Legislature(1997 - 1998)
04/30/1997 08:07 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 178 ANCHORAGE OFFICE BUILDING
Testimony was heard from DUGAN PETTY, FORREST BROWNE,
BOB PARKS, DOUGLAS EXWORTHY, KEITH GERKEN and MITCH
GRAVO. SENATOR DONLEY MOVED Amendment #1. COCHAIR
PEARCE objected. Amendment #1 FAILED by a vote of 3 to
3. SENATOR DONLEY MOVED Amendment #2. COCHAIR SHARP
objected, then withdrew his objection. Without further
objection, Amendment #2 was ADOPTED. SENATOR DONLEY
MOVED Amendment #2. COCHAIR SHARP objected. Amendment
Amendment #4. Without objection, Amendment #4 was
ADOPTED. SENATOR PHILLIPS MOVED the bill from
committee with individual recommendations. Without
objection, CSSB 178(FIN) was REPORTED OUT with fiscal
notes from the Department of Revenue and the Department
of Administration (1823.0) and (<914.6>).
SENATE BILL NO. 178
"An Act giving notice of and approving a lease-purchase
agreement by the Department of Administration for an office
building in Anchorage; relating to the financing of the
lease-purchase agreement; and providing for an effective
date."
BOB PARKS, President, and DOUGLAS EXWORTHY, Executive Vice-
President, TRF Pacific, Inc., addressed the committee. MR.
PARKS explained that their company was one of two general
partners in the Frontier building. They intended to present
a proposal for a long-term lease for state occupancy in that
building. He noted they had not been asked to make a
proposal until a couple weeks ago by a member of the House
Finance Committee. He passed the proposal out to committee
members (copy on file) and explained the details.
MR. EXWORTHY asked that the Department of Administration
include certain factors in their analysis of comparison
between the purchase of the Bank of America building and
their long-term lease proposal. He further discussed areas
of concern regarding development, parking and risks inherent
in long-term ownership of real estate.
SENATOR PARNELL inquired about the time period of the
proposal and operating costs. He also asked about including
the value of existing leases. SENATOR PHILLIPS asked for
the department's response to the proposal. COCHAIR SHARP
expressed concern that it was a contingent proposal based on
approval of three additional lenders within a limited time
period.
DUGAN PETTY, Director, Division of General Services,
Department of Administration, had received the proposal at
the same time as committee members. He commended the
management of the Frontier building on behalf of the state.
He noted that the proposal had a smaller square footage and
a different method and length of control of the space. He
believed the Bank of America scenario compared more
favorably for the state than the proposal for the Frontier
building.
There was additional lengthy discussion between MR. PETTY,
COCHAIR PEARCE and SENATOR TORGERSON regarding details of
the pros and cons of the two buildings.
FORREST BROWNE, Debt Manager, Treasury Division, Department
of Revenue, was invited to joint the committee. COCHAIR
PEARCE asked him about falling interest rates with respect
to financing of the Bank of America building. MR. BROWNE
responded that they retain some flexibility to refinance,
but there would be a cost. He explained further. He had
recently reconfirmed the timing schedule with the lender,
noting that it was important. He was confident that
flexibility may be extended based on a showing of good
faith.
In response to a question from SENATOR DONLEY, MR. BROWNE
explained that they would have no authority to accept the
Frontier building proposal without special legislation.
SENATOR DONLEY MOVED Amendment #1. COCHAIR PEARCE objected.
SENATOR DONLEY explained that the amendment would require
the state to continue to pay property tax to communities for
existing buildings that they purchase. He noted that
Anchorage taxpayers would be paying the cost and subsidizing
the building. The amendment dealt only with purchase of
existing buildings.
SENATOR TORGERSON asked if the footage rented by the state
in the Frontier building was exempt from municipal taxation.
COCHAIR SHARP said it was not. MR. PETTY confirmed. There
was discussion about the fact that municipalities could
grant an exemption to taxation.
SENATOR DONLEY noted Amendment #1 would apply to all future
purchases.
A roll call vote was taken on the MOTION to adopt Amendment
IN FAVOR: Torgerson, Parnell, Donley
OPPOSED: Phillips, Pearce, Sharp
Amendment #1 FAILED by a vote of 3 to 3.
End SFC-97 #134, Side 1, Begin Side 2
SENATOR DONLEY MOVED Amendment #2. COCHAIR SHARP objected.
SENATOR DONLEY explained that there should be a guarantee of
public access to parking. There was additional discussion
between SENATORS DONLEY and PHILLIPS, COCHAIR PEARCE and MR.
PETTY about the issue of parking.
COCHAIR SHARP withdrew his objection. Without further
objection, Amendment #2 was ADOPTED.
SENATOR DONLEY MOVED Amendment #3. COCHAIR SHARP objected.
SENATOR DONLEY explained that the amendment dealt with
parking fees for lower salaried employees. SENATOR PARNELL
agreed with the concept but questioned how it would work.
He also questioned the impact and practicality. MR. PETTY
did not have the information before him to respond to the
question. COCHAIR PEARCE inquired if the state paid parking
for lower range employees of the court system.
KEITH GERKEN, Gerken and Associates, Juneau, explained that
there was no statewide policy. Some spaces were allocated
to judicial officers, others were on a first come, first
served basis. Some paid for their own parking by necessity
because of lack of spaces.
A roll call vote was taken on the MOTION to adopt Amendment
IN FAVOR: Donley
OPPOSED: Parnell, Phillips, Pearce, Sharp
Amendment #3 FAILED by a 1 to 4 vote.
SENATOR PHILLIPS noted a proposed letter of intent, stating
that he would rather have it added to the language of the
bill. It would protect people already in the building
regarding standard of maintenance and parking. MR. PETTY
spoke to the concerns, explaining that they would be bound
to the existing leases and would honor existing rights.
Additional discussion ensued among all members present at
the table regarding existing tenant leases.
SENATOR PHILLIPS MOVED the intent language as a conceptual
Amendment #4. Without objection, Amendment #4 was ADOPTED.
MITCH GRAVO, Lobbyist, Frontier Building Limited
Partnership, commented that the department negotiated a sole
source agreement to purchase the Bank of America building.
He asked if and when the commissioner had made a written
finding that the sole source negotiation was appropriate,
and if so, he requested a copy. MR. PETTY responded that
under AS 36.38.050, the acquisition of real property was not
subject to that type of determination.
SENATOR PHILLIPS MOVED the bill from committee with
individual recommendations.
SENATOR DONLEY objected for the purpose of further
discussion. He had concerns that the proposal was unfair to
Anchorage property taxpayers and suggested the state
continue to pay property tax on the building. MR. PETTY
responded that the state would continue to pay a portion of
property tax for private interests remaining in the
building, but would be exempt itself.
SENATOR PHILLIPS expressed similar concerns regarding
property tax as well as the sole source nature of the
contract in light of the new proposal.
SENATOR DONLEY withdrew his objection. There being no
further objection, CSSB 178(FIN) was REPORTED OUT with
fiscal notes from the Department of Revenue, and the
Department of Administration (1823.0) and (<914.6>).
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