Legislature(1997 - 1998)
02/11/1998 01:45 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 159
"An Act relating to the new business incentive
program."
SENATOR DRUE PEARCE spoke to the point that SB 159 would
create a new business incentive and economic development
program targeted at companies locating or expanding into
manufacturing businesses in Alaska. The program is
designed to attract substantial business with high value
and year round jobs.
The grant program would be limited to reimbursement of
defined portions of relocation costs, site development
costs, special employee training not covered by other
programs, and special analysis of sites in Alaska. The
program is limited to $3 million dollars annually and all
unallocated funds would be returned to the General Fund.
Allocations would be made each year to fund the program and
would be administered by the Department of Commerce and
Economic Development (DCED).
Senator Pearce continued, the New Business Incentive
Program will target three essential functions:
1. A need to generate cargo and freight exports from
Alaska.
2. A need for more diversity in the corporate tax
base.
3. High value jobs for Alaskans.
Senator Pearce noted that the proposal had been initially
presented by the Anchorage Economic Development Corporation
(AEDC) and has been embraced by the other Alaska Regional
Development Corporation (ARDOR) in the State. She
interjected that it is not unusual for any state to provide
this type of incentive program.
Co-Chair Therriault referenced the business feasibility and
analysis study, pointing out that a business would not be
reimbursed for costs unless they actually went forward in
manufacturing. He inquired that if the business went
bankrupt, would the State continue to be secure. Senator
Pearce was not clear on how the Department of Commerce and
Economic Development would create the security aspect. She
advised that at least 75% of the United States currently,
use such incentive programs.
Representative J. Davies referenced Page 1, Line 14, and
Page 3, Line 1, language that indicates that the business
requires continued operation to receive funding. Senator
Pearce agreed that the costs would be reimbursable only
after the business was in operation. She stated that she
would not oppose some sort of alternative clarification to
Page 1, Line 14, as long as the new language could
guarantee to assure the grant work.
Representative Grussendorf inquired if new business
established in the proposed legislation would compete with
already existing State business. Senator Pearce replied
that the program targets mainly manufacturing done in the
State for export. At present time, there is very little
manufacturing occurring in Alaska. The program will act as
an enticement for manufacturing and fabricating plants.
She stressed the amount of interest and support for the
bill.
Representative G. Davis asked when the "five years of
operation" specification would begin - at the time of the
contract or at the time of production. Senator Pearce
acknowledged the concern. She suggested that issue could
lend itself to a House Finance Committee Letter of Intent
directing the Department of Commerce and Economic
Development (DECD) when writing the regulations to specify
that production would have had to occur.
ERNIE HALL, CHAIRMAN OF THE BOARD, ANCHORAGE ECONOMIC
DEVELOPMENT CORPORATION (AEDC), ANCHORAGE, noted that he
was the owner of a small furniture manufacturing company in
Anchorage. AEDC has the responsibility for growing an
economic base in the State. Alaska generates about $140
million dollars a year in corporate taxes. Of that, eleven
corporations, pay $110 million dollars, six of which are
oil corporations. He stressed the need to broaden the
economy base in the State given the declining oil revenues.
The State must diversify. The question that any
manufacturing corporation will ask is what are the
incentives Alaska has to offer. He stressed that passage
of the proposed legislation would be an asset to the entire
State.
DONNA TOLLMAN, (TESTIFIED VIA TELECONFERENCE), GLENNALLEN,
spoke in support of passage of SB 159. She suggested that
it would be instrumental in providing a "level playing
field" for Alaska when competing with other states inticing
new manufactures.
KEITH LAUFER, (TESTIFIED VIA TELECONFERENCE), ALASKA
INDUSTRIAL DEVELOPMENT EXPORT AUTHORITY (AIDEA), ANCHORAGE,
expressed AIDEA's support for SB 159. AIDEA believes that
the legislation could be an important tool for attracting
new business to Alaska. The bill provides a role for AIDEA
to review applications on the objective standards.
