Legislature(1997 - 1998)
04/28/1998 01:35 PM Senate TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE TRANSPORTATION COMMITTEE
April 28, 1998
1:35 p.m.
MEMBERS PRESENT
Senator Jerry Ward, Chairman
Senator Gary Wilken, Vice Chair
Senator Lyda Green
Senator Rick Halford
Senator Georgianna Lincoln
MEMBERS ABSENT
None
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 373(RES)
"An Act making changes to the Forest Resources and Practices Act;
classifying anadromous streams and tributaries; relating to the
designation of riparian areas; establishing buffers and slope
stability standards on certain streams; and requiring retention of
low value timber along certain water bodies where prudent."
- MOVED SCSCS HB 373(HES)am OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 239(FIN)
"An Act relating to the liability of motor fuel dealers for payment
of tax imposed on certain credit transactions involving motor fuel
sales or transfers that become worthless debts or on sales or
transfers to persons who declare bankruptcy; and providing for an
effective date."
- MOVED SCSCS HB 239(RES) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 290(TRA)
"An Act relating to motor vehicle license plates for ranchers,
farmers, and dairymen."
- MOVED SCSCS HB 290(TRA) OUT OF COMMITTEE
SENATE BILL NO. 352
"An Act relating to international airports revenue bonds; and
providing for an effective date."
- MOVED SB 352 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 386(FIN)
"An Act relating to the financing authority, programs, operations,
and projects of the Alaska Industrial Development and Export
Authority; and providing for an effective date."
- HEARD AND HELD
OVERSIGHT HEARING ON MEDICAID TRANSPORT ON RURAL AIRLINES
PREVIOUS SENATE ACTION
HB 373 - See Resources minutes dated 3/11/98, 3/20/98 and 4/6/98.
HB 239 - No previous Senate action.
HB 290 - No previous Senate action.
HB 386 - No previous Senate action.
SB 352 - No previous Senate action.
WITNESS REGISTER
Pat Springer
Legislative Aide to Speaker Gail Phillips
Alaska State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Presented HB 373 for sponsor
Jeff Jahnke
Division of Forestry
Department of Natural Resources
400 Willoughby, 3rd Floor
Juneau, Alaska 99801-1724
POSITION STATEMENT: Supports HB 373
Marty Welbourn
Division of Forestry
Department of Natural Resources
3601 C St., Suite 1034
Anchorage, Alaska 99503-5937
POSITION STATEMENT: Supports HB 373
Representative Gary Davis
Alaska State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Sponsor of HB 239
Bob Bartholomew
Income & Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
POSITION STATEMENT: Answered questions about the fiscal note for HB
290
Jeff Logan
Staff to Representative Joe Green
Alaska State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Testified for sponsor of HB 290
Sally Ellis
Yute Air
4706 Herding Drive
Anchorage, Alaska 99519
POSITION STATEMENT: Discussed problems with Medicaid Transportation
on Rural Airlines
Mike Hageland
P.O. Box 220610
Anchorage, Alaska 99522
POSITION STATEMENT: Discussed problems with Medicaid Transportation
on Rural Airlines
Darrell Nagel
First Health Services
4411 Business Park Boulevard
Anchorage, Alaska 99503
POSITION STATEMENT: Answered questions regarding Medicaid
Reimbursement to Rural Airlines
Fran Collins
First Health Services
4411 Business Park Boulevard
Anchorage, Alaska 99503
POSITION STATEMENT: Answered questions regarding Medicaid
Reimbursement to Rural Airlines
Teri Kekiak
Division of Medical Assistance
Department of Health and Social Services
4501 Business Park Boulevard
Anchorage, Alaska 99503
POSITION STATEMENT: Answered questions regarding Medicaid
Reimbursement to Rural Airlines
Bob Labbe
Division of Medical Assistance
Department of Health & Social Services
P.O. Box 110660
Juneau, Alaska 99811-0660
POSITION STATEMENT: Answered questions regarding Medicaid
Reimbursement to Rural Airlines
Nancy Weller
Division of Medical Assistance
Department of Health & Social Services
P.O. Box 110660
Juneau, Alaska 99811-0660
POSITION STATEMENT: Answered questions regarding Medicaid
Reimbursement to Rural Airlines
Representative John Cowdery
Alaska State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Discussed SB 352
Marco Pignalberi
Staff to Representative Cowdery
Alaska State Capitol
Juneau, Alaska 98901-1182
POSITION STATEMENT: Answered questions regarding SB 352
Morton Plumb, Jr.
Director, Anchorage International Airport
P.O. Box 196960
Anchorage, Alaska 99519-6960
POSITION STATEMENT: Answered questions about SB 352
Lydia Jones
Senate Transportation Committee Staff
Alaska State Capitol
Juneau, Alaska 98901-1182
POSITION STATEMENT: Explained the provisions of SCSCSHB 386(TRA)
Dave Eberle
Director, Construction and Operations
P.O. Box 196900
Anchorage, Alaska 99519-6900
POSITION STATEMENT: Answered questions about SB 352
Keith Laufer
Alaska Industrial Development & Export Authority (AIDEA)
480 West Tudor Road
Anchorage, Alaska 99503-6690
POSITION STATEMENT: Answered questions about, and supports, HB 386
Roger Head
Hatcher Pass Development Corporation
POSITION STATEMENT: Supports SCSCSHB 386 (TRA)
Kyle Randish
Hatcher Pass Development Corporation
POSITION STATEMENT: Described the Hatcher Pass Project
Paul Fuhs
Consultant, City of Nome
10652 Porter Lane
Juneau, Alaska 99801
POSITION STATEMENT: Described the Port of Nome Project
Charlotte Maccay
Cominco, Inc.
1133 West 15th Avene
Anchorage, Alaska 99501
POSITION STATEMENT: Supports SCSCSHB 386(TRA)
Mr. Mike Scott
Mat-Su Borough
350 East Dahlia
Palmer, Alaska 99645
POSITION STATEMENT: Supports SCSCSHB 386(TRA)
ACTION NARRATIVE
TAPE 98-7, SIDE A
CHAIRMAN WARD called the Senate Transportation Committee meeting to
order at 1:35 p.m. Present were Senators Green, Wilken, Lincoln,
and Chairman Ward. The first order of business before the
committee was HB 373. Chairman Ward noted the arrival of Senator
Halford.
CSHB 373(RES) - FOREST RESOURCES
PAT SPRINGER, legislative aide to Speaker Gail Phillips, sponsor of
HB 373, read the following statement on behalf of Speaker Phillips.
"I am pleased to bring before you today a bill that will
greatly enhance protection of Alaska's salmon resources and
water quality. Thanks to a major cooperative effort between
timber and fishing industries, environmental groups, and state
agencies, we have proposed legislation designed to improve
present Forest Practices Act safeguards. This cooperation
represents the commitment from these groups to periodically
reevaluate the Forest Practices Act protections for Alaskan
streams. In February, 1996, the Board of Forestry heard
reports from state agencies regarding the Act's effectiveness.
The Board found that indeed the Act generally was working well
in protecting salmon habitat and water quality but concluded
that there were some areas needing further review. The Board
then established a science and technical committee to
recommend modifications. This group included scientists from
timber, commercial fishing, and environmental communities, as
well as federal and state research agencies. After intensive
review, the committee identified opportunities to strengthen
habitat and wildlife protection. A stakeholder committee
convened to incorporate these findings into recommendations
for the Board of Forestry, which in turn endorsed a series of
amendments to the Act. These amendments have broad consensus
support from all the participants. The cooperation shown by
the Board members and the implementation group is indeed
laudable, and as a result, we are now looking forward to
better protections for our valuable salmon resources without
unreasonable costs to industry or private owners. The State
of Alaska has one of the most effective forest practices acts
in the nation. I believe the collaborative process undertaken
by the stakeholders in defining and agreeing to necessary
protections is extremely valuable. It's the first step
forward in our continued path toward managing our marketable
resources while protecting our natural resources for future
generations. Thank you for your consideration."
MS. SPRINGER introduced the state forester, Jeff Jahnke.
Number 080
JEFF JAHNKE, Director of the Division of Forestry in the Department
of Natural Resources (DNR), and the presiding officer for the Board
of Forestry, gave the following testimony in support of HB 373 on
behalf of the Administration and the Board of Forestry. This bill
is the result of a carefully crafted consensus following two years
of effort by many people in the fishing, forestry and environmental
communities, and the agencies associated with implementing the Act.
Key points related to the development of this legislation are:
-the process of resulting recommendations was based on the
best available scientific information;
-the process was open to the public throughout;
-many different interests were involved in each step along the
way
-the results were supported by a wide range of interests; and
-the interests represented by the Board of Forestry include
commercial fishing, forest industry, Native corporations,
environmental organizations, mining, fish and wildlife
biologists, professional foresters, and recreationists.
