Legislature(2003 - 2004)
05/16/2003 01:49 PM House FIN
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HOUSE BILL NO. 312
An Act giving notice of and approving the entry into
and the issuance of certificates of participation for a
lease-purchase agreement for a seafood and food safety
laboratory facility; relating to the use of certain
investment income for certain construction costs; and
providing for an effective date.
Co-Chair Harris MOVED to ADOPT work draft version #23-
GH1134\I, Bannister, 5/15/03, as the version of the
legislation before the Committee. There being NO OBJECTION,
it was adopted.
Co-Chair Williams explained that the bill would conform with
the version coming from the Senate side.
ERNESTA BALLARD, COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION, commented that the Department was responsible
for protecting the environment and human health. She
testified to the importance of the lab. The seafood and
food safety lab analyzes raw, finished and value-added food
products for bacteria, chemicals, and toxic contaminants,
maintaining the capabilities and Food and Drug
Administration (FDA) certifications that private labs
cannot. The Department operates on schedules that are not
available from private labs and assumes greater liability
needed to perform analysis for paralytic shellfish
poisoning. The Department cooperates with emerging
industry, such as the growing dive fisheries to guarantee
time-critical water and raw product analysis are available
and market commitments are met.
Commissioner Ballard continued, the Department is qualified
to train and certify private labs so that they can operate
in established and high-demand testing markets.
The Department of Environmental Conservation leased a
facility in Palmer for 34 years. The new facility will not
be available until after 2006. The current facility is
overcrowded, not fully compliant with safety codes and
laboratory design standards. That facility was originally
placed in Palmer when the principal lab business was
agriculture and dairy. The emerging value added seafood
industries in coastal Alaska have added significant and
time-sensitive testing demands for the Department's service.
The proposed new lab will be in Anchorage where valuable
hours could be saved between sample collection and testing
for raw and live seafood products.
Commissioner Ballard continued, the laboratory functions are
essential to protect the health of all Alaskans. The
Governor, past legislatures, and the commissioners of the
Department of Revenue, Department of Transportation & Public
Facilities, and Department of Environmental Conservation
have reviewed the design specifications, equipment
requirements and expense. Alternative locations were
considered and financing mechanisms for a modern facility
sized and equipped for long-term service to the State.
Careful consideration was given to the possibility of
locating in remodeled Alaska Seafood International (ASI)
facility space in Anchorage. Requirements would occupy
approximately 5% of that space.
The process of acquiring a new seafood and food safety lab
began seven years ago with a feasibility study. The
Department received an appropriation of $150,000, to obtain
an independent evaluation of both build and lease options.
The analysis showed that the most economical choice would be
a State owned laboratory financed with lease/purchase bonds
known as Certificates of Participation. The Legislature
agreed and in 2001 appropriated $1,300,000 dollars to design
the facility, a conservative and cost conscious proposal.
She emphasized that the building design, specifications,
space allocations, and the financing plan were all
conservative. The building contains only laboratory and lab
support space. Meeting and classroom facilities will be
available in the adjacent public health lab. The building
materials were selected for low and simple maintenance. The
design and materials are similar to those used in
constructing the public health lab, built several years ago
on schedule and within budget. Laboratory fee charges for
services are being reviewed. They compare well to fees used
in other states.
Representative Stoltze interjected that the project and
building facility was too large and asked about other
alternatives.
JOHN MACKINNON, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION & PUBLIC FACILITIES, responded that
consideration had been discussed regarding the facility in
the ASI building. He noted that the building was too large
and that another building could actually fit inside it. The
space requirements for the lab would consume around 5% of
the total area in ASI and that there would be "serious
compromises" made by doing it, limiting the ability of that
building to be used for anything else. When considering the
overall cost, there would be little savings made. The API
building was designed as a stand-alone structure. The
redesign costs would be well over $900,000 and it would
require complete separate mechanical system & electrical.
Mr. MacKinnon acknowledged that initially, it appeared to be
a good idea; however, with all the information gathered,
there would not be a tremendous amount of savings to be made
if it were located in that space. He added that this design
process has been on going for many years and attempting to
accommodate these needs.
Representative Stoltze inquired how many employees would the
facility employ. Commissioner Ballard responded that there
are 11 employees.
Co-Chair Harris understood what the Department considers
this to be a vital need to move the lab to Anchorage and
having closer access to the airport. He asked if there had
been any attempt to address the City of Palmer's concern
with the possible move. Commissioner Ballard pointed out
that there are approximately 23 employees in the Valley area
and that only 11 would be moved. The reason for adding
additional staff would be particularly for the drinking
water certification. Those needs are growing as the State's
population expands. All employees would remain in the
Palmer area except the ones working in the laboratory.
Co-Chair Harris questioned why such a large facility was
needed. Commissioner Ballard explained that the utilization
of the space would be about 50/50. The portion used for the
labatory testing activities versus equipment space, requires
a certain amount of isolation. Using half the space for
isolation is important to protect the integrity of that
work.
