02/25/2014 09:00 AM Senate STATE AFFAIRS

         SB 106-STATE LAND DISP./LEASEHOLDER PREFERENCE                                                                     
                                                                                                                                
CHAIR DYSON announced the consideration of SB 106.                                                                              
                                                                                                                                
9:04:02 AM                                                                                                                    
SENATOR  KEVIN MEYER,  Alaska State  Legislature, Juneau,  Alaska,                                                              
said  SB  106  provides  for  certain  individuals  to  receive  a                                                              
preference  right  to  purchase   certain  state  land  without  a                                                              
competitive bid.                                                                                                                
                                                                                                                                
9:04:33 AM                                                                                                                    
SENATOR  GIESSEL moved  that the  committee  adopt the  CS for  SB
, labeled 28-LS0864\N.                                                                                                       
                                                                                                                                
CHAIR DYSON  said seeing  no objection, version  N is  the working                                                              
document.                                                                                                                       
                                                                                                                                
SENATOR MEYER  explained that  the purpose of  SB 106 is  to allow                                                              
state land leaseholders  the first opportunity and  first right of                                                              
refusal on land  that they have made investments on  and depend on                                                              
for their  livelihood. He  noted that  SB 106  was initiated  by a                                                              
constituent  who   has  invested  a  substantial   amount  of  his                                                              
retirement funds  in a hunting  lodge on  some land he  had leased                                                              
from the state  for a long period  of time. He explained  that his                                                              
constituent requested  to be given  first opportunity  to purchase                                                              
his  leased land  before  the property  was  sold or  traded to  a                                                              
municipality. He  explained that current state statutes  allow for                                                              
an individual to  purchase up to five acres of  land under certain                                                              
conditions as follows:                                                                                                          
                                                                                                                                
   · Must have erected a building on the land,                                                                                  
   · The land must have been used for more than five years for                                                                  
     bona fide business purpose,                                                                                                
   · Must be under a federal permit or without the need for a                                                                   
     permit,                                                                                                                    
   · For state selection, must be under a state permit or lease,                                                                
   · The business the land is used for must have produced at                                                                    
     least 25 percent of an individual's total income for the                                                                   
     five years preceding the application.                                                                                      
                                                                                                                                
He  said  SB 106  would  extend  the  first  right of  refusal  to                                                              
individuals  who  have state  issued  leases.  He noted  that  the                                                              
right of  first refusal currently  applies only to  federal lands.                                                              
He specified that  the municipal entitlement selection  also means                                                              
"borough." He said  SB 106 allows for a preference  to purchase up                                                              
to  five  acres  of  land without  a  competitive  bid  under  the                                                              
following conditions:                                                                                                           
                                                                                                                                
   · Individual must have erected a building,                                                                                   
   · Individual must have used the building for a bona fide                                                                     
     purpose for ten years or more,                                                                                             
   · Individual has received at least 25 percent of their income                                                                
     for the last ten years preceding the application.                                                                          
                                                                                                                                
He explained  that the program's specifics  are in the  case of an                                                              
admissible  state land  entitlement  of the  state  land where  an                                                              
individual meets  the conditions  previously outlined  and applies                                                              
for preference  right  within 120  days of notice  of a  municipal                                                              
entitlement  selection. He  specified that  an individual  will be                                                              
granted a  preference right  to purchase land  and added  that the                                                              
land will  be sold at  a fair market value.  He noted that  SB 106                                                              
also  provides  a  mechanism  for  which  a  municipality  may  be                                                              
compensated for the  entitlement land if a leaseholder  chooses to                                                              
purchase the  land. He said  there is no  cost associated  with SB
 and  the Department of  Natural Resources (DNR)  has submitted                                                              
a zero fiscal note.                                                                                                             
                                                                                                                                
9:07:43 AM                                                                                                                    
SENATOR GIESSEL addressed  a memorandum attached to  the bill from                                                              
Don  Bullock [Legislative  Counsel].  She said  Mr. Bullock  asked                                                              
questions that pertained  to whether the acreage  will be credited                                                              
against a  municipal entitlement  and where  the money  ultimately                                                              
goes.  She   asked  Senator   Meyer  to   address  Mr.   Bullock's                                                              
questions.                                                                                                                      
                                                                                                                                
SENATOR  MEYER  replied that  he  will  have Ms.  Morledge  answer                                                              
Senator Giessel's inquiry.                                                                                                      
                                                                                                                                
9:08:21 AM                                                                                                                    
EDRA  MORLEDGE, Staff,  Senator Meyer,  Alaska State  Legislature,                                                              
Juneau, Alaska,  explained  that a committee  substitute  (CS) was                                                              
brought forward  in response to  Mr. Bullock's scrutiny.  She said                                                              
the bill's  previous  version did  not have a  mechanism by  which                                                              
the municipalities  could be  compensated for  land that  they may                                                              
have wanted to choose,  but the first right of  preference goes to                                                              
the  leaseholder.  She  explained  in  the  CS,  lines  26-30,  as                                                              
follows:                                                                                                                        
                                                                                                                                