MR. JAHNKE noted Marty Welbourn, who was involved with the
development of this legislation over the last two years, was
available to speak on the specifics of the Act.
Number 117
MARTY WELBOURN, Chief of Forest Resources for the Division of
Forestry, and Co-chair of the Science and Technical Committee, made
the following comments. When the Science and Technical Committee
reviewed the Forest Practices Act in 1996 and 1997, it found that
the Act was sound and needed few changes. The proposed changes in
HB 373 only affect the part of the Act that addresses stream
classification and riparian management on private land in Region 1,
which includes the coastal forest in Southeast Alaska, Prince
William Sound, the eastern part of the Kenai Peninsula, and Kodiak.
It also includes Mental Health Trust land within that region.
Under the existing Forest Practices Act, about 20 percent of
streams, including some anadromous streams, are unclassified and
have no designated riparian protection area therefore requirements
to maintain some tree cover along stream banks do not apply to
unclassified streams. Tree cover provides woody debris for fish
habitat, stabilizes stream banks to control erosion, and provides
nutrients to the stream.
MS. WELBOURN described the two recommendations made by the
committee that require statutory changes. The first recommendation
is to classify all anadromous streams, and all tributaries to
anadromous streams, and to provide appropriate riparian
protections. Abundant scientific literature exists on the value of
stream buffers for the protection of fish habitat in anadromous
streams. The second recommendation is to provide for more woody
debris in Type B streams (anadromous streams with rocky banks or
steep gradients). Woody debris is needed for fish habitat within
those streams, to control sedimentation, and as a source of debris
for downstream Type A channels. Type A channels are the most
productive of the salmon streams; woody debris washes downstream
from Type B channels into Type A channels.
MS. WELBOURN continued. HB 373 contains numerous recommendations
from the Board of Forestry that respond to the Science and
Technical Committee's findings. First, the bill changes the stream
classification system and riparian management standards, so that
all anadromous waters and their tributaries will be classified and
have appropriate protection measures. All anadromous streams
(salmon streams) would be classified as Type A or Type B, depending
on the slope and the type of bank. All salmon streams would have
a buffer, and slope stability standards would apply to those
streams. Stability standards are special requirements for road
construction and timber yarding to prevent erosion. They include
a requirement to retain low value timber at the operator's
discretion where it is feasible to do so. Under the existing Act,
only Type A streams have a buffer. These low gradient streams are
the most highly productive. HB 373 adds stability standards to
those streams to 100 feet from the stream, or to the slope break,
whichever comes first. On Type B streams, the bill would add a
buffer out to 66 feet or to the slope break and, in many cases, the
buffer would be narrower than 66 feet. The bill would classify
all tributaries to anadromous streams as Type B or D, based on
their steepness, and slope stability standards would apply. No
buffer would be required. On Type B streams, slope stability
standards would apply up to 100 feet from the stream or to the
slope break, whichever comes first, and on Type D streams it would
apply up to 50 feet or the slope break. The bill also strengthens
the timber retention standards around larger tributaries. It
requires the operator to retain low value timber where prudent
within a minimum of 25 feet from the stream, depending on the
particular stream characteristics. These changes help ensure that
the goals of the Act, to provide adequate protection of fish
habitat and water quality and to support the continuation of
healthy timber and fishing industries, are met. These changes also
help ensure that the Forest Practices Act continues to satisfy the
requirements for nonpoint source pollution prevention under the
federal Clean Water Act and the Coastal Zone Management Act. The
Forest Practices Act provides one-stop shopping for the timber
industry with respect to state and federal nonpoint source
pollution and coastal management standards.
Number 192
SENATOR HALFORD asked whether roads that are built with public
funds or credits on public lands and continue as a public asset,
remain open for use.
MR. JAHNKE replied DNR evaluates each road individually to
determine whether leaving it open for public use will affect the
protection of water quality, fisheries, and other values. He
believed the process is similar for federal land. He stated that
use of roads generates maintenance needs, so the cost of
maintenance to protect those values is also considered.
SENATOR HALFORD questioned whether the state gives dollars or
credits for the construction of roads.
MR. JAHNKE did not believe it does.
SENATOR HALFORD stated his concern is that the roads remain open
unless there is some resource reason to close them.
Number 222
CHAIRMAN WARD said he agreed, and that is one reason why the
committee requested the bill. He expressed concern that people be
able to use logging roads with their four-wheelers. He asked Mr.
Jahnke if the procedure used to determine whether a road will
remain open is in regulation.
MR. JAHNKE repeated DNR looks at each road, and in its
responsibility to protect the resources of the State of Alaska, it
makes a determination as to whether leaving the road open will have
a negative impact on the resources.
CHAIRMAN WARD asked how many miles of logging roads DNR has opened
up to the public in the last 10 years.
MR. JAHNKE offered to get that information to the committee.
MS. WELBOURN said she could not provide the specific number of
miles, but in the Tanana Valley, most of the logging roads stay
open because they are long term management roads. In other areas,
logging roads have been closed because of particular concerns about
long term erosion resulting from a lack of maintenance on those
roads.
Number 248
CHAIRMAN WARD asked Ms. Welbourn to elaborate on closures in the
other areas of the state.
MS. WELBOURN said most of the roads built in the Kenai Peninsula
are temporary spur roads, and the main access road actually crosses
private land. DNR does not have the option to decide whether those
roads will remain open because the private land owners control
access across their land. Similarly, in Southeast Alaska, most of
the main roads have already been built by the Forest Service. The
roads in the Haines State Forest were built by the State, and those
roads typically stay open.
CHAIRMAN WARD stated one of his original concerns and reasons for
requesting this bill was due to inquiries about non-access to
logging roads on the Kenai Peninsula.
MS. WELBOURN repeated that most of the access to the logging roads
is through private land, therefore access to that land is
controlled by the land owner.
CHAIRMAN WARD asked if DNR's policy is to close the public roads if
they can only be accessed through private land.
MS. WELBOURN repeated that typically the private land owners have
the more accessible land.
Number 262
SENATOR HALFORD asked if the public roads are open once a person
gets to them.
MS. WELBOURN replied they are open where they are maintained. Some
of the roads follow seismic lines or existing trails, and those
would remain open. Other roads that are built as temporary spur
roads, typically on the Kenai, are not maintained, and have not
been left open because of concerns about impacts on wildlife and
fisheries.
CHAIRMAN WARD asked whether DNR is maintaining the roads in the
Interior.
MS. WELBOURN said it does.
CHAIRMAN WARD asked if the criteria is to close a logging road
unless it is maintained.
MS. WELBOURN stated that is correct if there is a hazard of
erosion. She added if a road is built in such a way that it would
be fatal to use without maintenance, it is closed, otherwise the
road building costs would be much more expensive.
Number 271
CHAIRMAN WARD asked if the fact that DNR considers the roads as
logging trails plays into any of the scenarios.
MS. WELBOURN stated logging roads are typically built to the lowest
standards possible because of the cost of road building.
CHAIRMAN WARD reiterated that people on the Kenai were refused
access to logging roads on four wheelers which is what prompted his
questions.
MS. WELBOURN asked whether those people were on state or private
land.
CHAIRMAN WARD said they were on state land.
MS. WELBOURN said she was not aware of any specific cases but would
look into the problem for Chairman Ward.
SENATOR HALFORD asked Chairman Ward if he received a copy of the
legal opinion on the short title for HB 373.
SENATOR WARD said he did.
SENATOR HALFORD said the problem is technical and, according to the
drafter, a section should be inserted that reads, "This chapter may
be cited as the Forest Resources and Practices Act."
SENATOR WARD asked where that line should be located in the bill.
SENATOR HALFORD answered on page 3, line 31. He explained,
according to the legal opinion, the Legislature has not officially
denominated a specific act as the Forest Resources and Practices
Act, hence the title of the bill is over-inclusive.
SENATOR HALFORD moved to amend the bill to add the language, "This
chapter may be cited as the Forest Resources and Practices Act" on
page 3, line 31 and explained the amendment is not substantive.
There being no objection, the motion carried.
SENATOR GREEN moved SCSCS HB 373(TRA) from committee with
individual recommendations and its accompanying zero fiscal note.
There being no objection, the motion carried.
CSHB 239(FIN) - MOTOR FUEL TAX CREDIT:TAX NOT PD BY USER
REPRESENTATIVE GARY DAVIS, sponsor of HB 239, stated the bill is an
attempt to resolve a problem brought to his attention several years
ago. A fuel distributor was owed an excessive amount of taxes from
a purchaser. The purchaser went bankrupt leaving the distributor
unable to collect the motor fuel tax that the distributor paid on
that delivery. Current statute requires the buyer to pay motor
fuel tax when the distributor delivers the fuel. HB 239 allows the
distributor to claim a credit for $500 or more in fuel taxes paid
to the state that the distributor cannot recover through no fault
of his/her own. The legislation establishes guidelines under which
the Department of Revenue will establish regulations. The credit
will only apply to aggregate amounts of taxes paid of $500 or more
before it goes into effect. The Department of Revenue proposed an
amendment to clarify existing language on page 2, lines 5 and 6.
