Legislature(2003 - 2004)
03/31/2004 01:47 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 319
An Act relating to the disposal of state land by
lottery; and relating to the disposal, including sale
or lease, of remote recreational cabin sites.
REPRESENTATIVE HUGH FATE pointed out that there was an
amendment to HB 319 regarding the contractual language at
the last hearing. The amendment has been replaced by a new
work draft.
Representative Fate MOVED to ADOPT Work Draft Version V
dated 3-30-04. Co-Chair Harris OBJECTED for purposes of
discussion.
Co-Chair Harris asked if Version V incorporates the
amendment and whether there are other changes.
Representative Fate explained that the language has been
changed to reflect the penalty for a lawsuit outside the
parameters of the statute. The penalties have been changed
from 150% of the appraised value to 100% of appraised value
in the proposed Committee Substitute. He noted that Legal
also changed other language in the bill.
JIM POUND, STAFF TO REPRESENTATIVE FATE, observed that
members should have the blank CS, Work Draft Version V, and
a page explaining the changes between the Resources
Committee Substitute and new CS. He explained that the
sponsor initially intended to drop all the contractual
language in Sections 2 and 3 but had since decided to retain
it. The CS brings the legal language up to current
standards. It also changes the appraised value, giving
latitude to the Department of Natural Resources (DNR) and
the Commissioner to determine a penalty not to exceed 100%
of the appraised value of the property. This language would
go into a purchase agreement between DNR and the buyer, and
the intent of keeping it in the bill is to avoid confusion
by the buyer on the question of obligation.
Co-Chair Harris withdrew his objection. Work Draft Version
V was adopted.
Representative Croft questioned the language at the bottom
of page 2 and the top page 3. He asked if Representative
Fate reads "an immediate assessment against the owner of a
penalty that may equal the current appraised value" as
saying that [the penalty] can't exceed. Mr. Pound answered
that there is supporting statutory language in Section 3 on
page 3, line 9, stating "the amount of the penalty, which
may not exceed the appraised value of the land."
Representative Croft felt it was awkward language in Section
2 and asked if Sections 2 and 3 refer to and supplement each
other. Mr. Pound affirmed.
Representative Croft asked if the language meant that if
there was an effort to develop coal bed methane on cabin
land that he had bought, and he objected and filed for
relief, the Department could assess him the entire value of
his land plus improvements. Mr. Pound replied that is
correct, and the language would be put into the contract so
that the buyer would be aware of it. Representative Croft
asked for clarification that it would result in immediate
assessment, so there is no discretion except for the amount
of the fine. Mr. Pound replied that is correct.
Representative Stoltze expressed that he still had some
concerns about the bill. He asked for clarification of the
filing a claim for relief, and if it would take away the
right to due process. Mr. Pound was unable to answer.
Representative Stoltze yielded to wait for response to his
question.
Co-Chair Harris acknowledged that the State has subsurface
rights that are protected. He questioned how the language in
Section 2 (on page 2, lines 27 through page 3, line 3) would
make private property owners feel comfortable or have any
protection to enjoy their property if a developer [wanted
the subsurface minerals] and the state offered leases to the
developer. Co-Chair Harris said he was concerned about it
because the coal bed methane development in the Mat-Su
Valley is occurring near a fairly populated area and is a
private property issue.
Representative Fate replied that this bill gives the
Commissioner the responsibility of delineating areas for
nomination that are within limits. The areas that are off
limits include lands with high mineral potential, or areas
that have been, or are earmarked to be, withdrawn. He
thought that the prospect of mineral development happening
is limited. The language on page 2, lines 29-30, provides
for redress for any physical damage on the property. He
asked how to address the intangibles of drilling or noise
pollution. He noted that people have sued on those bases,
and the plaintiffs have usually lost the cases but it has
cost the defendants a lot of money. He said that the bill
doesn't curtail, but it does limit, that possibility.
Representative Fate continued, pointing out that if it is a
site on a lake, it doesn't exclude the Commissioner from
deciding to develop it in the buffer area of 660 feet over
which the State has jurisdiction. The bill includes
safeguards on the existing and prospective uses of the land.
Representative Stoltze stated that the property rights issue
has been top priority this session, and he lauded the
efforts of Representative Fate to try to make more land
available.
Representative Croft understood that noise would be
excluded, and he asked if the owner could complain about
groundwater contamination or the subsurface water on his
site without incurring the penalty. Representative Fate was
unable to respond. Representative Croft said he would ask
Legal.
Representative Croft withdrew his objection to the Work
Draft Version V.
BOB LOEFFLER, DIRECTOR, DIVISION OF MINING LAND AND WATER,
DEPARTMENT OF NATURAL RESOURCES, stated he would do an
overview of the current land disposal program and the remote
recreation cabin program. He explained that land disposal
began with the passage of SB 283 in 2000, which passed with
some new funding. The department was given specific
performance measures to put all the inventory of land
disposal parcels on the market until they sell; to start a
new subdivision program of at least 100 lots a year; and
start the remote recreation cabin program in FY 02. In the
first year, there were 2400 re-offered parcels, with an
additional 1900 in the second year.
