Legislature(2003 - 2004)

05/16/2003 01:49 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 312                                                                                                            
                                                                                                                                
     An Act  giving notice  of and  approving the entry  into                                                                   
     and the issuance of certificates  of participation for a                                                                   
     lease-purchase agreement  for a seafood and  food safety                                                                   
     laboratory  facility;  relating to  the  use of  certain                                                                   
     investment  income for certain  construction costs;  and                                                                   
     providing for an effective date.                                                                                           
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  version  #23-                                                                   
GH1134\I,  Bannister,   5/15/03,  as   the  version   of  the                                                                   
legislation before the Committee.   There being NO OBJECTION,                                                                   
it was adopted.                                                                                                                 
                                                                                                                                
Co-Chair Williams explained that  the bill would conform with                                                                   
the version coming from the Senate side.                                                                                        
                                                                                                                                
ERNESTA  BALLARD, COMMISSIONER,  DEPARTMENT OF  ENVIRONMENTAL                                                                   
CONSERVATION, commented  that the Department  was responsible                                                                   
for  protecting  the  environment  and  human  health.    She                                                                   
testified  to the  importance of  the lab.   The seafood  and                                                                   
food safety lab  analyzes raw, finished and  value-added food                                                                   
products  for bacteria,  chemicals,  and toxic  contaminants,                                                                   
maintaining    the   capabilities    and   Food   and    Drug                                                                   
Administration   (FDA)  certifications   that  private   labs                                                                   
cannot.   The Department operates  on schedules that  are not                                                                   
available  from private  labs and  assumes greater  liability                                                                   
needed   to   perform  analysis   for   paralytic   shellfish                                                                   
poisoning.     The   Department   cooperates  with   emerging                                                                   
industry,  such as the  growing dive  fisheries to  guarantee                                                                   
time-critical  water and raw  product analysis are  available                                                                   
and market commitments are met.                                                                                                 
                                                                                                                                
Commissioner Ballard  continued, the Department  is qualified                                                                   
to train  and certify private  labs so that they  can operate                                                                   
in established and high-demand testing markets.                                                                                 
                                                                                                                                
The  Department   of  Environmental  Conservation   leased  a                                                                   
facility in Palmer  for 34 years.  The new  facility will not                                                                   
be  available until  after  2006.   The  current facility  is                                                                   
overcrowded,  not  fully  compliant  with  safety  codes  and                                                                   
laboratory  design standards.  That  facility was  originally                                                                   
placed  in  Palmer  when  the   principal  lab  business  was                                                                   
agriculture  and dairy.   The  emerging  value added  seafood                                                                   
industries  in  coastal  Alaska have  added  significant  and                                                                   
time-sensitive testing demands  for the Department's service.                                                                   
The  proposed new  lab will  be in  Anchorage where  valuable                                                                   
hours could  be saved between  sample collection  and testing                                                                   
for raw and live seafood products.                                                                                              
                                                                                                                                
Commissioner Ballard continued,  the laboratory functions are                                                                   
essential  to  protect  the  health of  all  Alaskans.    The                                                                   
Governor,  past legislatures,  and the  commissioners of  the                                                                   
Department of Revenue, Department  of Transportation & Public                                                                   
Facilities,  and  Department  of  Environmental  Conservation                                                                   
have   reviewed   the   design    specifications,   equipment                                                                   
requirements  and   expense.    Alternative   locations  were                                                                   
considered  and financing  mechanisms for  a modern  facility                                                                   
sized  and  equipped  for long-term  service  to  the  State.                                                                   
Careful  consideration  was  given   to  the  possibility  of                                                                   
locating  in  remodeled Alaska  Seafood  International  (ASI)                                                                   
facility  space  in Anchorage.    Requirements  would  occupy                                                                   
approximately 5% of that space.                                                                                                 
                                                                                                                                