SENATOR WARD asked Representative Davis to explain the amendment.
REPRESENTATIVE DAVIS explained the Department of Revenue believes
the existing language on page 2, lines 5-6, is awkward. That
language reads, "(1) under this chapter, the sales or transfers
result in a tax liability, in the aggregate, on the transactions of
$500 or more; and." The amendment deletes the words, "on the
transactions" for the purpose of simplification.
SENATOR GREEN moved to adopt the amendment. There being no
objection, the motion carried.
SENATOR HALFORD questioned why the Department of Revenue submitted
a zero fiscal note that states it is not feasible to estimate the
revenue loss, but includes estimates. He maintained that it is bad
policy to submit zero fiscal notes that include amounts in the
explanation, and he does not think the Legislature should let the
Administration get away with doing so.
Number 376
CHAIRMAN WARD asked Senator Halford if he would like the Senate
Transportation Committee to do a separate fiscal note.
SENATOR HALFORD suggested that the committee request the Department
of Revenue to reflect its best estimate in the fiscal note. He
added that the Department of Revenue should not deny the statutory
requirement to estimate the cost of the bill just because it is not
easy to do.
CHAIRMAN WARD asked Representative Davis if he has discussed the
fiscal note with the Department of Revenue.
REPRESENTATIVE DAVIS said he has discussed the explanation section
and he understands their unwillingness to put an actual dollar
figure on the fiscal note.
Number 388
BOB BARTHOLOMEW, Assistant Director of the Income and Excise Tax
Division of the Department of Revenue, stated the department does
not know what, if any, bad debt is in the industry related to motor
fuel sales. The department called other states to find out their
experiences and from those discussions, came up with an estimate of
.01 percent. He did try to give some sense of the financial impact
to the committee but did not include it in the fiscal note because
of the uncertainty of it actually happening.
SENATOR GREEN indicated the two page attachment to the fiscal note
was not actually attached to it, which may have created some
confusion.
SENATOR WILKEN expressed concern about the basis of the legislation
because the state will be subsidizing bad debt that could be taken
care of through normal business practices, and this bill might set
a precedent. He stated, to give an example, Petro, one of the
state's biggest fuel customers, might do $45 million per year in
business, so if Petro is losing $4500 per year, that does not seem
important enough to begin the process of subsidizing businesses
that go bankrupt. He noted indications of bankruptcy come far
ahead of the actual event.
Number 428
REPRESENTATIVE DAVIS said he appreciates the discussion, but does
not believe that Petro Marine would not find that amount of debt to
be a hardship, but would support this idea on principle. Current
law requires the distributor to pay the tax when fuel is delivered,
therefore the distributor is paying in advance, and betting that
the customer will reimburse the expense.
SENATOR HALFORD pointed out the fiscal note requirements in Title
24 require that a fiscal note shall contain an estimate of the
amount of appropriation increase or decrease that will result from
enactment of the bill. If the bill has no fiscal impact, a
statement to that effect shall be attached. The fiscal note for HB
239 says that its enactment will cost money but contains zeroes, so
it does not meet the law. He expressed concern that this
Administration is submitting more and more of these fiscal notes.
CHAIRMAN WARD asked Mr. BARTHOLOMEW if he is familiar with that
requirement.
MR. BARTHOLOMEW said he has not read that portion of Title 24 but
is familiar with the requirement to do fiscal notes. He stated he
does not believe the department would have a problem with putting
the estimate contained on page three on the fiscal note.
Number 456
SENATOR LINCOLN suggesting changing the fiscal note in committee to
reflect the actual estimate.
SENATOR HALFORD moved HB 239 from committee with the attached
fiscal note, and a note to the Senate Finance Committee indicating
that the fiscal note does not reconcile with the legislation.
There being no objection to the motion, HB 239 moved to the Senate
Finance Committee.
CSHB 290(TRA) - LICENSE PLATES: RANCHES, FARMS, AND DAIRY
JEFF LOGAN, legislative assistant to Representative Joe Green,
sponsor of HB 290, explained the measure as follows. HB 290
broadens the definition of who can qualify as a person for the
purpose of qualifying for an agricultural license plate. Language
on lines 12-13 refers to AS 01.10.060, which defines a person as a
corporation, company, partnership, firm, association, organization,
and a few other entities. HB 290 was introduced at the request of
one of Representative Green's constituents. The constituent was a
farmer who formerly qualified for the agricultural license plates
by registering his vehicles under his company name. The Division
of Motor Vehicles (DMV) changed its interpretation of the statute
and required that people registering under the company name pay the
more expensive commercial fees. To pay the less expensive
agricultural fees, he would have to register the vehicles under his
personal name. Representative Green believes it is not up to any
state agency to tell any Alaska business how it will organize the
business, whether it be a corporation, sole proprietorship, etc.,
in order to get something that the business owner previously got
anyway. After about one year of trying to get DMV to change its
procedures, Representative Green introduced the bill.
SENATOR HALFORD stated he agrees with Representative Green's
intent, but he noted this restriction is abused in another area
which could be fixed under this bill. He explained that farmers
who have a bad year and seek seasonal employment elsewhere are
forced to register their farm vehicles outside of the agricultural
program if they did not earn their primary source of income from
farming during the year. Senator Halford said he would like to see
the language that requires the person's primary source of income be
from farming deleted so that the statute would read, "vehicles
under 16,000 pounds, owned by a person deriving income from the
operation of a ranch, farm, or dairy where the person resides full
time ...." He thought farm vehicles should not all of a sudden
become illegally registered because the farmer took winter work.
MR. LOGAN pointed out that agricultural vehicles are not on the
road as often as commercial vehicles, as they are seasonal
vehicles.
CHAIRMAN WARD asked if the sponsor would object to Senator
Halford's proposed amendment.
MR. LOGAN said he did not think the proposed amendment is
inconsistent with the goal of the legislation.
SENATOR HALFORD moved to delete the words, "the person's primary
source of" on line 7.
SENATOR LINCOLN questioned whether anyone who gets any income from,
and lives on, a farm or ranch would be eligible to get license
plates for a lower fee.
Number 520
SENATOR HALFORD explained the requirement is still restrictive in
that a person can register a vehicle under the agricultural
provision provided the vehicle is used exclusively to transport the
person's own ranch, farm or dairy products to and from market, or
to transport supplies, commodities or equipment to be used on a
person's ranch, farm or dairy.
SENATOR LINCOLN said that section would also allow a person with a
few chickens on his/her land to register any vehicle used to
transport chicken feed as agricultural. She objected to the motion
because she stated the current language requires the person's
primary source of income to be from agriculture, but not one's
exclusive source of income. She believed the amendment would open
up the reduced fee provision to many it is not intended for.
MR. LOGAN showed committee members a picture of a 16,000 pound
vehicle and stated, in regard to Senator Lincoln's concern, that it
would not be necessary to use a 16,000 pound vehicle to transport
chicken feed.
SENATOR LINCOLN clarified the bill requires vehicles to not exceed
16,000 pounds, therefore a person could be using a regular pick-up
truck. She maintained her objection to the amendment.
The motion to adopt Senator Halford's amendment carried with
Senators Halford, Wilken, Green, and Chairman Ward voting for the
motion, and Senator Lincoln voting against it.
SENATOR LINCOLN commented HB 290 is accompanies by a zero fiscal
note that contains an asterisk signifying an indeterminate cost.
She echoed Senator Halford's concern about not knowing the actual
cost of a piece of legislation.
SENATOR GREEN questioned whether the definition in the bill of
"agricultural" includes greenhouse nurseries.
MR. LOGAN replied under the definition given in AS 29.45.060(c),
greenhouses are included.
SENATOR GREEN moved SCSHB 290(TRA) from committee with individual
recommendations and its accompanying fiscal note, and a letter to
the Senate Finance Committee asking it to request an updated fiscal
note. There being no objection, the motion carried.
OVERSIGHT HEARING ON MEDICAID TRANSPORT IN RURAL AREAS
SALLY ELLIS, representing Yute Air Alaska, discussed billing
problems the airline has had with First Health. One problem is
with prior authorization. An airline must have a prior
authorization number in order to get reimbursed for Medicaid
passengers. A physician or public health nurse is supposed to call
First Health to get a prior authorization number, put the number on
the travel form and sign off on it. In turn, the airline bills
First Health and is supposed to be reimbursed in a timely manner.
