Legislature(2017 - 2018)BUTROVICH 205
04/07/2017 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| SB65 | |
| SB28 | |
| SB89 | |
| SB86 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 86 | TELECONFERENCED | |
| += | SB 65 | TELECONFERENCED | |
| += | SB 28 | TELECONFERENCED | |
| += | SB 89 | TELECONFERENCED | |
SB 86-ALASKA RAILROAD CORPORATION LAND
3:54:22 PM
CHAIR GIESSEL announced consideration of SB 86, sponsored by
Senator Coghill. She said it grants flexibility to the Alaska
Railroad Corporation (ARRC) to make longer-term lease and land
sales without legislative approval.
SENATOR COGHILL, sponsor of SB 86, explained that ARRC has the
authority to lease land, but not to sell it without legislative
approval. His district has a lot of sub-divisible and business
land that won't be leased because of the equity issue, and this
measure would give the ARRC some much needed revenue that it
wouldn't otherwise get. He said the ARRC has had land management
issues and those would probably continue, but they brought this
solution to him and he is willing to entertain it.
3:55:53 PM
RYNNIEVA MOSS, staff to Senator Coghill, Alaska State
Legislature, Juneau, Alaska, further explained that SB 86
repeals the current requirements for the legislature to approve
land sales by the ARRC and land leases that are over 95 years in
length. This bill would enable the railroad to sell land on
which development wouldn't occur with a land lease, such as
residential land.
She said the ARRC board chairman, Jon Cook, was on-line to
provide some of the logic behind introduction of this bill and
the fact that at least two areas are interested in purchasing
ARRC land for residential subdivisions.
MS. MOSS said the ARRC feels that this bill will allow them to
monetize non-performing land assets, generate cash flow to
respond to opportunities in the real estate market, and enhance
their overall real estate portfolio allowing it to comply with
state law that requires them to be self-sufficient.
She noted four letters of support, Eklutna, Inc., being one,
that said their corporation has been involved in real estate
development in Alaska for quite some time and they see great
potential in this legislation for them to move quickly to take
advantage as development opportunities arise. SB 86 will align
the ARRC with other state entities they have worked with in the
past, such as Department of Transportation and Public Facilities
(DOTPF), to be able to sell land without legislative approval.
3:57:59 PM
MS. MOSS provided a sectional analysis for SB 86, explaining
that the ARRC statutes are in AS 42.40. and SB 86 deletes each
place where language requires legislative approval.
Section 1. Deletes from AS 42.40.120 (delegation
of powers and duties to the chief executive
officer) the requirement for legislative
approval of land transactions affecting utility
corridors, land leases, or land disposals if it
is a land sale or a lease longer than 95 years.
Sec. 2. Deletes from AS 42.40.120(c)
(transactions requiring board approval) the
requirement for legislative approval.
Sec. 3. Deletes from AS 42.40.350(b)
(authorization of use of a utility corridor) the
requirement for legislative approval of such
authorization.
Sec. 4. Deletes from AS 42.40.350(c) (granting
easements on railroad land) the requirement for
legislative approval.
Sec. 5. Deletes from AS 42.40.350(d) (lease
or disposal of land at fair market value) the
requirement for legislative approval.
Sec. 6. Deletes from AS 42.40.352 (sale of
land not necessary for railroad purposes)
language requiring the board to make findings
that land is not necessary for railroad
purposes and that the sale is in the best
interest of the state; and it also deletes the
requirement to provide notice to persons
having leasehold interest in the land proposed
to be sold and offered. It also deletes the
provision that requires them to offer the
leaseholders the right of first refusal. They
feel it's very important to know that if land
is sold to someone, the lease is held
harmless. So, if they purchase the land and
there is a lease active the Railroad must
honor the lease.
This section also deletes language requiring
legislative approval.
Sec. 7. Repeals AS 42.40.285, "Legislative
approval required" so language is:
Unless the legislature approves the action by
law, the corporation may not:
(l) exchange, donate, sell, or otherwise
convey its entire interest in land;
(4) lease land for a period in excess of 95
years unless the corporation reserves the
right to terminate the lease if the land is
needed for ARRC purposes.
Sec 8. Provides for an immediate effective date.
