Legislature(2007 - 2008)HOUSE FINANCE 519
03/19/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB418 | |
| HB396 | |
| HB419 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 396 | TELECONFERENCED | |
| *+ | HB 419 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 418 | TELECONFERENCED | |
1:47:05 PM HOUSE BILL NO. 418 An Act providing notice of and authorization for the Department of Administration to enter into a lease- purchase agreement for the construction, the purchase of equipment, and the financing of a fish hatchery in Anchorage to be operated by the Department of Fish and Game; relating to the issuance of certificates of participation for the fish hatchery; authorizing payments for the lease-purchase agreement from sport fishing facility license surcharge fees; relating to capital lease financing of sport fishing facilities; and providing for an effective date. 1:47:29 PM DEVEN MITCHELL, DEBT MANAGER, ALASKA MUNICIPAL BOND BANK AUTHORITY, DEPARTMENT OF REVENUE, inquired if the Committee preferred to hear testimony on the project or the financing first. Co-Chair Meyer requested the project be identified. CHARLIE SWANTON, DIRECTOR, DIVISION OF SPORT FISH, DEPARTMENT OF FISH AND GAME, explained that the project proposes building a hatchery in Anchorage for the purposes of producing resident species as well as anadromous fish. The fish would be distributed throughout Southcentral Alaska as well as provide brute stock for the Interior hatchery. Mr. Swanton pointed out that in 2004, the Division managed hatcheries largely located on military bases. In that year, the military decided to decommission their power plants. Those facilities are "vintage", built in the 1970's and now, well beyond their construction life. The intent of the bill is replace the Anchorage facility with a 146,000 square foot facility, located on Elmendorf Air Force Base, which will allow the State to produce fish for the programs for the next 20-30 years. The original cost estimate was $45 million dollars and the estimate received in March 2008 was $100 million dollars, including the construction, design and site preparation work as well as the associated legal and administrative fees. 1:50:16 PM Vice-Chair Stoltze applauded the effort. He worried about the policy passing through the House Special Committee on Commercial Fisheries because of over-escapement issues. He asked if there was too much salmon escapement in the Southcentral streams. Mr. Swanton explained there are six species of salmon; he asked for further refinement of the questioned species. He agreed there has been production and yield escapement and that over-escapement has been identified with Kenai sockeye. 1:52:58 PM Co-Chair Chenault questioned the $100 million dollar estimated Anchorage hatchery costs and asked the anticipated costs associated with the Fairbanks hatchery. Mr. Swanton replied $45.6 million dollars and that a surcharge will pay the bond debt. Co-Chair Chenault acknowledged how essential hatcheries are throughout the State. He mentioned that a hatchery in Kenai had to be shut down resulting from spawning fish in federal waters. He indicated concern with the proposed amount for the State in obligating for the proposed expenditures. 1:55:16 PM Co-Chair Meyer inquired why expenses had so dramatically increased and understood there is not adequate funding for both proposals. He said that both Anchorage and Fairbanks hatchery proposals are in a "mess together". He inquired if the Department would recommend a Governor's veto for the supplemental language. 1:56:21 PM Mr. Swanton addressed the concerns. Originally, when the hatchery issue first surfaced, there was not an available site for the Fairbanks hatchery. A design is usually developed on a selected site. The original numbers submitted were confusing. The $25 million dollar number was in fact for construction alone. The buildings are very complex to build and if something goes wrong, an entire year of production could be lost. He identified increases to construction costs. The refinements on the estimates are good. Co-Chair Meyer was concerned that the Anchorage hatchery would be dependant on a Certificate of Participation (COP) approval, making the project based on selling fishing licenses in Southeast Alaska to subsidize it. He wanted to see that the supplemental split the request, encouraging Fairbanks and Anchorage to work together for COP funding. He maintained that was not fair. 1:58:36 PM Mr. Mitchell proposed a potential solution to amend the proposed legislation to include Fairbanks as a participant in the transaction and allocate costs to accomplish both projects. One concern regarding the Fairbanks proposal is that they are further along in the design process and now are ready to assume bids for construction. 2:00:46 PM Co-Chair Meyer inquired the status for funding the Fairbanks project. Mr. Swanton noted that the bids for construction had already gone out for the reimbursable service agreements (RSA) and will be opened in early April 2008. He noted the Fairbanks facility is on schedule. 