The problem is that Yute Air Alaska has been denied reimbursement
for claims because the prior authorization number on the travel
form is invalid. Yute Air has no way to determine whether the
number is invalid prior to providing passenger travel, therefore it
does not know for which passengers it will get reimbursed.
CHAIRMAN WARD asked how much money Yute Air has carried.
MS. ELLIS replied Yute Air Alaska has billed over $50,000 which is
over 120 days past due.
SENATOR HALFORD asked for clarification on how the system works.
CHAIRMAN WARD stated representatives from the Department of Health
and Social Services (DHSS) would address the committee shortly.
TAPE 98-7, SIDE B
Number 573
SENATOR GREEN asked what medical conditions most patients are being
transported for.
MS. ELLIS replied many people are flying from the smaller villages
to Bethel, or into surrounding villages, such as Aniak, to go to a
hospital to get better health care.
CHAIRMAN WARD asked if the lack of payment by First Health is
causing a reduction in air service.
MS. ELLIS answered not that she is aware of.
Number 564
SENATOR HALFORD asked how much travel is provided for Medicaid or
Indian Health Service (IHS) patients, and how the provider bills
for services.
MS. ELLIS explained Yute Air gets First Health forms from the
physician or Public Health nurse in the village as a form of
payment. The form contains a prior authorization number which
guarantees Yute Air payment.
SENATOR HALFORD questioned whether First Health is a contractor for
IHS.
MS. ELLIS believed First Health is a contractor for the Medicaid
program.
SENATOR HALFORD asked how the IHS fits in.
MS. ELLIS was not sure.
Number 553
MIKE HAGELAND, owner of Hageland Aviation Services, an air carrier
in Western Alaska, made the following comments. He noted the forms
presented to the airlines also contain dates that may be changed
without the airlines' knowledge. When those forms are submitted,
the claims are denied because the services took place outside of
the time frame for travel. He thought DHSS contracts with First
Health for Medicaid services. He stated the form is burdensome.
BOB LABBE, Director of the Division of Medical Assistance,
explained Medicaid is a $350 million program; payment for medical
transportation represents about three percent of the budget. In-
state and out-of-state air transportation is provided for medical
purposes, and is an expensive issue in Alaska. Because of the
potential for high expense, air transportation costs need a certain
amount of controls. First, DHSS needs to be assured that the
travel is being provided for a medical purpose, which is the reason
for the prior authorization.
CHAIRMAN WARD asked if the controls are in place because of ongoing
abuse or past abuse.
MR. LABBE said the requirement was put in place when the program
began to prevent abuse, and a similar requirement is in place in
most states. National alerts were publicized because abuses
occurred elsewhere. Alaska has avoided some of the experiences
other states have had.
CHAIRMAN WARD asked why the airlines are not being reimbursed.
NANCY WELLER, Division of Medical Assistance, stated she received
a phone call from another legislative office earlier this session
regarding the problems Yute Air has experience. She alerted the
division's Anchorage office, and First Health has been working with
that office for about two months to clean up the errors that
occurred in claim processing. At this time, DHSS computer records
show that Yute Air has billed DHSS $13,000 more than it has been
paid. The claims were not paid for a number of reasons such as
data entry problems.
CHAIRMAN WARD questioned the discrepancy between Yute Air's claim
that $50,000 is outstanding and DHSS's claim that $13,000 is
outstanding. He asked Ms. Weller if Yute Air has actually billed
DHSS for the entire $50,000.
MS. WELLER stated Yute Air bills consistently and just submitted
hundreds of claims last week electronically. First Health is
working with the division diligently to make sure that the errors
in the claims are cleared up.
CHAIRMAN WARD asked if the same activity is taking place on behalf
of Hageland Air Services.
MS. WELLER said she had no information on Hageland Air Services.
SENATOR HALFORD asked for further clarification of the billing
procedure for IHS.
MS. WELLER stated IHS has very little transportation money and many
of the IHS clients, particularly in the Bethel region, are Medicaid
eligible, so Medicaid pays for their approved transportation.
SENATOR HALFORD asked how the priority of eligibility works.
MS. WELLER said the Medicaid program is a prior payer to IHS under
federal law, meaning that Medicaid pays first.
SENATOR HALFORD asked if the entire Medicaid system is a prior
payer to the IHS system.
MS. WELLER said that is correct for all health care services. If
an Alaska Native is eligible for Medicaid, his/her services are
paid for by Medicaid. Medicare or insurance companies are prior
payers to DHSS but IHS is an exception.
MR. LABBE added if an IHS program provides a service, it can bill
DHSS for a Medicaid client. In those situations, DHSS turns around
and collects 100 percent of that payment from the federal
government. Each state's Medicaid program may vary, but under
federal law, each state treats Medicaid like a third party for
purposes of IHS programs. IHS is limited to reimbursement only for
services provided under Medicaid, i.e. if adult dental services are
not provided under Medicaid, IHS would not be reimbursed for
providing those services.
Number 437
CHAIRMAN WARD asked what the Legislature has to do to resolve the
airline reimbursement problem.
MS. ELLIS commented that Yute Air Alaska is billing according to
recommendations made by First Health. Yute Air bills electronically
on a weekly basis, but she is spending hours researching problems
associated with a $100 claim, and the number of claims gets
backlogged. She said she has reviewed all of the claims with Fran
Collins of First Health and has billed for the entire $50,000.
CHAIRMAN WARD asked DHSS to explain its method of dispute
resolution.
SENATOR LINCOLN asked Ms. Ellis what kind of research she has to
do.
MS. ELLIS responded it depends on the reason a claim was rejected.
She noted DHSS has 999 rejection codes. She stated the first
rejection code applies to problems with the prior authorization
number. Yute Air Alaska has no way of knowing when a doctor of
Public Health nurse applies the correct prior authorization number
with the date of travel. The Medicaid recipient brings the form to
the counter after it has been signed by the doctor. Yute Air ends
up being penalized by a claim rejection when it has no way to
determine whether the number is legitimate.
SENATOR LINCOLN asked Ms. Ellis to provide the committee with other
examples of rejection codes.
MS. ELLIS explained Yute Air often bills for one-way tickets
because a lot of customers prefer to return on a different airline
because the schedule is more convenient. Yute Air's claim will be
rejected if Hageland Air already billed for its one-way portion.
Yute Air then has to fill out an adjustment form and resubmit the
claim, which is time consuming. Yute Air bills approximately 100
claims each Friday, and the adjustments take between 2 and 3 hours
per week.
CHAIRMAN WARD asked whether the procedure or lack of funds causes
the delay in claim processing.
MR. LABBE replied the problem is not funding, it is more likely
procedural, especially in the area of data entry. He thought First
Health staff could better respond to that question, but added the
claims are paid every week and the turnaround time is fairly quick.
CHAIRMAN WARD asked how this problem can be resolved.
MS. WELLER answered DHSS provides training on a regular basis. The
First Health staff have been working with Yute Air staff on a
weekly basis for the past two months to help them understand how to
do the claims data entry so that the claims can be paid.
CHAIRMAN WARD asked if the problem is that Yute Air is not billing
correctly.
MS. WELLER responded the problem is a lack of understanding of the
procedures.
CHAIRMAN WARD said if the citizens of the state cannot perform a
service because the state procedures are so complicated, then DHSS
needs to cease contracting or change its procedures.
MR. LABBE said he is more than willing to review the procedures and
was glad to hear the comments today. He stated most of the
problems are procedural, not regulatory.
Number 364
SENATOR WARD asked Mr. Labbe if he has reviewed and approved all of
the rejection codes.
MR. LABBE said he has not.
CHAIRMAN WARD suggested there only be four or five rejection codes,
rather than 999.
SENATOR HALFORD asked if First Health has discussed its analysis of
the problem.
Number 350
DARRELL NAGEL, First Health, stated only a small percentage of the
999 rejection codes apply to transportation providers. Some are
very specific to particular types of providers. He believed
limiting the number of codes to a few would dilute their meaning.
CHAIRMAN WARD asked if 999 rejection codes exist, but the air
carriers only need four.
THERESA KEKIAK, Division of Medical Assistance - Anchorage, stated
DHSS has about 900 codes but they do not all apply to every single
provider. The different types of providers are broken into claim
types and they are of different dispositions, meaning some are
denied automatically, i.e. a claim would automatically be denied if
a client was not eligible. Other rejection codes specifically
require prior authorization.
CHAIRMAN WARD asked how DHSS measures the effectiveness of First
Health.
MS. WELLER replied the contract DHSS has with First Health contains
performance standards that pertain to claim turnaround time, among
other things.
CHAIRMAN WARD asked if First Health has paid all claims within the
proper time frame.
MS. WELLER said First Health has met the performance standards in
the contract.