4:01:46 PM
CHAIR GIESSEL opened invited testimony.
JON COOK, Chairman of the Board, Alaska Railroad Corporation
(ARRC), Fairbanks, Alaska, supported SB 86. He said the reason
they are doing this is that the state was given an endowment of
land when it purchased the railroad. It was one of the most
valuable assets that came along with the purchase. Its lease
revenues predominantly come from Fairbanks, Anchorage, Whittier,
Seward, and the Healy area and have sustained the corporation
through trying times including now.
Very little land sales have been done through either federal or
state ownership. Only three transfers have happened: two to
Eklutna, Inc., and one to DOTPF. The fact that a private
individual or developer would have to go through the process of
getting a bill introduced, passed, and signed into law by the
governor is an inherent deterrent.
4:05:50 PM
MR. COOK said the railroad leaves money on the table by only
being able to lease land. He explained that some leased parcels
could be used for single family homes, like Chena Landings in
Fairbanks. It is a beautiful piece of river-front real estate
right on the Chena River; utilities are in and it has a southern
exposure. Those lots should have the most expensive homes in
Fairbanks on them and yet that subdivision has sat vacant for 16
years, because the market just doesn't exist for leased land.
ARRC also has remote and rural lands, like the Tri-Valley
Subdivision, and those should be in the hands of the folks who
have lived there a long time. The Alaska Railroad doesn't need
to be in the business of single family homes.
Lastly, Mr. Cook said, there are some "buckets" of land that are
below-market leases including Ship Creek in Anchorage. Because
the railroad is a political entity and charges "fair market
value," there have been pressures to curb increases that have
happened as the real estate market has dramatically improved in
Anchorage. It ends up with leases that are less than half of
fair market value, because of the lease caps. However, some of
the same folks that lease that land are willing to buy it for
fair market value, which would make sense for the railroad.
MR. COOK said the legislative approval process is terrifying to
some people and off-putting to the development community. He
said two things need to be taken out of the bill other than the
legislative approval process. One is the right of first refusal,
and this is because it is a severe impediment to being able to
market a piece of property. For instance, someone wants to
purchase some land and does several hundred thousand dollars of
due diligence and gets all the way to the finish line, and is
trumped by someone who says, "Thanks for doing all that work.
I'm just going to exercise my right of first refusal."
It is also not the ARRC's position to sell land that is being
leased by somebody else, he said, but if that did need to
happen, the existing leaseholder would be protected by his
lease.
4:08:50 PM
Lastly, requiring a formal best interest finding is repetitive.
Either the deal makes sense and is at fair market value or not.
It just adds in a layer and slows the railroad down in terms of
being able to put deals together in a timely manner.
4:09:57 PM
SENATOR VON IMHOF said a letter from the Denali Borough states
that some ARRC land is currently leased to the Usibelli Coal
Mine for the development of a residential subdivision at the
center of the Healy Community, and a letter from the Usibelli
Coal Mine said they would be interested in exploring the
purchase of the Tri-Valley Subdivision land. They are the
current lessors and she asked if they would be denied first
refusal under this bill.
MR. COOK replied that Usibelli Corporation is the lessor and the
ARRC doesn't have a sublease. It's likely that Usibelli would
purchase that land and turn around and sell individual parcels
to those who wish to purchase them. He assumed Usibelli would
purchase the entire subdivision.
SENATOR VON IMHOF asked if Usibelli leases the entire parcel at
this time.
MR. COOK answered yes.
SENATOR VON IMHOF asked if Usibelli could be provided an
opportunity to make a bid on the land prior to ARRC marketing it
to others.
MR. COOK responded that their intent is not to solicit third
parties to purchase that land.
SENATOR VON IMHOF said, rather than removing the first right of
refusal from the current leaseholders, she hoped this body would
consider a way to structure the bill so there is at least an
ability for the ARRC to notify the current leaseholders of the
intent to sell and provide at least 60 days for those
leaseholders to do their own due diligence and have an
opportunity to put a down payment on the property.
4:14:08 PM
SENATOR STEDMAN asked why the ARRC doesn't come forward with
tracts that it would like to sell off versus requesting a
blanket authority for all its lands.