The process  of acquiring a new  seafood and food  safety lab                                                                   
began  seven  years  ago  with  a  feasibility  study.    The                                                                   
Department received  an appropriation of $150,000,  to obtain                                                                   
an independent  evaluation of  both build and  lease options.                                                                   
The analysis showed that the most  economical choice would be                                                                   
a State owned  laboratory financed with  lease/purchase bonds                                                                   
known  as Certificates  of  Participation.   The  Legislature                                                                   
agreed and in 2001 appropriated  $1,300,000 dollars to design                                                                   
the  facility, a  conservative and  cost conscious  proposal.                                                                   
She  emphasized  that the  building  design,  specifications,                                                                   
space   allocations,  and   the  financing   plan  were   all                                                                   
conservative.  The building contains  only laboratory and lab                                                                   
support  space.   Meeting and  classroom  facilities will  be                                                                   
available in  the adjacent public  health lab.   The building                                                                   
materials were selected for low  and simple maintenance.  The                                                                   
design   and  materials   are  similar   to  those  used   in                                                                   
constructing the  public health lab, built several  years ago                                                                   
on schedule  and within budget.   Laboratory fee  charges for                                                                   
services are being reviewed.   They compare well to fees used                                                                   
in other states.                                                                                                                
                                                                                                                                
Representative  Stoltze  interjected  that  the  project  and                                                                   
building  facility  was  too  large  and  asked  about  other                                                                   
alternatives.                                                                                                                   
                                                                                                                                
JOHN   MACKINNON,   DEPUTY   COMMISSIONER,    DEPARTMENT   OF                                                                   
TRANSPORTATION   &   PUBLIC    FACILITIES,   responded   that                                                                   
consideration  had been discussed  regarding the  facility in                                                                   
the ASI building.   He noted that the building  was too large                                                                   
and that another building could  actually fit inside it.  The                                                                   
space requirements  for the  lab would  consume around  5% of                                                                   
the  total area  in  ASI and  that  there would  be  "serious                                                                   
compromises" made  by doing it, limiting the  ability of that                                                                   
building to be used for anything  else.  When considering the                                                                   
overall cost,  there would be  little savings made.   The API                                                                   
building  was  designed  as a  stand-alone  structure.    The                                                                   
redesign  costs would  be  well over  $900,000  and it  would                                                                   
require complete separate mechanical system & electrical.                                                                       
                                                                                                                                
Mr. MacKinnon acknowledged that  initially, it appeared to be                                                                   
a  good idea;  however, with  all  the information  gathered,                                                                   
there would not be a tremendous  amount of savings to be made                                                                   
if it were located in that space.   He added that this design                                                                   
process has  been on going for  many years and  attempting to                                                                   
accommodate these needs.                                                                                                        
                                                                                                                                
Representative Stoltze inquired  how many employees would the                                                                   
facility employ.   Commissioner Ballard responded  that there                                                                   
are 11 employees.                                                                                                               
                                                                                                                                
Co-Chair  Harris  understood what  the  Department  considers                                                                   
this to  be a  vital need to  move the  lab to Anchorage  and                                                                   
having closer access  to the airport.  He asked  if there had                                                                   
been  any attempt  to address  the City  of Palmer's  concern                                                                   
with the  possible move.   Commissioner  Ballard pointed  out                                                                   
that there are approximately 23  employees in the Valley area                                                                   
and  that only  11 would  be moved.   The  reason for  adding                                                                   
additional  staff  would  be particularly  for  the  drinking                                                                   
water certification.  Those needs  are growing as the State's                                                                   
population  expands.    All employees  would  remain  in  the                                                                   
Palmer area except the ones working in the laboratory.                                                                          
                                                                                                                                
Co-Chair  Harris questioned  why  such a  large facility  was                                                                   
needed.  Commissioner Ballard  explained that the utilization                                                                   
of the space would be about 50/50.   The portion used for the                                                                   
labatory testing activities versus  equipment space, requires                                                                   
a certain  amount  of isolation.   Using half  the space  for                                                                   
isolation  is  important to  protect  the integrity  of  that                                                                   
work.                                                                                                                           
                                                                                                                                