2:02:07 PM Mr. Mitchell addressed financing aspects of the legislation. He noted that the surcharge on sport fishing license sales was implemented in 2006, creating a revenue stream bonds and supported by that revenue. In order to achieve the needed ratings, the State required a restrictive bond test to secure the revenue stream. As a result of and with the outstanding debt, there are limitations on how much more capital can be raised from that finite revenue stream. Mr. Mitchell was comfortable with about $45 million dollars as an achievable figure without General Fund support. That would involve backend loading and the use of capital appreciation bonds and being more creative and perhaps suffering on the rating side & interest rate. As an alternative, the COP options were introduced. The General Fund would become the backstop for the bonds and use the surcharge to pay a portion of the debt service on simple permanent bases to the outstanding bonds. Mr. Mitchell pointed out that the fiscal note does not indicate issuing capital appreciation bonds, but rather shows the benefits of the current interest bonds, using some General Fund support at least through 2026 to support the obligations. If fishing license revenues from the surcharge continue to grow, the amount would diminish over time. The structure extends the surcharge by 15-17 years. Contemplating the structure is a large commitment. He noted the structure is marketable. 2:05:17 PM Co-Chair Meyer thought that the length could be shortened by adding more cash. Mr. Mitchell responded that the legislature could come up with General Fund monies that could be appropriated to the projects or direct the Administration to administer the Capital Appreciation Bonds (CAB) with a shorter life. 2:06:08 PM Representative Crawford asked about specifics of the bonds. Mr. Mitchell explained that CAB bonds are otherwise referred to as zero coupon bonds, paying no interest expense until the bonds mature. The earnings would correlate to an annualized interest rate. 2:07:01 PM Representative Thomas remembered when Senator Seakins introduced a similar bill. He commented that he represents a long district that has many hatcheries. He pointed out that Southeast Alaska would be paying 25% of the sport licenses and receiving nothing back and then paying for hatcheries in Anchorage and Fairbanks. Mr. Swanton advised that the total request of the Administration is $146 million dollars. Representative Thomas argued that Southeast sells 25% of the permits and maintained that the requests are not "fair or equitable" as the Governor proposes her Administration to be. He said he would only support the bill if Southeast hatcheries were included. 2:10:04 PM Representative Thomas asked if it was intended to displace Kings and Coho's in the Whittier area. Mr. Swanton did not know the specifics. There have been modifications to where fish are provided, yet did not know about displacement. Representative Thomas pointed out past federal efforts to shut down military bases and asked what would happen if Elmendorf was closed. Mr. Swanton explained the current plan to use the Elmendorf Air Force is isolated from the base proper; however, it is on federal land. The former facilities were not on a public access road which was problematic; that has been addressed by rerouting it. Representative Thomas referenced the DiPac Hatchery, pointing out that most of the funding comes from cost recovery of a chum release in Amalga Harbor. He wanted to see some of the dollars used to pay off sport-fish hatchery activity. He emphasized that Southeast should be supported. He noted he had hoped to add an amendment to the bill but that it was impossible the way it is written; consequently, he would oppose it. 2:13:06 PM Representative Hawker referenced the COP vehicle; he asked why the Administration had not requested General Obligation (GO) bond funding if it was determined that it was the will of the people to support the projects. Mr. Mitchell acknowledged that it could be funded through GO bonds, however, there is a timing issue associated with the project, lending urgency. He added that stand-alone facilities lend themselves to COP type funding. 2:14:46 PM Representative Hawker wondered if the request was unrealistic. Mr. Swanton characterized the request as moderate, pointing out that the costs associated with the building are complex, structured with tanks, pumps, & back- up systems. It will be a production facility. He advised that the Fairbanks facility had been scaled back. The purpose is to efficiently produce fish. There are additional costs associated with the design work. He defended the costs of the project. Representative Hawker requested objective testimony regarding the facts. Mr. Swanton did not have any available, but offered to research it for the Committee. 2:17:35 PM Vice-Chair Stoltze wanted to see more fish in the Southcentral streams but was not sure that HB 418 was the correct vehicle to achieve that. He worried about the costs and commented on buy-back programs. Mr. Swanton explained that the facility would produce about half the resident species for stocking streams, lakes and impoundments and of which, 140 are located in the Interior, 82 in Mat-Su and a smattering up and down the Kenai Peninsula. The other production component is the anadromous, which are primarily King and Coho and what the facility production is intended for. It should satisfy the location demands for particular species. He added that the language of the bill is broader regarding angler opportunity. Vice-Chair Stoltze noted that he had received a lot of mail regarding the deficiency of Alaska salmon availability. He did not understand the motives for the bill and asked if he misread the needs of Southcentral and public pressure. 2:22:51 PM Mr. Swanton interjected that he had not indicated that lake trout would be the primary species released. He stipulated that he had referenced rainbow trout and Dali Varden as the primary large volume fish. Vice-Chair Stoltze said he had been generically referring to lake fish & apologized. Mr. Swanton guaranteed that without the hatchery production, there would be less sport fishing opportunities in and around Cook Inlet and cannot be expanded without a production facility. Vice-Chair Stoltze offered to ask the Commissioner about the buy-backs. Mr. Swanton addressed the concerns with a buy-back, pointing out that unless there is a large volume, the fish preserved through not having permits would not go elsewhere and that the permit being fished, always catches more fish. 2:24:56 PM Vice-Chair pointed out that with the economic value currently being in Cook Inlet, $50 million would be a substantial buy-back. Mr. Swanton agreed it would be substantial. Mr. Mitchell interjected that a buy-back would not be funded through COP; for that funding there must be a project. 