     The  amount   of  land,  within  an   overall  municipal                                                                   
     entitlement,  shall be  reduced  by the  amount of  land                                                                   
     covered under  this section, up  to the five  acres that                                                                   
     an  individual  can exercise  their  noncompetitive  bid                                                                   
     rights; however,  subject to appropriation,  the revenue                                                                   
     from the  purchase of  the parcel will  be given  to the                                                                   
     municipality   if   the   municipal   entitlement   land                                                                   
     selection  is approved.  We felt this  CS addressed  the                                                                   
     concerns  that   the  drafter  had  with   the  original                                                                   
     version.                                                                                                                   
                                                                                                                                
CHAIR DYSON  asked to  clarify in  the previous statement,  "Shall                                                              
be reduced by the amount of land covered under this section."                                                                   
                                                                                                                                
MS.  MORLEDGE  answered  that  the  land  of  a  leaseholder  that                                                              
exercises  their  first right  of  refusal  will reduce  the  land                                                              
entitled to the municipality.                                                                                                   
                                                                                                                                
CHAIR  DYSON asked  to clarify  that  a municipality  is going  to                                                              
have a state owned land as an inholding within a municipality.                                                                  
                                                                                                                                
MS.   MORLEDGE  responded   that   theoretically,  Chair   Dyson's                                                              
assertion could  be correct. She deferred  to the DNR on  how some                                                              
of the specifics would work.                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI  asked  for an explanation  on the  statement                                                              
located on page  2, line 9, and "Where there is  a valid municipal                                                              
entitlement selection on state land."                                                                                           
                                                                                                                                
9:11:53 AM                                                                                                                    
WYN  MENEFEE,   Deputy  Director,   Division  of  Mining,   Alaska                                                              
Department  of  Natural  Resources,  Anchorage,  Alaska,  answered                                                              
that  when a  municipality has  an entitlement  they first  select                                                              
their  desired  acquisition lands  and  the  DNR proceeds  with  a                                                              
consideration  process. He  noted  that municipalities  inevitably                                                              
over-select  for their  entitlement  due to  a certain  percentage                                                              
being  denied.  He  explained  that  municipality  selections  are                                                              
constrained by legal land classifications.                                                                                      
                                                                                                                                
SENATOR  WIELECHOWSKI   asked  for   an  explanation   under  what                                                              
circumstances   a  municipality   would   have  a   right  to   an                                                              
entitlement selection on state land.                                                                                            
                                                                                                                                
MR. MENEFEE  replied that  a municipal  entitlement occurs  when a                                                              
borough  or  municipality  is  formed. He  explained  that  a  law                                                              
dictates that entitlement is calculated on a percentage basis.                                                                  
                                                                                                                                
9:14:12 AM                                                                                                                    
SENATOR  WIELECHOWSKI asked  if  Anchorage,  Fairbanks, or  Juneau                                                              
still have opportunities for state land entitlement.                                                                            
                                                                                                                                
MR. MENEFEE  answered that  most of  the main municipalities  have                                                              
already  received   their  entitlement.   He  said   newly  formed                                                              
boroughs have room for additional state land entitlement.                                                                       
                                                                                                                                
SENATOR   WIELECHOWSKI   asked   to  clarify   that   state   land                                                              
entitlement applies to newer forming municipalities.                                                                            
                                                                                                                                
MR.  MENEFEE  replied  correct.  He noted  that  some  entitlement                                                              
lands have not  been fulfilled in Petersburg, Lake  and Peninsula,                                                              
and Northwest  Arctic  boroughs. He  said the  DNR is wrapping  up                                                              
land entitlement in the Denali Borough.                                                                                         
                                                                                                                                
CHAIR  DYSON  asked   to  verify  that  the   term  "municipality"                                                              
includes cities and boroughs.                                                                                                   
                                                                                                                                
MR. MENEFEE answered correct.                                                                                                   
                                                                                                                                
CHAIR DYSON  asked if a qualified  citizen would get title  to the                                                              
land or just the improvements.                                                                                                  
                                                                                                                                
9:16:48 AM                                                                                                                    
MR.  MENEFEE answered  that a  qualified  individual may  purchase                                                              
the land  with improvements.  He noted  that the land  acquisition                                                              
would  not apply  to subsurface.  He added  that land  sold to  an                                                              
individual   will   be   decremented   from   the   municipality's                                                              
entitlement. He  specified that  an individual's land  is taxable,                                                              
but lease  revenue will  not exist  due to  the land purchase.  He                                                              
said  the   municipality   would  receive   the  money  from   the                                                              
individual's land purchase.                                                                                                     
                                                                                                                                
9:19:48 AM                                                                                                                    
SENATOR WIELECHOWSKI  asked how many properties would  be affected                                                              
by SB 106.                                                                                                                      
                                                                                                                                