Representative Croft asked if "subdivision" means platted
lots that are next to each other. Mr. Loeffler affirmed,
and said that the parcels have been surveyed. In response
to a question by Representative Croft, he explained "re-
offered" means a parcel that came back to DNR. In the 1980s
during the huge land sale program, most parcels never sold
and there was a 50-60% default rate on the programs.
Mr. Loeffler continued, explaining that the performance goal
was 250 offerings each year. The Department is drawing down
the inventory of parcels available, and not replenishing
them with new subdivisions as fast as it is selling the
parcels.
Mr. Loeffler referred to a chart, "Economics of Land
Disposal." The first remote subdivision under SB 283 is
completed this year, and the first recreational cabin
program was in FY 02; the parcels were staked but only now
are being purchased. The chart shows 2000 re-offers at $13-
43 dollars an acre, and it makes a lot of money for the
Department. The DNR does a limited title search. A pre-
surveyed parcel in a new subdivision costs $750 an acre
minimum, not including roads, which takes two years with
most of the time and cost in the survey. Remotes cost a lot
less, at $250-350/acre, because the applicant pays for the
survey and appraisal. Mr. Loeffler said that it can be done
in a year but it typically takes longer, with staking during
the first year, surveying during the second year, and
appraisal during the third year. It takes two additional
years before DNR receives real income from it.
Representative Croft asked if the Department does a regional
best interest finding for remote parcels. Mr. Loeffler
replied that DNR does sub-regions of an area, with a batch
of 30-60 parcels in one area. The same is true for
subdivisions.
Mr. Loeffler discussed a chart titled "Re-Offer" that shows
2816 parcels, totaling 21,839 acres available today. He
noted there are program innovations including acceptance of
credit cards, personal checks, cash, and payments by mail,
in person, or over the Internet.
Mr. Loeffler showed charts of re-offered parcels around
Fairbanks, Mat-Su and Southcentral with detail around
Talkeetna.
Mr. Loeffler explained that the supply is land-classified
settlements. On the Mat-Su map, the demand area includes
swamp. In some areas of the state with a lot of demand, DNR
has a lot of potential supply. In general, DNR is the fourth
best place to look for land after the Mental Health Trust,
the University, and Municipal Entitlements have rejected the
land and it becomes classified settlement. In Fairbanks
there is a lot of supply, but not at much in other areas.
Mr. Loeffler referred to the subdivision or "Pre-Survey
Program." In SB 283, the DNR was required to do over 100 per
year. The increment in this year's budget is an increase to
300 lots per year, which would help replenish the supply.
He explained that costs average $3400 for a 3-acre parcel,
but range to an unusual 40-acre parcel costing $201
thousand. The size range is from 3 to 40 acres with the
average at 7 acres. The platting board requirements now
include roads. The Department ensures that the value of the
land with roads will more than pay back the cost of the
roads. This year the DNR expects a 10-12% internal rate of
return, after not selling all the parcels and with some
defaults. The subdivision challenge is to find good quality,
profitable land with roads that meets platting board
requirements. The cost of $750 per acre is for the title
search, platting board approval, and public assistance and
contract administration.
Mr. Loeffler discussed SB 283 and the "Remote Recreational
Cabin Program." The Department offers over 250 parcels a
year. He pointed out that there is a significant reduction
between the authorizations that people take and the actual
parcels leased. He explained that this is due to people
realizing, once they're on the land, that it is more
difficult than they had expected, and not following through.
The average acreage is 13.6, and the average value over the
first two years is estimated at $620 per acre after taking
out survey costs, which the applicant pays.
Mr. Loeffler described the program innovations that include
putting the cost up front with a key parcel appraisal. The
Department does 30-40 parcels in an area to come up with a
hypothetical parcel to show the public the costs, and the
additional costs for lake frontage. The DNR requires a
quarterly deposit for an appraisal survey, and contracts out
in batches, with the result of getting the work done, which
people don't do themselves. He concluded that this works
well, but the challenges are to increase the follow-through
rate and getting untaken parcels to market.
Mr. Loeffler illustrated the staking patterns in the Yentna
Remote, which tend to be in family groups, the access points
of airstrips or trails, and around water frontage. The
Department must reserve easements along public waters and
trails.
Mr. Loeffler concluded that the Department's challenge is to
"ratchet up" the program.
Representative Fate asked Mr. Loeffler to describe the
procedure of staking a remote cabin site. Mr. Loeffler
answered that the Department opens a particular area, and
the public can stake anywhere within it, subject to the
guidelines.
Representative Fate noted a difference in the value per
parcel between his historical data and that of the
Department. He said that the $627 figure, with a multiplier
of 1.14, brought the level up to $750-900 in today's value.