Representative J. Davies asked if the Committee would be
writing a Letter of Intent. Co-Chair Therriault suggested
that the "grant provisions" could be clarified by changing
language on Page 3, Line 1, inserting after "must" the
language "be operating and". Senator Pearce supported the
addition of that language.
Co-Chair Therriault MOVED that conceptual language as
Amendment #1. There being NO OBJECTION, it was adopted.
Representative J. Davies asked why the bill required that a
business be engaged in exporting outside the State rather
than just "manufacturing". Senator Pearce replied that
language would alleviate the concern that business' would
not compete with small business' already established. She
added, the intent of the legislation is to create a
business in Alaska of materials that are for export,
providing for greater cargo and freight needs. Anchorage
is an economic crossroad and the International Airport is a
primary economic driver. Cargo and freight seriously
impact that consideration and the original intent is to
help build on that aspect.
Co-Chair Therriault pointed out that there has been concern
expressed that Alaska ships out a lot of our raw and
organic resources to be processed outside of the State to
supply the rest of the world with product. He suggested
that business in Alaska should be encouraged to process the
natural resources.
Representative J. Davies concurred, questioning why the
legislation does not encourage creation of new business
engaged in manufacturing inside the State. Senator Pearce
explained that her intent was to limit the amount of
dollars spent on the program. As the focus is expanded, so
is the cost. She felt that SB 159 would not be the proper
vehicle to provide that incentive.
Representative J. Davies stated that he was not speaking
about services, but instead about manufacturing. There
have been a number of businesses' which have proposed to
open up small scale manufacturing forest products. He
pointed out that those businesses would not be eligible for
funding from the proposed program.
PATTY DEMARCO, PRESIDENT, ANCHORAGE ECONOMIC DEVLEOPMENT
CORPORATION (AEDC), ANCHORAGE, acknowledged Representative
Davies concern, although pointed out that the focus of the
proposed legislation is to find ways to bring revenue into
the State through manufacturing. AEDC is looking for ways
to incentify small companies to expand their operation for
exporting. She felt that the program has provoked people
to consider how value could be added so that Alaska can
reach a world market. The market would create higher value
jobs and production with a broad base of primary functions
in the State.
Representative J. Davies reiterated why eliminate the
privilege of manufacturing with the intent to keep it in
the Alaska market. Representative Moses pointed out that
the State has a great need for value added processing. He
urged consideration of that concern. Senator Pearce
pointed out that the bill would allow for incentives for
business' doing that in Alaska and then expanding into the
export market. The intent of the program is not to start
new businesses in Alaska just for Alaskans. The point is
to bring in more revenues by bringing in business from
outside and providing export privileges.
Co-Chair Therriault noted that the legislation was
permissive. It would allow money to be set aside into a
fund. The appropriation would have to be a yearly
appropriation and the unexpended funds would lapse at the
end of each fiscal year. The proposed fiscal note is zero;
a specific appropriation would be requested yearly. Co-
Chair Hanley commented that the way the appropriation had
been established would limit the way the program was set
up. Senator Pearce replied that there are many senators
sensitive about adding fiscal notes to legislation,
consequently, SB 159 has been submitted with zero fiscal
notes. She anticipated that the Legislature could
appropriate required funding and provide for carry forward.
Representative Kohring asked why the bill provided grant
funding rather than low interest rate money. Senator
Pearce explained that it is essential that Alaska be
competitive with other States. Elsewhere, states and local
governments are making huge tax concessions and they are
willing to build the infrastructure to bring high value
jobs to their communities. It is important that Alaska is
involved with a similar effort.
Co-Chair Hanley MOVED to report HCS CS SB 159 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it
was so ordered.
HCS CS SB 159 (FIN) was reported out of Committee with a
"do pass" recommendation and with two zero fiscal notes by
the Department of Commerce and Economic Development dated
1/23/98.
(Tape Change HFC 98-27, Side 2).
| Document Name | Date/Time | Subjects |
|---|