MR. MENEFEE replied that currently there are 8 to 12.                                                                           
                                                                                                                                
SENATOR  WIELECHOWSKI  asked  what   specifically  occurs  when  a                                                              
municipality selects land that has a citizen with a business.                                                                   
                                                                                                                                
MR. MENEFEE answered  that the existing lease is  transferred to a                                                              
municipality  and  the lease's  terms  are honored.  He  specified                                                              
that lease renewal is strictly up to a municipality.                                                                            
                                                                                                                                
9:22:54 AM                                                                                                                    
CHAIR  DYSON  asked  what  happens   to  private  leaseholders  on                                                              
federal land  when a transfer occurs  to either a  municipality or                                                              
native corporation.                                                                                                             
                                                                                                                                
MR. MENEFEE  answered that  he is  not sure.  He assumed  that the                                                              
federal transaction  is similar in nature where  valid lease terms                                                              
are honored.                                                                                                                    
                                                                                                                                
9:24:31 AM                                                                                                                    
SENATOR  WIELECHOWSKI  noted  his  intent  to  address  unintended                                                              
consequences  of the  bill. He asked  if there  is any  likelihood                                                              
for people to  start leasing state land for  future noncompetitive                                                              
bid  possibilities  when  new  municipalities  may  be  formed  or                                                              
expanded.                                                                                                                       
                                                                                                                                
MR. MENEFEE  noted that  the qualifications  stipulated in  SB 106                                                              
makes Senator Wielechowski's scenario inconceivable.                                                                            
                                                                                                                                
CHAIR DYSON welcomed the testimony from two citizens.                                                                           
                                                                                                                                
9:26:52 AM                                                                                                                    
ROGER  BURGGRAF,  representing  self,  Fairbanks,  Alaska,  stated                                                              
that  he   supports  SB  106  as   a  means  of   protecting  many                                                              
individuals  and businesses  from  losing  developed property.  He                                                              
said in many  cases an individual's primary livelihood  and assets                                                              
have been tied  up into leased state properties  that were thought                                                              
to be secure.                                                                                                                   
                                                                                                                                
9:32:58 AM                                                                                                                    
MEL GILLIS,  representing himself,  Fairbanks, Alaska, said  he is                                                              
one  of the  eight or  ten that  Mr. Menefee  noted. He  explained                                                              
that  he has  a lodge  on  land that  was given  to  the Lake  and                                                              
Peninsula  Borough.  He revealed  that  he  has invested  over  $1                                                              
million  into  his leased  land.  He  asserted that  boroughs  are                                                              
specifically selecting  the best properties.  He said he  has been                                                              
guiding in Alaska  for 43 years and is just about  out of business                                                              
because of his leased  land situation. He declared  that SB 106 is                                                              
a good first step.                                                                                                              
                                                                                                                                
CHAIR DYSON  recalled that he had  spoken to Mr.  Gillis regarding                                                              
his lease situation.                                                                                                            
                                                                                                                                
MR. GILLIS answered correct.                                                                                                    
                                                                                                                                
CHAIR DYSON assumed  that an attempt was made to  see if there was                                                              
any way  to help  out people  like Mr.  Gillis and concluded  that                                                              
there was not.                                                                                                                  
                                                                                                                                
SENATOR MEYER  replied that SB 106  does not help Mr.  Gillis with                                                              
his  current  situation.  He  set  forth that  SB  106  will  help                                                              
individuals in the future.                                                                                                      
                                                                                                                                
9:36:24 AM                                                                                                                    
SENATOR WIELECHOWSKI asked if more than five acres is involved.                                                                 
                                                                                                                                
MR.  MENEFEE replied  that  SB  106 only  allows  for  up to  five                                                              
acres. He  added that  an applicant can  further negotiate  with a                                                              
municipality for additional land.                                                                                               
                                                                                                                                
SENATOR WIELECHOWSKI  asked what would  stop the DNR  from selling                                                              
the land right now as opposed to leasing.                                                                                       
                                                                                                                                
MR. MENEFEE explained  that statutes dictate that  only settlement                                                              
land may be sold.                                                                                                               
                                                                                                                                
CHAIR DYSON asked if DNR in favor of SB 106.                                                                                    
                                                                                                                                
MR. MENEFEE  replied  that the Administration  is  in favor  of SB
 in the revised version as it stands.                                                                                        
                                                                                                                                
CHAIR DYSON  commented that he appreciates  what seems to  be fair                                                              
consideration  the  state  is doing  in  protecting  Alaskans  and                                                              
landholders.                                                                                                                    
                                                                                                                                
9:40:44 AM                                                                                                                    
SENATOR  GIESSEL moved  CS for  SB 106,  labeled 28-LS0864\N  from                                                              
committee with zero fiscal note and individual recommendations.                                                                 
                                                                                                                                
9:41:00 AM                                                                                                                    
CHAIR  DYSON announced  that  without objection,  [CSSB  106(STA)]                                                              
moved out of the Senate State Affairs Standing Committee.