,  controls,  and  possesses   17(b)  easements;  the  State  of                                                            
Alaska  owns,  controls, and  manages  RS-2477  easements.  RS-2477s                                                            
are  much broader  in scope  than  17(b) easements.  So eliminating                                                             
RS-2477s  where it overlaps  a 17(b) would  be essentially  creating                                                            
a patchwork  of  legal responsibility  all  along  the Klutina  Lake                                                            
Road, because  they are two  very different  legal animals  and have                                                            
very   different   rights   and  responsibilities;    it  would   be                                                            
extremely unworkable.                                                                                                           
                                                                                                                                
The other  problem  with Klutina  Lake Road  is under  the bill  the                                                            
only thing  that you  could do is  access the  lake through  ingress                                                            
and  egress;  you  could  not launch  boats  from  the  easement  or                                                            
camp.  You   couldn't  do  all  the   things  that  the   public  is                                                            
currently  doing  in recreating  and  using that  ROW  now. That  is                                                            
why it is  important. It  takes almost three  hours to get  from the                                                            
bottom  of  that  road on  the  Richardson  Highway  up  to  Klutina                                                            
Lake,  and  if you  couldn't  stop  along  there  and have  day  use                                                            
sites  or occasionally  camp,  it would  make that  ROW practically                                                             
unusable and of very low utility.                                                                                               
                                                                                                                                
2:50:11 PM                                                                                                                    
SENATOR FAIRCLOUGH asked if he had a "white paper" written on                                                                   
this bill or comments.                                                                                                          
                                                                                                                                
MR. SULLIVAN said he would send them.                                                                                           
                                                                                                                                
2:51:27 PM                                                                                                                    
SENATOR  BISHOP,  going back  to  the fiscal  note,  commented  that                                                            
the $1000/acre  determination  was  a little  troubling, because  he                                                            
knows people  whom the  state has  bought property  from for  a road                                                            
or airport construction, and they didn't receive that much.                                                                     
                                                                                                                                
CHAIR EGAN stated he would hold SB 94 in committee.                                                                             
                                                                                                                                
CHAIR EGAN adjourned the Senate Transportation Standing                                                                         
Committee meeting at 2:52 p.m.                                                                                                  

Document Name Date/Time Subjects
SB 94 Sponsor Statement.pdf STRA 3/13/2014 1:30:00 PM
SB 94
SSSB 94.pdf STRA 3/13/2014 1:30:00 PM
SB 94
SSSB 94 - Sectional Analysis.pdf STRA 3/13/2014 1:30:00 PM
SB 94
SB094SS-DOT-NDAES-3-8-14.pdf STRA 3/13/2014 1:30:00 PM
SB 94
SB094SS-DNR-MLW-3-8-14.pdf STRA 3/13/2014 1:30:00 PM
SB 94
SB 197 - Sponsor Statement.pdf STRA 3/13/2014 1:30:00 PM
SB 197
SB197-DOT-SDES-3-8-14.pdf STRA 3/13/2014 1:30:00 PM
SB 197
CSSB 178 DRAFT Letter of Intent.pdf STRA 3/13/2014 1:30:00 PM
SB 178
CSSB 178 DRAFT Text.pdf STRA 3/13/2014 1:30:00 PM
SB 178
CSSB 178 Sectional Analysis.PDF STRA 3/13/2014 1:30:00 PM
SB 178
CSSB 178 Sponsor Statement.PDF STRA 3/13/2014 1:30:00 PM
SB 178
SB 178 Letters Supporting - Third Batch.PDF STRA 3/13/2014 1:30:00 PM
SB 178
SB 178 Side by Side Analysis with CSSB 178.pdf STRA 3/13/2014 1:30:00 PM
SB 178
CSSB178(TRA)-DOR-TAX-03-18-14.pdf STRA 3/13/2014 1:30:00 PM
SB 178
SB 178 Delta Leasing documents.PDF STRA 3/13/2014 1:30:00 PM
SB 178
SB 94 FINAL_AHTNA_PPT_HANDOUT.pdf STRA 3/13/2014 1:30:00 PM
SB 94