Co-Chair   Harris  asked   for   more  information   on   the                                                                   
certificate of  participation bonding and/or funding  for the                                                                   
project.                                                                                                                        
                                                                                                                                
TOM  BOUTIN,  DEPUTY  COMMISSIONER,  DEPARTMENT  OF  REVENUE,                                                                   
explained that  lease financing was a mechanism  of financing                                                                   
building  that  the  State  issues.    The  State  uses  that                                                                   
mechanism, as  do all other  states and municipalities.   The                                                                   
debt service is subject to annual  appropriation and for that                                                                   
reason, the credit  is normally rated much below  the general                                                                   
obligation (GO) rate of the issuer.                                                                                             
                                                                                                                                
Co-Chair  Harris  asked who  would  own  the building.    Mr.                                                                   
Boutin  responded  that a  feature  of a  lease-financing  or                                                                   
capital  lease is  that at  the end  of the  lease term,  the                                                                   
lessee owns the  building.  In a capital lease  as opposed to                                                                   
an operating  lease, the  lessee becomes  the owner.   During                                                                   
the lease term,  there is a trustee who has  an obligation on                                                                   
behalf of the bondholder to enter  and take over the facility                                                                   
on behalf of the best interest of the bondholders.                                                                              
                                                                                                                                
Representative Hawker  asked why the  State was in  this type                                                                   
business,  noting that  it appeared  to be  "out sourcing  of                                                                   
services",  which  should  be  left in  the  private  sector.                                                                   
Commissioner  Ballard  advised that  whenever  they can,  the                                                                   
State  gets out  of the  "testing"  business.   The State  no                                                                   
longer  does testing  of drinking  water.   The only  testing                                                                   
that  the  States  currently  does are  those  that  are  not                                                                   
available  through  private lavatories.    If  a private  lab                                                                   
sought the  certification, then  the State would  not compete                                                                   
with them.  She pointed out that  it is unlikely that private                                                                   
labs would  perform this type  testing as there  is generally                                                                   
not enough volume and it needs to be done on a 24/7.                                                                            
                                                                                                                                
Representative Hawker  inquired why the private  industry has                                                                   
not  expressed   interest  in   undertaking  this   activity.                                                                   
Commissioner Ballard  advised that  the fees that  would need                                                                   
to be charged, the schedule of  maintaining the equipment and                                                                   
the   rigorous  certification   requirements   would   simply                                                                   
preclude  the  investment  of  working  capital  for  private                                                                   
enterprise   for   performing   these   tests.      The   lab                                                                   
certification   requirements   certify   the   facility   and                                                                   
technicians.   The technicians  must be certified  to operate                                                                   
the new facility  and that they have to be  available.  There                                                                   
is  not a  large  enough market  in  Alaska  and that  market                                                                   
expects turn-around on its schedule.   The State provides the                                                                   
service  at the same  cost that  the industry  would find  in                                                                   
other states.                                                                                                                   
                                                                                                                                
Representative Hawker  argued that the State could  not do it                                                                   
cheaper.    Commissioner  Ballard disagreed.    She  reminded                                                                   
members that the  general fund subsidizes the  service in the                                                                   
way that it  subsidizes other public services,  considered to                                                                   
be in the interest of the State's citizens.                                                                                     
                                                                                                                                
Co-Chair Harris  asked again what  the general  "feeling" was                                                                   
currently in the  Palmer area regarding moving  the facility.                                                                   
Representative  Stoltze  observed that  it  was  viewed as  a                                                                   
"slap in the  face" to the agriculture industry.   He pointed                                                                   
out that he  does not represent that entire  "physical area",                                                                   
however, does represent the entire  valley.  He repeated that                                                                   
there is not a good feeling around the proposed change.                                                                         
                                                                                                                                
Co-Chair Williams remembered that  three years ago, a similar                                                                   
bill passed  from Committee  to undertake  basic design  work                                                                   
and that this concern had been  discussed during the last two                                                                   
legislative sessions.                                                                                                           
                                                                                                                                
