04/05/2000 03:20 PM Senate RES

          HB 344-HARDROCK LAND EXCHANGE/HEALY RR LEASE                                                                          
                                                                                                                                
CHAIRMAN HALFORD announced that a Senate version of HB 344 has been                                                             
discussed by the Committee.  The House amended HB 344, which was                                                                
similar to the Senate bill, and added the Alaska Railroad                                                                       
Corporation (ARRC) land in Healy.                                                                                               
                                                                                                                                
MS. CAROL CARROLL, Director of the Division of Support Services of                                                              
the Department of Natural Resources (DNR), explained that the                                                                   
intent of the House amendment is to fix a problem the community of                                                              
Healy has with leased land.  It allows ARRC to extend the lease so                                                              
that community members can get mortgages on homes on that land.                                                                 
                                                                                                                                
Number 1070                                                                                                                     
                                                                                                                                
SENATOR GREEN asked if that subdivision is already established.                                                                 
                                                                                                                                
MS. CARROLL said it is.                                                                                                         
                                                                                                                                
MR. CHARLIE GREEN, representing Usibelli Coal, concurred with Ms.                                                               
Carroll's statement and explained that the original lease with the                                                              
ARRC, when it was under federal management, was for 55 years.                                                                   
About 25 years have passed.  The subdivision homeowners are buying                                                              
and building homes on subleased land.  Most banks require a minimum                                                             
10 year cushion on mortgages on leased land.  At this time, two                                                                 
families have moved from the subdivision and are unable to sell                                                                 
their homes because of the duration of the lease.  Additionally, a                                                              
number of houses in the subdivision are available for rent                                                                      
primarily because the owners have been unable to sell them.  HB 344                                                             
will give legislative approval for an extension of the lease.  It                                                               
does not require language to be placed in statute giving ARRC                                                                   
unilateral approval to terminate the lease.  In addition, the owner                                                             
will not be able to unilaterally terminate the lease, as banks                                                                  
would not give mortgages in that case.  The subdivision is in the                                                               
heart of the community of Healy.  It contains about 120 residences,                                                             
as well as the community center and volunteer fire department.                                                                  
                                                                                                                                
CHAIRMAN HALFORD asked if the benefit of this extension and any                                                                 
value that is accrued will go to the subleasees.                                                                                
                                                                                                                                
MR. GREEN replied that it would certainly be a benefit because                                                                  
subleases could be extended, satisfying requirements of bankers and                                                             
other lenders.                                                                                                                  
                                                                                                                                
CHAIRMAN HALFORD asked if a profit is being made by anyone in this                                                              
process.                                                                                                                        
                                                                                                                                
MR. GREEN answered, "No, this is definitely a non-profit                                                                        
enterprise."  He explained the ARRC lease held by Usibelli Coal                                                                 
requires that Usibelli sublease to homeowners and commercial                                                                    
businesses that locate within the subdivision.  Usibelli is only                                                                
allowed to recover its original development fees and the rent it                                                                
pays to ARRC, which is calculated on a per acre basis.  From                                                                    
Usibelli's perspective, it is a non-profit project.                                                                             
                                                                                                                                
SENATOR TAYLOR asked why ARRC does not sell the homeowners the land                                                             
instead of continuing to lease.                                                                                                 
                                                                                                                                
CHARLIE BODDY, Vice President of Government Relations with Usibelli                                                             
Coal, explained that Usibelli has been working with the Denali                                                                  
Borough, ARRC, and the homeowners to find a better solution.                                                                    
Usibelli considers CSHB 344(FIN) to be an interim, stop-gap measure                                                             
to allow people who want to sell and build homes to be freed up                                                                 
from the current problem.  The parties involved anticipate that                                                                 
within the next year they will find a way to get that land into                                                                 
private hands.  Usibelli got involved in developing the subdivision                                                             
because it had the equipment needed to lay out the entire                                                                       
subdivision and lay a trunk line.  It then moved all of the "folks"                                                             
out of the Usibelli and Sun Trana mining communities into this new                                                              
area however it was never Usibelli's intention to be a landlord.                                                                
With the creation of the Borough, he believes private ownership can                                                             
be achieved.                                                                                                                    
                                                                                                                                
SENATOR GREEN moved CSHB 344(FIN) from committee with individual                                                                
recommendations. There being no objection, the motion carried.