MR. COOK answered that they must have an offer in hand to bring
to the legislature and people just haven't been interested. They
have brought three deals to the legislature since 1983. He added
that notification provisions for any lease or sale are currently
so in section 6.
SENATOR STEDMAN responded that it's common for someone to
express interest in a particular parcel to the landowner, and
then the landowner considers the sale. It seems that he is
saying they must have a viable offer in hand, and that is a less
drastic change to existing law.
4:16:37 PM
MR. COOK replied he understands what he is saying, but for
example, if the board wants to sell Chena Landing right now,
legislation to obtain permission to sell that block of land
would have to be introduced and passed and signed into law,
which might happen in one session or the second year. However,
markets and opportunities don't wait that long.
SENATOR STEDMAN said sometimes the developer gets out ahead of
the market. He said that this issue comes down to how much
authority the legislature wants to give the ARRC on the sale of
state-owned land.
SENATOR HUGHES asked if a nimbler process to respond had been
proposed before and if not, why not. Has there been a trust
factor problem?
4:19:16 PM
MR. COOK said that is an interesting question to which he would
answer from being on the board since 2009: management and
certain board members have a great deal of fear that there would
be political pressure to dispose of income producing lands in
"sweet-heart, below fair-market value deals." Their intent is
not to sell the best income producing lands, but to have a
complete tool kit to monetize the lands and get the maximum
value from them, and having a lease-only policy has made that
impossible.
MR. COOK said he has a background in commercial real estate
development and a lot of Senator Hughes' constituents have asked
to purchase some of these lands, both residential and
commercial, but the board has evolved its understanding of the
need for a "full tool kit" and as well as the need to be able to
say "no."
SENATOR HUGHES remarked that Eklutna, Inc., has been "a
wonderful community partner," and asked if this structure is in
place to provide protection against "sweetheart deals" in future
years.
MR. COOK answered yes. First, there are public notice
requirements as well as appraisal and fair market value
requirements, and all land sale transactions must be reported to
the legislature.
4:23:33 PM
SENATOR WIELECHOWSKI asked if he would support language
prohibiting the sale of land unless it is at fair market value.
MR. COOK said he thought that language was already in there, but
the appraisal process might not be the best way to get there.
Competitive bid is another way to do that, and might be better
for rural lands than "fair market value" language. Having the
flexibility to do both is important.
SENATOR WIELECHOWSKI asked the total amount and value of the
land that ARRC owns.
MR. COOK answered about 36,000 acres of land and some of that is
in reserves. The value is impossible to say; it depends on what
they would be used for: highest and best use. A fair market
value appraisal is required in section 5, and for the ARRC that
means a Member of the Appraisal Institute (MAI) appraisal or
competitive bid.
SENATOR WIELECHOWSKI asked if he would support capping at a
certain value without having to go to the legislature.
MR. COOK answered no, because one never knows what kind of deal
is going to walk through the door. Curbs are the reason there
haven't been more sales; they have a diverse real estate
portfolio and are reluctant to do that.
SENATOR WIELECHOWSKI said it's got to be hundreds of millions of
dollars in value, and he has trouble with the legislature
completely giving up control of its disposal.
MR. COOK answered that other entities don't have to come to the
legislature to dispose of land. The ARCC has a board and
fiduciary obligations and public notice requirements. Right now,
there is nothing to prevent DOTPF or DNR from doing that. Why is
the Railroad different?
4:28:51 PM
SENATOR WIELECHOWSKI asked if anything would prohibit the ARRC
from selling the terminal in Seward or some large asset to a
cruise ship company, or sell the entire railroad to a private
corporation, for that matter.
MR. COOK answered the ARRC can't sell land that is used for
operations like track or terminals.
4:29:49 PM
SENATOR VON IMHOF asked if any parcels of land have been
identified that have railroad tracks running through them.
MR. COOK answered no.
SENATOR VON IMHOF said at some point in the future, assuming
this land sale gains momentum, the railroad might want to sell
tracts of land that the tracks run through.
MR. COOK answered that tracks have a 100-foot right-of-way where
land could never be sold.
SENATOR VON IMHOF said another bill traveling through the
legislature is about right-of-way and permit user fees, and
asked if this bill passes, will the railroad want to address
potential user fees for the new owner.