CHAIRMAN WARD commented DHSS's measurements must be flawed if there
is a problem. He asked why there is such a large discrepancy in
the amount of claim reimbursements that have not been paid.
FRAN COLLINS, First Health, stated $13,000 of the total amount
billed has not been paid to date, or has been denied for a
verifiable, or correctable, reason.
SENATOR HALFORD commented AS 37.05.285 requires payment by state
agencies to occur within 30 days. He asked if that standard
applies to DHSS.
Number 297
MS. KEKIAK replied DHSS's payment standard is 21 days for a "clean"
claim which is a claim containing no errors.
MR. LABBE added that the federal standard for Medicaid payments
requires states to process 90 percent of "clean" claims within 30
days, and DHSS far exceeds that standard.
SENATOR LINCOLN questioned what DHSS's time frame is for responding
to claims with problems.
MS. WELLER explained the error codes are used to inform the
provider of why the claim was not paid, i.e., an error code may
tell the provider the claim was not paid because it is a duplicate
or the recipient was not eligible. Those error codes are to
provide specific information to the provider so that the provider
can fix the claim and get reimbursed.
CHAIRMAN WARD stated there seems to be the perception that there is
an unnecessary delay in reimbursements.
SENATOR LINCOLN asked Ms. Ellis if she has further problems once
she responds to the error code or whether the problem is the amount
of time it takes to research information to respond to the error
code.
MS. ELLIS stated she began researching the problems associated with
the error codes with Ms. Collins and Ms. Weller about two months
ago, and in that time, Yute Air has only been reimbursed for about
$5,000 of the $50,000 billed.
SENATOR LINCOLN asked Ms. Ellis if she feels she has responded to
all of the requests surrounding the $50,000 in claims.
MS. ELLIS answered she has tried.
SENATOR LINCOLN asked what DHSS's turn around time is for
reimbursement of corrected claims.
MR. NAGEL responded the adjusted claims are worked immediately.
SENATOR LINCOLN asked what the time frame is.
MS. COLLINS replied, for the most part, a paper claim can be turned
around in one to two weeks if there is no reason for further review
of the claim or attachments. Electronically submitted claims can
be processed and paid within the same week of submission. "Clean"
claims, submitted by noon on Tuesday, can be paid by Friday.
Adjustments and voided claims take two to three weeks, depending on
the division's work load and the amount of research the claim
requires.
Number 184
SENATOR HALFORD said state law requires a payment of interest of
1.5 percent per month for non-paid debts over 30 days. He asked if
DHSS ever pays interest on claims that were wrongly denied.
CHAIRMAN WARD asked if that amount is deducted from payments made
to the contractor.
MS. WELLER said DHSS exceeds the 30 day payment requirement, but
the issue is whether a claim is submitted in a condition to be
paid.
SENATOR HALFORD asked whether interest is paid if the error is on
DHSS's part.
CHAIRMAN WARD asked if DHSS pays interest if it is in error in any
of its programs.
MS. WELLER stated to her knowledge, DHSS does not, and she was
unsure whether DHSS could do so under federal law.
SENATOR WILKEN suggested that the Senate write a letter to First
Health to ask it to straighten out the problem, and he suggested
that Mr. Labbe report back to the committee on the resolution of
this problem.
CHAIRMAN WARD stated the committee would take care of the
appropriate letter and would schedule a follow-up meeting.
SB 352 - AIRPORT REVENUE BONDS
REPRESENTATIVE COWDERY, sponsor of a House bill identical to SB
352, discussed the measure as follows. Five hearings were held in
House committees. Ten percent of the Anchorage workforce is
airport related, therefore this bill is very important to
Anchorage. The interest rates on bonds are very favorable at this
time. The project will be sized to where 15 to 20 contracts will
be let.
MARCO PIGNALBERI, staff to Representative Cowdery, joined committee
members at the table.
JOHN STEINER, representing the Attorney General's Office, was
available to answer questions via teleconference.
Number 119
MR. PIGNALBERI discussed the bill further. Existing statute
provides authorization to sell $100 million in bonds to be repaid
by the International Airport Revenue Fund. The sole purpose of SB
352 is to increase the $100 million to $180 million for the
exclusive purpose of airport improvements envisioned by the project
at Anchorage International Airport. In addition to the $180
million, approximately $26 million in federal highway funds, and
upwards of $25 million in Federal Aviation Administration (FAA)
funds, will be available. The total project cost is estimated at
$230 million.
CHAIRMAN WARD asked Mr. Pignalberi to inform committee members of
the Air Carriers vote.
MR. PIGNALBERI stated an Air Carrier Committee at the Anchorage
International Airport exists. Two-thirds of the member carriers
are required to reject a proposal. Approximately 85 percent of the
revenue producing carriers voted in favor of this project, which
exceeded the one-third approval rate required by the nature of
their agreement.
Number 085
SENATOR HALFORD asked if the Air Carrier Committee agrees to a
project unless two-thirds of the group says no.
MR. PIGNALBERI said that is correct.
SENATOR LINCOLN asked about the 85 percent of revenues referred to
by Mr. Pignalberi.
MR. PIGNALBERI stated the carriers who voted in favor of the
project constitute the carriers who provide 85 percent of the
revenue generating capacity at the airport. He added there are a
total of 15 votes but he was not sure how many voted each way.
SENATOR HALFORD asked what the actions were of ERA, Peninsula Air,
Reeves Airlines, and Southcentral Airlines.
REPRESENTATIVE COWDERY stated many hearings were held to give ERA,
Northern Air Cargo, and every carrier that wanted to testify the
chance to do so. Basically, all approved of a project but some of
the smaller carriers expressed concerns about downsizing. The
original plan was reduced by $25 million and the project contains
enough contingencies to assure that there will be no reduction in
the size of the airport or the construction of it.
SENATOR HALFORD asked how the carriers pay off the bond.
REPRESENTATIVE COWDERY said the money will come from land rent,
landing fees, fuel charges, and vendor leases.
SENATOR GREEN questioned if the land rent is from the airport
complex itself.
MR. PIGNALBERI explained it includes land rentals for the whole
Anchorage International Airport, for example, the FedEx project,
and ERA on the Southern end of the airport. The airport revenue
fund includes all revenues that come to the state from airport
operations.
CHAIRMAN WARD asked how many meetings occurred to consider this
project.
REPRESENTATIVE COWDERY replied five public meetings were held which
amounted to over eight hours of testimony. The hearings
accommodated everyone who wanted to speak, for as long as they
wanted to speak. The bill contains a spending plan that requires
the group to report to the Legislature about how it is spending the
money each year.
TAPE 98-8, SIDE A
SENATOR WILKEN asked why the language change on lines 13-14 of page
1 of the bill was proposed and whether the project could occur
without that change.
MR. PIGNALBERI explained that language was provided by the legal
drafters for stylistic consistency. The change is not substantive.
Number 980
SENATOR WILKEN stated the sponsor statement refers to this airport
project as the largest public works project ever undertaken by the
state. He noted the revenue flow over 25 years is of concern to
him. He questioned whether the $180 million will also provide for
construction of roads leading to the airport.
MR. PIGNALBERI answered the $180 million figure is the cost of the
airport project and the financing cost, the two-year capitalization
of interest.
SENATOR WILKEN asked if we are going to finance $180 million for 25
years and back it up with landing fees, fuel flowage fees, and
rents. He asked if any new sources of revenue are anticipated that
are not in effect today.
MR. PIGNALBERI stated all of those fees will increase by some
increment.
SENATOR WILKEN said what bothers him is on page 5 of the special
review, the possibility is raised that an increase in landing fees
and fuel flowage fees may render the Anchorage airport non-
competitive and may affect air traffic.
MR. PIGNALBERI said the conclusion of the report is that the
airport can afford the project. He added an additional revenue
source will be created sooner or later, and that is the passenger
facility charge which the FAA is strongly recommending but no one
wants to approach before November. He noted the amount of revenue
is estimated at $5 to $7 million per year.
SENATOR WILKEN asked whether that amount is projected in the 25
year revenue stream.
MR. PIGNALBERI said it is not.
REPRESENTATIVE COWDERY said he talked to Reeves and was told one
employee does nothing but separate the passenger facility charges
and sends the money to Seattle and Portland.
SENATOR WILKEN repeated this bonding package is not based on
passenger facility charges.
MR. PIGNALBERI said that is correct.
SENATOR WILKEN stated he is concerned the state will be spending
$180 million and two years after the project is completed, the
airport will need another four gates, and in the year 2010, another
four gates. He questioned whether this project will need to be
expanded as soon as it is finished.
DAVE EBERLE, Director of Construction and Operations for the
Department of Transportation and Public Facilities, answered that
the facility is being built according to the current projected
needs through the year 2005, and to correct the current
deficiencies at the airport. To try to size the project larger
would be somewhat speculative, so the plan is to take a wait and
see approach to review passenger growth and other factors to
prevent over-building at this stage. In the initial analysis of
projection load growth, DOTPF projected there may be a need for an
initial four gates in the year 2010. Future expansion will be
evaluated on its own merits at a future date.