Co-Chair Harris asked for more information on the
certificate of participation bonding and/or funding for the
project.
TOM BOUTIN, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
explained that lease financing was a mechanism of financing
building that the State issues. The State uses that
mechanism, as do all other states and municipalities. The
debt service is subject to annual appropriation and for that
reason, the credit is normally rated much below the general
obligation (GO) rate of the issuer.
Co-Chair Harris asked who would own the building. Mr.
Boutin responded that a feature of a lease-financing or
capital lease is that at the end of the lease term, the
lessee owns the building. In a capital lease as opposed to
an operating lease, the lessee becomes the owner. During
the lease term, there is a trustee who has an obligation on
behalf of the bondholder to enter and take over the facility
on behalf of the best interest of the bondholders.
Representative Hawker asked why the State was in this type
business, noting that it appeared to be "out sourcing of
services", which should be left in the private sector.
Commissioner Ballard advised that whenever they can, the
State gets out of the "testing" business. The State no
longer does testing of drinking water. The only testing
that the States currently does are those that are not
available through private lavatories. If a private lab
sought the certification, then the State would not compete
with them. She pointed out that it is unlikely that private
labs would perform this type testing as there is generally
not enough volume and it needs to be done on a 24/7.
Representative Hawker inquired why the private industry has
not expressed interest in undertaking this activity.
Commissioner Ballard advised that the fees that would need
to be charged, the schedule of maintaining the equipment and
the rigorous certification requirements would simply
preclude the investment of working capital for private
enterprise for performing these tests. The lab
certification requirements certify the facility and
technicians. The technicians must be certified to operate
the new facility and that they have to be available. There
is not a large enough market in Alaska and that market
expects turn-around on its schedule. The State provides the
service at the same cost that the industry would find in
other states.
Representative Hawker argued that the State could not do it
cheaper. Commissioner Ballard disagreed. She reminded
members that the general fund subsidizes the service in the
way that it subsidizes other public services, considered to
be in the interest of the State's citizens.
Co-Chair Harris asked again what the general "feeling" was
currently in the Palmer area regarding moving the facility.
Representative Stoltze observed that it was viewed as a
"slap in the face" to the agriculture industry. He pointed
out that he does not represent that entire "physical area",
however, does represent the entire valley. He repeated that
there is not a good feeling around the proposed change.
Co-Chair Williams remembered that three years ago, a similar
bill passed from Committee to undertake basic design work
and that this concern had been discussed during the last two
legislative sessions.
Representative Kerttula noted her appreciation that the
Department has considered what is happening in Juneau with
closure of the lab. She hoped that would make it easier for
the employees and the University.
ROGER PAINTER, ALASKA SHELLFISH GROWERS ASSOCIATION, JUNEAU,
testified in support of the bill. He commented that the lab
needs a new facility. There has been interest in S.E.
Alaska but there is not enough commerce related to the lab
to locate it in the Southeast area. He acknowledged that an
Anchorage location would make the most sense.
Mr. Painter responded to queries regarding private sector
testing, pointing out that it is easier to go to Seattle
than to get samples to Palmer. There are no private labs
that can test marine samples and no private labs anywhere in
the United States that can check for paralytic shellfish
poisoning or other harmful problems. Assuming that the
private sector will step up to contract for these services
is not an option. He added that in support of comments made
by Commissioner Ballard regarding fees, the costs are below
what would be paid to a private lab.
Representative Hawker noted that he was supportive of the
State's mari-culture activities. He asked if there were any
alternative facilities for that type of testing. Mr.
Painter replied that there is not for either the growing
water certification or for paralytic shellfish poisoning.
He noted that Washington State is the largest producer of
oysters and clams and that he had contacted all labs in
Seattle, finding no testers.
Representative Hawker asked if this type testing was unique
to Alaska. Mr. Painter replied that these are federal
requirements and that the State must comply with those laws
in order to participate in interstate commerce. Providing
public health protection is an important service.
Representative Hawker asked if there were federal
regulations in place in the Pacific Northwest, then why were
the services not available. Mr. Painter explained that the
State of Washington does provide testing services and has a
somewhat different testing program in that they certify
large areas, which is more cost effective than working on
the issues in Alaska where everything is remote and the
farms are separated. The Department of Environmental
Conservation is working in those areas where there is a
concentration of farms in order to certify larger areas.
KRISTIN RILIN, DIRECTOR, DIVISION OF ENVIRONMENTAL HEALTH,
DEPARTMENT OF ENVIRONMENTAL CONSERVATION, added that the
Federal Drug Administration (FDA) certifies laboratories to
perform the testing. Paralytic shellfish poison is a
dangerous toxin and is heavily regulated. Because of that,
private lavatories are not interested in the liability.
Representative Foster asked how the costs were being
determined. Ms. Rilin replied that the costs were not based
on the costs of running the tests. She added that the fees
would need to change to meet the operating costs associated
with the laboratory.
HB 312 was HELD in Committee for further consideration.
TAPE HFC 03 - 97, Side B
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