He also asked if the average price today is $1400 per acre.
MS. NANCY WELCH, SPECIAL ASSISTANT, DEPARTMENT OF NATURAL
RESOURCES, replied that the Department projected $900 per
acre in the fiscal note. She clarified that Mr. Loeffler has
been giving historical data and some of the costs do not
necessarily compare to the fiscal note because it is based
on individual processing. The Personal Services cost would
be about $245 thousand to do 150 parcels under the proposed
program in HB 319 [Ms. Welch referred to the fiscal note
dated 3-15-04].
Representative Fate asked if the fee simple program has the
same surface right restrictions and problems that have been
brought up. Ms. Welch said that the buyer would have the
same rights of ownership as in any other DNR land sale
program.
Ms. Welch commented that the Department is working through
the coal bed methane issue in the Mat-Su area and it may be
premature to comment on it. It has held public meetings and
it is working on standards to make coal bed methane
compatible with existing uses.
Representative Foster noted that during the mid-1980s and
early 1990s offerings north of Nome were cancelled, and he
wondered if there would be offerings on the Seward Peninsula
in the next five to ten years. Mr. Loeffler replied that if
it's classified settlement, the Department is anxious to go
there. Ms. Welch advised that a lot of those lands still
have the municipal entitlement provision that the Department
must resolve first before it can sell lands in the Seward
Peninsula area.
Co-Chair Williams asked what bill would do to the existing
land disposal program. Ms. Welch replied that Commissioner
Irwin has two areas of concern with the bill. The first is
fairness to all Alaskans, and the bill implies a first right
of refusal to some who nominate the parcels. It is not
genuinely offering it to every Alaskan. The second concern
is that all the efficiencies gained in the past three or
five years, particularly with the inception of the Land
Disposal Fund, would be lost because of HB 319. A
significant figure in the fiscal note is the cost of
individual processing because the DNR couldn't do batch
processing. The fiscal note also reflects a change in the
type of staff, because technicians cannot do decision-making
for the State on best interest findings. There are also
technical issues, including limitations in the bill on
spacing requirements and size, resulting in a different
staking pattern. She said that the revenue stream for a
disposal like Yentna would be significantly lower, and the
staking pattern would be significantly different.
Ms. Welch concluded that this bill amends the Department's
existing program because it is in the same statute.
Ms. Welch explained that DNR hadn't done an analysis of Work
Draft Version V, Section 2 but she guessed if it went
through the judicial system, the court would make the
decision. If it went through administratively, it could
take the form of an appeal or a complaint. The Department
would have to write regulations.
Representative Croft referred back to Ms. Welch's
interchange with Representative Fate that concluded there
would be the same problems of any other surface owner. He
asked if this penalty language is in the statutes. Ms.
Welch replied negative, this is new generic, reservation to
the State, language. Offering remote recreation land does
not remove the conflict between surface and subsurface uses.
Representative Croft asked if Sections 2 and 3 apply to all
of the State land sales, not just remote cabin sites. Ms.
Welch noted the language on page 2, lines 2-5 and said that
these provisions apply to all of the DNR land sales.
Representative Croft asked what is left out. Ms. Welch
replied that conveyances to municipalities under Title 29
are omitted.
Representative Croft asked how this program used to work and
how it would work under this bill. Ms. Welch said she had
not done an analysis. Co-Chair Williams asked her to do an
analysis for the next hearing on the bill.
TAPE HFC 04 - 72, Side B
Representative Fate commented that the rest of the disposal
program by lottery or subdivision is a completely different
concept than when this bill was formulated four years ago,
to allow people to choose areas which are open. The lottery
is not successful with more than 40% and the rest is turned
over for resale. There are about 2200 parcels available for
people wanting land. The fiscal note is based on the lowest
per acre cost to show that the state, and the people, will
be benefactors.
MRYL THOMPSON, REPRESENTING SELF, MATANUSKA-SUSITNA VALLEY,
stated that he is a land developer, but he hasn't been able
to develop his properties during last 8 months because all
of it has been leased by the coal bed methane (CBM)
industry. He reviewed the remote land bill, which "floored"
him when he saw the huge exemption for the gas extraction
industry. He expressed that Work Draft Version V is even
worse than the previous version. He said that he has not
even considered buying another piece of land, especially
leased land. He thought that because of the CBM issues,
people who just eight months ago would have had no problem
buying remote land or a cabin now wouldn't even consider it.
He noted that studies out of Colorado showed land values
dropped by 20% with extraction taking place. A decrease in
value would make these parcels less attractive. He felt
that it is not right or fair to say that the owner has no
right to complain on land that he bought.
Mr. Thompson expressed that Sections 2 And 3 are "totally
egregious," and he asked, if the system isn't really broken,
why do we need to fix it with this bill.
HB 319 WAS HEARD AND HELD in Committee for further
consideration.
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