SENATOR WILKEN asked if DOTPF based its projections on the graph
named Enplanement Forecast which looks like a 20 year projection at
4.65 percent.
MR. EBERLE said he could not speak to the revenue in total. DOTPF
had an economic forecast and model of revenues done by a person who
works with bonding issues. Various factors were included in the
model. The assumed passenger load growth was around 4.2 percent.
Several load growth scenarios were reviewed in the needs
assessment.
SENATOR WILKEN suggested developing these questions further for the
Finance Committee to review. He expressed concern that we are
planning to build a very nice airport, maybe more than what is
needed, and that if we cannot support that airport ten years from
now, given the current projections, the rates will have to be
raised in both Anchorage and Fairbanks. Fairbanks does not want to
do anything to upset the balance in fuel flowage or other fees,
which is very delicate.
SENATOR HALFORD asked what the interest rate will be on the bonds.
ROSS KINNEY, Deputy Commissioner of the Department of Revenue,
informed committee members the fiscal note attached to the bill
shows three interest rates: a low rate; a mid-rate; and a high
rate. If the bonds were issued today, the true interest cost would
be in the neighborhood of 5.4 percent. With credit enhancement,
which is the purchase of an insurance policy, the interest rate
could be lowered to about 5.15 percent. The Department of Revenue
feels extremely confident that the rates are as low as they have
been in 20 years, and it believes the time is right to provide the
funding for this project through a bonding mechanism simply because
it is going to the be the cheapest money the airport providers will
have access to.
REPRESENTATIVE COWDERY asked Mr. Kinney to elaborate on the
insurance policy.
MR. KINNEY said the Department of Revenue would like to credit
enhance any kind of a bond issue provided that the cost of the
premium to buy the insurance provides a reduction in the interest
rate that is greater than the cost of the premium itself. By
purchasing the policy, the bondholders are assured they will get
paid. If, for some reason, the airport did not make a timely
payment, the insurance company would make the payment to the
bondholders and would then look to the airport system for
reimbursement.
SENATOR HALFORD asked if the project is carried forward with a six
percent interest rate, what the range of a proposed increase in
landing fees and comparable lease rates would be.
MR. EBERLE replied the informational packet should show it would
not exceed 93 cents in the high year of around 2000, and that
number would be less with the reduction to $180 million.
SENATOR HALFORD asked what the percentage of that increase is.
MR. EBERLE replied, from his recollection, the basic rate was done
on around 72 cents, and the high year was 93 cents in the year 2000
and it comes down for a blend of 79 cents over the life of the
bond. He offered to get that information to the committee.
SENATOR HALFORD asked if the increase was less than ten percent and
the increase in landing rates is comparably less than ten percent.
MR. EBERLE said he did not want to speculate. He added one of the
people who testified before the committee discussed the econometric
models and that the fuel costs have a much greater impact than the
landing fees.
REPRESENTATIVE COWDERY said an increase in fuel costs by one cent
per gallon would have a major impact.
SENATOR HALFORD questioned whether that increase would have the
same impact proportionally on small carriers and large carriers.
REPRESENTATIVE COWDERY answered he is sure it would. He added the
landing fees are based on gross weight of the plane.
SENATOR HALFORD asked how many gates are at the Anchorage
International Terminal.
MR. PLUMBER said the International Terminal has 8 gates.
SENATOR HALFORD asked how many flights go through that terminal
each day.
MR. PLUMBER said approximately 50 to 70 passenger flights use that
terminal per week. The number per day varies. In the master plan
forecast up to the year 2012, Lee Fischer projected that the
traffic would not exceed 362,000, yet there were 700,000 last year.
That forecast did not anticipate the return of some of the
international traffic, nor did it anticipate the use of the
international terminal for charters or as a place to put some of
the cargo aircraft.
SENATOR WILKEN asked if the one cent change in the fuel flowage fee
will have a significant impact on the carriers.
MR. PLUMBER replied the fuel flow charge is currently around two
cents per gallon for signators and 2.03 cents for non-signatories.
An increase in fuel flow costs of one cent would be a significant
increase.
SENATOR WILKEN asked if an increase of one cent would be able to
support a certain debt load, but that one cent is a 50 percent
increase in existing costs at the current terminal.
MR. PLUMBER said he is not anticipating any increase in the fuel
flow charge and such an increase has not been in any of the
calculations. He clarified he was talking about the cost of fuel
per gallon. The cost of gas has dropped close to 30 percent in the
last year.
SENATOR WILKEN questioned whether a one cent increase per gallon in
the wing is also significant.
MR. PLUMBER said that is correct.
SENATOR WILKEN commented we should not think that a one cent
increase here and there should pay this off because those increases
threaten Alaska's geographic advantage.
SENATOR WILKEN moved to report SB 352 out of committee with
individual recommendations and the attached fiscal note. There
being no objection, the motion carried.
CSHB 386(FIN) - RE AK INDUS. DEVELOP & EXPORT AUTHORITY
SENATOR GREEN moved to adopt SCSCSHB 386(TRA) as the working
document before the committee. There being no objection, the
motion carried.
LYDIA JONES, Senate Transportation Committee Aide, explained the
committee substitute as follows. HB 386 was introduced to extend
the life of the Alaska Industrial Development and Export Authority
(AIDEA) which is scheduled to sunset this year. The Senate
Transportation Committee substitute extends AIDEA's bonding
authority to July 1, 2000. A number of projects for which
legislative approval is requested are contained in the bill. Among
those are the Red Dog Mine and the port at the City of Nome. The
committee substitute added the issuance of bonds to finance the
improvement and modification of existing facilities at the
Anchorage International Airport in the amount of $179 million;
bonds in the amount of $70 million to finance the design and
construction of a port at Pt. MacKenzie to be owned by Authority;
issuance of bonds not to exceed $70 million to develop a railroad
right-of-way and utility corridor to gain northern access to Denali
National Park; issuance of bonds to finance improvement and
expansion of the port facilities at the City of Seward for $20
million; and bonds to finance the construction and improvement of
the Hatcher Pass Ski Resort, phase one, located in the Mat-Su
Borough, not to exceed $15 million; and Section 25 provides
detailed information about the right-of-way for the railroad and
utility corridor.
CHAIRMAN WARD asked about the expiration date.
MS. JONES answered the expiration date of AIDEA's bonding authority
was amended to the year 2000 because, while AIDEA has an excellent
track record with its projects, the Legislature would like to have
oversight of those projects and be informed of how they are
proceeding.
SENATOR LINCOLN asked Ms. Jones to expand on Section 25 in relation
to Kantishna Holdings, Inc.
MS. JONES noted that Mr. Joe Fields of Kantishna, Inc. was
participating via teleconference. She explained Kantishna, Inc. is
developing a project to gain northern access to Denali National
Park.
SENATOR LINCOLN asked Mr. Fields to describe the area referred to
in the bill and how vast that area is.
MR. FIELDS replied this land extends into Denali National Park to
the West of Healy. The description in the bill is a portion of the
townships in that area which contain the most likely final right-
of-way for the Denali railway system.
SENATOR LINCOLN asked Mr. Fields how many miles this area will
extend.
MR. FIELDS answered the area will extend, from the Alaska Railroad,
about 20 miles to the West, to the eastern boundary of Denali
National Park.
SENATOR LINCOLN asked who is involved in Kantishna Holdings, Inc.
MR. FIELDS replied Kantishna Holdings, Inc. is an Alaskan
corporation that has proposed the development of the Denali Railway
System. It currently holds an access permit across some of the
lands in this area, and it has made a petition to the Secretary of
the Interior for the balance of a right-of-way to the Kantishna-
Wonder Lake area.
SENATOR LINCOLN asked who the board members are.
MR. FIELDS stated the Kantishna Holdings, Inc. board is comprised
of Ken Murray, Jr. from Fairbanks, Lawrence Irving, Jack Williams,
and himself.
SENATOR LINCOLN asked if those four are the principal owners of
Kantishna Holdings, Inc.
MR. FIELDS said they are.
KEITH LAUFER, Financial and Legal Affairs Manager of AIDEA, made
the following comments. AIDEA supports HB 386, which will extend
AIDEA's funding authority and create new facilities and jobs and
help diversify Alaska's economy. AIDEA provided the committee with
a detailed sectional analysis of the Finance Committee version of
the bill. The bill contains four major components. The first
extends AIDEA's bonding authority, which would otherwise sunset
July 1, 1998. If AIDEA's authority was to sunset, AIDEA would be
prevented from issuing development bonds under $10 million and from
issuing conduit bonds. Bonds in the amount of over $10 million
always require legislative approval. Conduit bonds can be issued
without any credit implication to the state or to AIDEA but allow
for tax exempt financing of qualified projects. Again, AIDEA will
be required to get legislative authorization of projects over $10
million.