Representative  Kerttula  noted  her  appreciation  that  the                                                                   
Department has  considered what  is happening in  Juneau with                                                                   
closure of the lab.  She hoped  that would make it easier for                                                                   
the employees and the University.                                                                                               
                                                                                                                                
ROGER PAINTER, ALASKA SHELLFISH  GROWERS ASSOCIATION, JUNEAU,                                                                   
testified in support of the bill.   He commented that the lab                                                                   
needs  a new  facility.   There  has  been  interest in  S.E.                                                                   
Alaska but  there is not enough  commerce related to  the lab                                                                   
to locate it in the Southeast  area.  He acknowledged that an                                                                   
Anchorage location would make the most sense.                                                                                   
                                                                                                                                
Mr.  Painter responded  to queries  regarding private  sector                                                                   
testing,  pointing out  that it  is easier  to go to  Seattle                                                                   
than to  get samples to  Palmer.  There  are no  private labs                                                                   
that can test marine samples and  no private labs anywhere in                                                                   
the  United States  that can  check  for paralytic  shellfish                                                                   
poisoning  or  other harmful  problems.   Assuming  that  the                                                                   
private sector  will step up  to contract for  these services                                                                   
is not an option.  He added that  in support of comments made                                                                   
by Commissioner  Ballard regarding fees, the  costs are below                                                                   
what would be paid to a private lab.                                                                                            
                                                                                                                                
Representative  Hawker noted  that he  was supportive  of the                                                                   
State's mari-culture activities.   He asked if there were any                                                                   
alternative  facilities  for  that  type  of  testing.    Mr.                                                                   
Painter  replied that  there is  not for  either the  growing                                                                   
water  certification or  for paralytic  shellfish  poisoning.                                                                   
He noted  that Washington  State is  the largest producer  of                                                                   
oysters  and clams  and that  he  had contacted  all labs  in                                                                   
Seattle, finding no testers.                                                                                                    
                                                                                                                                
Representative Hawker  asked if this type testing  was unique                                                                   
to  Alaska.   Mr.  Painter  replied  that these  are  federal                                                                   
requirements and  that the State must comply  with those laws                                                                   
in order  to participate in  interstate commerce.   Providing                                                                   
public health protection is an important service.                                                                               
                                                                                                                                
Representative   Hawker   asked   if   there   were   federal                                                                   
regulations in place in the Pacific  Northwest, then why were                                                                   
the services not  available.  Mr. Painter explained  that the                                                                   
State of Washington  does provide testing services  and has a                                                                   
somewhat  different  testing  program in  that  they  certify                                                                   
large areas,  which is  more cost  effective than working  on                                                                   
the  issues in  Alaska  where everything  is  remote and  the                                                                   
farms  are  separated.    The   Department  of  Environmental                                                                   
Conservation  is working  in  those areas  where  there is  a                                                                   
concentration of farms in order to certify larger areas.                                                                        
                                                                                                                                
KRISTIN RILIN,  DIRECTOR, DIVISION  OF ENVIRONMENTAL  HEALTH,                                                                   
DEPARTMENT  OF  ENVIRONMENTAL  CONSERVATION, added  that  the                                                                   
Federal Drug  Administration (FDA) certifies  laboratories to                                                                   
perform  the  testing.    Paralytic  shellfish  poison  is  a                                                                   
dangerous toxin and  is heavily regulated.   Because of that,                                                                   
private lavatories are not interested in the liability.                                                                         
                                                                                                                                
Representative  Foster   asked  how  the  costs   were  being                                                                   
determined.  Ms. Rilin replied  that the costs were not based                                                                   
on the costs of  running the tests.  She added  that the fees                                                                   
would need to  change to meet the operating  costs associated                                                                   
with the laboratory.                                                                                                            
                                                                                                                                
HB 312 was HELD in Committee for further consideration.                                                                         
                                                                                                                                
                                                                                                                                
TAPE HFC 03 - 97, Side B                                                                                                      
                                                                                                                                

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