MR. COOK replied that a user fee wouldn't be part of a sale
document. Any land subject to user fees would be found in the
title search.
4:32:09 PM
SENATOR VON IMHOF said another specific bill addresses right-of-
way user fees with some of her district's private landowners and
she wanted to know how the railroad's practice may affect future
land sales with future landowners.
4:32:48 PM
MR. COOK replied that the right-of-way itself and any areas that
are potentially under dispute will never be sold, but if an
adjacent landowner has some sort of permitting rights for a
garden or something else, those rights will be assignable by the
individual when the owner sells the land. The ARRC has rights-
of-way and easements, which will never be sold, so the two are
not related to this legislation.
4:34:15 PM
MS. MOSS said she spoke with Representative Kopp yesterday, the
sponsor of the other legislation Senator von Imhof referenced,
who said he has in agreement with the ARRC and supports this
bill.
SENATOR STEDMAN remarked why does the state own the railroad and
why doesn't it sell it?
4:35:43 PM
BILL O'LEARY, President & CEO, Alaska Railroad Corporation
(ARRC), Anchorage, Alaska, said he was available for questions
on SB 86 and that the chairman had done a good job of explaining
the bill.
4:36:33 PM
JIM KUBITZ, Vice President, Real Estate and Facilities, Alaska
Railroad Corporation (ARRC), Anchorage, Alaska, said he was
available for questions on SB 86, and he also said the chairman
had done a good job of explaining the bill.
BRUCE BUSTAMANTE, President, Anchorage Chamber of Commerce,
Anchorage, Alaska, supported SB 86 to encourage more real estate
development in the Anchorage Bowl. He said they had provided
recommendations to the municipality and have found a shortage of
useful land, particularly land zoned for industrial use. He
agreed that one must move quickly on some real estate deals to
be competitive. This bill provides an advantage for the
Municipality of Anchorage in facilitating land swaps in a more
expeditious manner.
4:39:41 PM
DAVE HANSON, representing himself, Anchorage, Alaska, supported
the concept of SB 86. He had been involved in land management
and natural resource development for the last 40 years and had
worked with many rural areas on subdivision development and is
sympathetic to some things he is hearing. He worked with
Representative Talerico when he was mayor on several projects up
in the Healy area.
He said the ARRC is in the position of a Native allottee who
can't do anything without the Bureau of Indian Affairs giving
them approval. The railroad is a semi-autonomous body and not
really a part of the administration directly under the governor.
Also, it's very clear that if land is sold to a developer the
buyer must have full title, so they can finance their
development. Many villages have had that problem with doing
long-term leases.
4:41:40 PM
MR. HANSON had two concerns; one being the first right of
refusal. It's one thing for a current board to say this is the
intent to honor that, but it's another thing over time to have
no assurance that will be the case as personnel and
circumstances change. He supported some kind of first refusal
right for the existing lessee with a limited time period, so the
lessee doesn't hold things up forever.
Secondly, he is hearing a lot of concern from the committee, and
rather than going forward with this bill, they might want to try
it out by applying it to a couple of parcels first - Chena
Landing and Tri-Valley land, maybe - before applying it to the
whole 36,000 acres to observe how it would really work.
SENATOR COGHILL noted those were good suggestions and he would
do his best to find some answers and a pathway forward.
CHAIR GIESSEL said she would leave public testimony open and
held SB 86 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 86 - Version A.PDF |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| SB 86 - Sponsor Statement.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| SB 86 - Sectional Analysis.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| SB 86 - Supporting Document - ARRC Fact Sheets.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| SB 86 - Fiscal Note - AK Railroad - 3 - 31 - 17.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| SB 86 - Support- Denali Borough.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| SB 86 - Support - Usibelli Coal Mine.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| Updated Agenda - 4 - 7 - 17.pdf |
SRES 4/7/2017 3:30:00 PM |
|
| SB 65- Proposed Senate Resources CS - 4 -6 - 17.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 65 |
| SB 65- Corrected Explanation of Changes - Version J to Version R.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 65 |
| SB 86 - Support - Eklutna Inc.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |
| SB 86 - Support - Anchorage Chamber of Commerce.pdf |
SRES 4/7/2017 3:30:00 PM |
SB 86 |