MR. LAUFER continued. The second major aspect of the bill is that
it merges AIDEA's export guarantee program and its business
assistance guarantee program. The ten year old export assistance
program has never been used. AIDEA commissioned a study to find
out why that was the case and found that while exporting businesses
are supported by other AIDEA programs, this program was not
effective because it was designed after other states' programs that
have strong manufacturing bases and it had some requirements that
did not work well. For example, it had a 25 percent value-added
component in Alaska which prevented the use of the program for
trans-shipment or other types of exports that are common. The bill
modifies the export program and merges it into the business
assistance program which has worked fairly well. The program will
cover services, not just manufacturing, and it covers distributors
and trading companies. It only requires export insurance at
AIDEA's discretion. Currently export insurance is required for all
transactions regardless of location.
MR. LAUFER explained the third aspect of the bill is the
confidentiality provision. AIDEA has no such provision right now.
AIDEA is subject to the general rules under the Public Records Act
which require AIDEA to release documents under the terms of the
Act. The default is that all records are public records; there is
no exception for records submitted by applicants such as tax
returns, business plans and the like. Instead, AIDEA must apply a
Supreme Court test that requires it to balance the public's right
to know versus the privacy interest of the applicant.
SENATOR GREEN asked where that language is contained in the bill.
MR. LAUFER stated it is in Section 8 of the bill. He stated the
current bill contains a provision that specifies categories of
documents, that if confidential when submitted to AIDEA, could be
kept confidential at the applicant's request. The Legislature and
the Legislative Budget and Audit Division would always have access
to all information. The last aspect of the bill pertains to
project authorizations. The Finance Committee's version of the
bill contained two project authorizations; one for an expansion and
modification of the port at the Red Dog Mine (the DeLong Mountain
Transportation System) to provide a direct float-out facility. At
present, Cominco Alaska uses barges to lighter concentrates out to
ocean going vessels. The proposed project would extend the
existing pier about one-half mile, and provide for dredging so that
ocean-going vessels could be directly loaded. The project is very
significant and will lower the costs of Cominco's operation thereby
making Cominco's operation more secure in the state's investment.
The project also has ancillary environmental benefits in that the
concentrate will not have to be handled as often. That project is
in a very preliminary stage. AIDEA believes the project to be a
very good one. AIDEA is concerned about its concentration of debt
in one particular project; AIDEA has over $200 million currently
invested in the facilities at the port. This additional $80
million is a significant portion of AIDEA's $1.3 billion in assets.
At present, AIDEA believes this project will be structured as a
revenue financing, non-recourse to the Authority, based solely on
Cominco's credit. That method will alleviate much of AIDEA's
concentration concern as well as the rating agencies' and bond
insurers' concerns.
MR. LAUFER informed committee members the second project included
in the House Finance Committee version of HB 386 is an expansion
and modification project for the port at the City of Nome which
provides for a new entrance channel to the harbor for safety and
other reasons. That $30 million project is in a preliminary stage.
It appears that $26 million could be funded through Army Corps of
Engineer funds, so a substantial portion of AIDEA's involvement in
this project would be short term. Again, there are a lot of due
diligence and statutory requirements AIDEA would have to meet
before it would invest in this project, but it looks promising at
this stage.
SENATOR HALFORD stated he believes the Legislature should have
access to most of the confidential information if it is to be
effective in its oversight capacity. He noted trade secrets and
income tax returns of individuals are far different than business
plans, credit reports, and other things the Legislature will need
to have.
MR. LAUFER responded AIDEA has been advised that the Legislature
will continue to have access to all information.
SENATOR HALFORD stated the Legislative Budget and Audit Division
will have such access, the Legislature will not. He stated
legislators who are willing to keep the information confidential
should have access.
CHAIRMAN WARD suggested Mr. LAUFER verify that the Legislature will
have access with the Attorney General's Office.
SENATOR LINCOLN asked for clarification about the additional amount
to be invested in the Red Dog Mine.
MR. LAUFER replied $80 million. The investment to date is about
$230 million.
SENATOR LINCOLN asked Mr. LAUFER if he had the opportunity to read
the Senate Transportation Committee substitute prior to the
meeting.
MR. LAUFER said he read it in the last few minutes.
SENATOR LINCOLN asked Mr. LAUFER if he had any comments he wanted
to share on the version.
MR. LAUFER stated he does not know what a lot of the projects are
about so it is difficult for him to comment on them. He noted that
typically, AIDEA has waited for projects to be further advanced
before it got project authorization, because when AIDEA goes out
into the bond financing market, that market treats all
authorizations as though the bonds will be issued. When they look
at AIDEA's finances, they will figure AIDEA will issue all of the
bonds regardless of the stage of the project which will cause some
difficulty.
CHAIRMAN WARD asked if AIDEA has a mechanism in place to ensure
that the public's interest is protected in the process.
MR. LAUFER replied AIDEA would have to meet a number of statutory
requirements before it could invest in any of these projects. He
clarified he was addressing the financing concerns AIDEA may
experience when it goes to the financing markets.
CHAIRMAN WARD said he would hope AIDEA would take a prudent man
rule and protect Alaska's interests.
ROGER HEAD, principal of the Hatcher Pass Development Corporation,
gave the following testimony in support of HB 386. The Hatcher
Pass development project has been seriously considered for about 15
years, and AIDEA has reviewed previous proposals for the project.
Both the Department of Natural Resources (DNR) and the Matanuska-
Susitna Borough have put a high priority on this project. The Mat-
Su Borough believes that in the near term, Hatcher Pass is one of
the major economic development projects available to the borough.
DNR believes this project is part of an overall winter and summer
tourism plan. Previous proposals for the Hatcher Pass project were
fairly grandiose in scale, and never reached fruition. DNR
requested a proposal for a new lease in 1994. The proposed
development that occurred as the result of that lease was a project
estimated to cost about $25 million. Hatcher Pass Development
Corporation, the Mat-Su Borough, and AIDEA reviewed the economic
feasibility of that particular project and concluded that although
the project offered great opportunities for both the state and the
Mat-Su Borough, its size was too large to be feasible. The lease
was sold about 1+ years ago to Davis Constructors. Davis
Constructors undertook a study to determine how the project could
be changed to meet the objective of the Mat-Su Borough and the
State, which was to create a four season resort. The project plan
was also pared down so that the first phase was financially
feasible. That work has been ongoing for the past year, and a
proposal was submitted to the National Bank of Alaska as the direct
contact to use AIDEA's guarantee for financing. At the beginning
of this year, NBA indicated that the debt-equity ratio of 90:10 did
not provide the security it required. NBA recommended a debt
equity ratio in the neighborhood of 25 to 30 percent. Since that
time, four milestones have occurred. The first is that DOTPF made
the Hatcher Pass road improvement project one of its highest
priorities after the Mat-Su Borough contributed some funds to that
project. That road is an integral part of the project's
infrastructure. The Matanuska-Susitna Electric Association found
a way to reduce the cost, from $2 million to $.5 million, for
providing electricity to the project by using an overhead line and
decided to participate and contribute to the project with its
development fund. Third, the Mat-Su Borough reached an agreement
with DNR whereby it will take over the lease property. The lease
funds will be injected by the Mat-Su Borough into the initial
development phase of the project. Fourth, DNR is planning to
privatize Independence Mine. The recent contributions are
narrowing the gap to where the Hatcher Pass Development Company
believes it is very close to meeting the ratio requirement. It
believes undertaking financing with AIDEA is logical. Ski areas
tend to be a little bit more difficult to finance than other
developments.
MR. KYLE RANDISH, Vice President of the Hatcher Pass Development
Company, described the project for committee members with the use
of charts. When Hatcher Pass Development Company bought out the
project, its goal was to down scale the project to make it
economically feasible. It is proposing a four-phase development
plan. The first phase will be the development of a ski area. The
second phase will include infrastructure development for the ski
area and to support the village. The third phase is the village
concept and the fourth phase will include more mountain
improvements. The ski area will have two detachable chair quad
lifts, a base facility, lighting on the mountain, and a snow making
system at the lower elevations. The goal of phase one is to
establish a skier experience equivalent to what is available in the
market in an economically feasible manner. The chair lifts are
state-of-the-art. During the second phase, power, gas, water, and
other developments will take place to accommodate the village
scheme. The village concept will be a four seasons resort
destination spot. The complex will offer some small hotels, small
retail stores, a convention center, a golf course, and some
residential development. As the village concept is developed, more
skier business should develop and the ski area size should
increase.
SENATOR WILKEN thanked Mr. Head and Randish for attending the
meeting.
PAUL FUHS, port consultant for the Port of Nome, described the Nome
port project through the use of illustrations. The existing port
was built in 1917 by the U.S. Army Corps of Engineers. The 75 foot
jetty is too small for the equipment coming in to the port.
Because of the Community Development Quota Program, the number of
fishing boats coming into Nome has increased. Over the last ten
years, ten people died trying to come in and out of the port
because of dangerous wave breaks in one spot. The causeway was
built during oil field development in Norton Sound, but was shut
down due to litigation. It contains cargo areas, but those areas
are exposed to rough weather. Nome is a trans-shipment port: it
serves 23 villages in the area. Senator Stevens and his staff met
with the U.S. Army Corps of Engineers and negotiated an 18 month
time frame to complete the project. A new breakwater and channel
entrance will be the main navigation features that improve the
safety and usability of the port. The Port of Nome prefers AIDEA
financing because if the Corps of Engineers and the federal
government do the procurement, it will take two years to get the
project out to bid. Using AIDEA (Section 204E) financing will save
an entire construction season. Also, if the federal government
finances the project, the project would have to be done in one bid.
By using AIDEA financing, the movement of the rock from Cape Nome,
dredging, and other projects, can be completed using local
contractors. With AIDEA financing, in the first year, 80 percent
will be paid back to AIDEA and the community will take the rest of
the debt ($5-6 million) as long term debt through AIDEA and pay
that off with port revenues.
SENATOR HALFORD asked if the Corps of Engineers has the money
appropriated to do the project.
MR. FUHS said that it does.
SENATOR HALFORD asked if the Corps of Engineers will pay AIDEA
back.
MR. FUHS said it will pay AIDEA back 80 percent of the money as
soon as it has certified that the project is complete. The project
is based on an 80-20 share; the local government has to come up
with 20 percent of the money. AIDEA will be reimbursed for roughly
$20 million in the first year when the project is complete, and $6
million will be financed long term.
SENATOR HALFORD asked how $20 million will amount to 80 percent of
the project's total cost of $30 million.
MR. FUHS said the total cost is estimated at $26 million but the
figure is not exact yet. The community might want to extend the
seawall to protect the front end of the spit. The dredged material
will be used to fill in the jetty to make it usable property.
SENATOR WILKEN asked about the purple area of the chart.
MR. FUHS explained the purple notations are the bathometric
markings which show the surveys of the elevations in the area to
ensure that the project will stand up to rough weather. The
community spent $550,000 on a feasibility study to which the
federal government contributed a like amount. $250,000 of that
amount was spent on modeling the port in a wave tank against the
conditions of the 1974 storm in Nome.
MR. FUHS stated the Community Development Quota Program contributed
$550,000 and the community put in the rest. The only state money
in the project is from a $200,000 community development block
grant.
SENATOR HALFORD asked what the tide level is in that area.
MR. FUHS stated the tide is only about a meter; two at the maximum,
but there is hold back from the storms because the area is so
shallow.
SENATOR WILKEN asked if the docking facilities will be upgraded.
MR. FUHS said they will in the small boat harbor area, however
those upgrades do not qualify for federal funding so they will be
financed with local money.
SENATOR HALFORD asked who owns the spit.
MR. FUHS replied it is owned by about 20 entities, among them the
city and the Native corporation. He added when this project got
started, he was hired as the acting city manager of Nome, and the
14C3 land reconveyance to the Native corporation was resolved.
SENATOR HALFORD commented this project will create a lot of high
value downtown beachfront property.
MR. FUHS agreed. He noted a gold seam runs through part of the
area where the Beema (ph) is working, and it contains arsenic. The
arsenic will be sealed into the bottom of the old channel so
technically one whole area will be a toxic waste dump with zero
value as far as the federal government is concerned.
CHARLOTTE Maccay, Senior Administrator of Environmental and
Regulatory Affairs for Cominco Alaska's Red Dog operation, stated
Cominco is asking the Legislature to approve the Red Dog portion of
the AIDEA funding bill which provides for further upgrade of the
DeLong Mountain transportation system port site by converting the
lightering barge load-out facility to an ocean vessel direct
loading facility. The direct loading facility will open the port
to other regional uses and other future resource extraction
projects in the region. It provides cleaner, and a reduced number
of, transfers of materials from port to vessel; it reduces marine
wildlife exposure to moving vessels; and it improves productivity
while greatly reducing shipping costs. Cominco has been successful
in bringing economic development to rural Alaska and with NANA
shareholder and Alaska hire. She noted she submitted detailed
written testimony to committee members and was available to answer
questions.
CHAIRMAN WARD thanked Ms. Maccay for the tremendous amount of
materials she supplied to the committee.
JOHN KEY, General Manager of Cominco Alaska, stated he was also
available to answer questions.
Committee members had no questions of Ms. Maccay and Mr. Key.
MIKE SCOTT, Manager of the Mat-Su Borough, stated his appreciation
to committee members for hearing HB 386 and for including the
Hatcher Pass and Point MacKenzie projects. The Hatcher Pass
development project has been in place for several years and is now
close to becoming reality. The Point MacKenzie project has been a
borough priority for many years. The Mat-Su Borough is the largest
area of the state without a port. At this point, some federal
funding for this project is working its way through Congress.
SENATOR HALFORD commented, regarding the confidentiality provision
in the bill, he believes some things should be on the list but
others should be a matter of public record. He believes income tax
statements, cash flow statements, and trade secrets should not be
a matter of public record, but financial statements, profit and
loss statements, credit records, appraisals, if part of the
collateral, marketing strategies, and market surveys should not be
kept confidential. He repeated the list is too expansive.
MR. LAUFER commented he was unable to get a representative from the
Attorney General's Office to attend. He stated the issue is the
separation of what the Legislature should have access to and what
information should be a matter of public record. AIDEA's
understanding was that any legislator would have access, providing
the information was kept in confidence. AIDEA would be in support
of amending the bill to clarify that provision. With respect to
the specific items mentioned by Senator Halford, one of AIDEA's
largest programs is its loan participation program in which AIDEA
buys bank participation. Under the laws that apply to banks, all
of that information is required by law to be kept confidential.
SENATOR HALFORD questioned how this system has been working for
years.
MR. LAUFER replied AIDEA gets requests regularly and goes through
the Supreme Court balancing test: the privacy interest versus the
public interest. Generally, no one is happy with the decision
AIDEA makes so it tried to create, in the bill, a list to give
people guidance as to what information would be public and what
would be confidential. The original bill allowed AIDEA to
promulgate regulations. Representative Therriault questioned why
AIDEA did not want to put a list in statute. AIDEA preferred
Representative Therriault's approach and the bill was amended. The
list is representative of the type of requests AIDEA receives and
where the problems have occurred related to those requests.
SENATOR GREEN asked if the bill could contain a stipulation
requiring any person who plans to get an AIDEA loan through a bank
to sign a waiver and comply with AIDEA's standards rather than the
bank's.
MR. LAUFER said certainly, and that has been the case up until now.
The problem has been that AIDEA gets requests from competitors for
information. AIDEA is not allowed, under current law, to inquire
as to motives or anything; the information is deemed public record.
AIDEA was hoping, through the legislative process, to get clearer
standards as to what information could be held in confidence.
AIDEA believes the list is representative of the kind of
information that is normally considered confidential. The bill
requires that the information be kept confidential before it is
submitted, and often many of the borrowers' financial statements
are already public at the time they are submitted. The bill would
not apply to any of that information.
SENATOR HALFORD stated, as an example, a high profile airline got
an AIDEA loan. The airline had a lot of property listed at certain
values and some of those properties had DEC problems. That
information was generally public. If this bill passes, that kind
of information would not be public. He believes the public has the
right to know the appraised value of the collateral.
MR. LAUFER responded the appraisal item is a particularly sensitive
one for banks because AIDEA has had cases where appraisals of
property were used by local assessors to reassess the property
value. The bill contains exceptions in the appraisal section
because AIDEA felt that certain appraisal information had to be
public, but the banks were hesitant to allow the entire appraisal
to be made public.
CHAIRMAN WARD asked if there was further testimony on SCSCSHB 386
(TRA) at this time and noted his intention to pass the bill out of
committee. There was no further testimony. CHAIRMAN WARD asked
Senator Halford to work with the AIDEA representatives to prepare
a committee substitute to be passed out of committee on Thursday.
SENATOR HALFORD questioned whether the Chairman would like him to
offer an amendment at this time.
CHAIRMAN WARD said he also wanted to work with the group to remove
some of the items that were included by the House Finance
Committee.
There being no further business to come before the committee,
CHAIRMAN WARD repeated his intention to move the committee
substitute out of committee on Thursday, and adjourned the meeting
at 4:17 p.m.
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