2:26:02 PM Co-Chair Meyer understood that the State would have a 50- year lease of the military land base. Mr. Swanton said yes. Co-Chair Meyer inquired how Fairbanks currently addresses the fish situation. Mr. Swanton said, currently, there is an experimental pilot hatchery run on the banks of the Chena River, producing between 30,000 to 40,000 rainbow trout from the Anchorage facility. Co-Chair Meyer asked if that process could continue rather than spending $50 million on a new hatchery. Mr. Swanton commented that the current situation will continue to diminish opportunities. Co-Chair Meyer thought the State could save at least $50 million dollars by using the Anchorage hatchery and trucking fish to Fairbanks. Mr. Swanton did not know the age of the facilities but thought they were close to 40 years old and that both have site demands. He mentioned the risks placed in one facility. Having two facilities, it is spread out. One facility carries additional water demands. He was not sure if the current system could adequately produce all the fish. 2:29:14 PM Co-Chair Chenault referenced the federal lease, questioning the guarantee on a 50-year lease on federal property. 2:31:06 PM Representative Thomas pointed out that in the 1970's, the Fishery Rehabilitation and Enhancement Division (FRED) built hatcheries in Southeast Alaska, which are now are operated by regional aquacultures. He asked if Department of Fish and Game would be managing the newly proposed hatcheries. Mr. Swanton was not sure why the FRED Division had surrendered management. The Department would operate the new proposed facilities. Representative Thomas mentioned his involvement with the DiPac Hatchery and that they had to apply for federal funding. Mr. Swanton reported that operating a facility producing pink and chum salmon is different from other species and that they need to be held longer. He added, concerns related to disease. 2:33:34 PM Representative Joule asked the difference between COP versus GO bonds. Mr. Mitchell responded the differences are subtle and perhaps more legal than not. With a General Obligation bonds, there is a full faith commitment and tax pledge with an entity. A Certificate of Participation is something that the State or municipality can issue and that there is a "lesser" pledge and is structured around a lease. An investor is looking at the credit as being the General Fund of the State of Alaska subject to appropriation pledged to them. Representative Joule asked if GO bonds had to be approved by the voters. Mr. Mitchell affirmed. Representative Joule asked if the COP's were simply an act of the Legislature. Mr. Mitchell replied that revenue debt and lease typically do not require a vote of the electorate. 2:36:44 PM Co-Chair Meyer asked if the last COP issued by the State was for the Virology Lab. Mr. Mitchell said yes and that the one before that was the Department of Environmental Conservation lab. A credit pledge is not an unusual commitment. Co-Chair Meyer asked where the fish from the Anchorage hatchery go. Mr. Swanton explained that there are 13 sites from Kachemak Bay to Ship Creek that receive King and Coho salmon. 2:38:45 PM PUBLIC TESTIMONY CLOSED Co-Chair Meyer acknowledged the proposed dilemma, realizing that the Legislature had authorized these two projects four years ago. Representative Crawford requested research information regarding the results of the hatchery. Mr. Swanton did not have an historical assessment of the costs available. Some of the hatcheries are at least 20-years old. He offered to research those projects. Representative Crawford questioned the size of the hatcheries in relationship to what already exists. Mr. Swanton indicated that he had visited only three or four sites around the State and did not have an adequate frame of reference. 2:42:02 PM Representative Thomas asked if the Department of Fish and Game budget would be increasing each year to cover the operational costs for the hatcheries. Mr. Swanton advised that $2.3 million dollars had been included for current facility operational costs. He did anticipate that operation of a facility could be run with the current operational allocation provided to the Department. It is anticipated that the Anchorage hatchery could be run for approximately $2.3 million dollars annually, essentially, a no net gain. The Fairbanks facility will cost about $1.7 million dollars to operate. Presently, the State is going through the Division's internal budget to capture the operating costs. 2:44:04 PM Co-Chair Meyer hoped that the COP could include both hatcheries, realizing that if the bill is going to make it through the Legislative bodies, it can not be a stand alone Anchorage project. Representative Kelly commented on the Fairbanks hatchery, pointing out that construction costs have increased dramatically statewide and that the needed amount is causing consternation. He encouraged that the project be scaled back. He wanted to see fixed costs put in place for the overruns, pointing out that the project are not justified. st An escapement should be the 1 requirement. It has not been completely balanced out. He hoped the problem could be solved with the Governor's help, hence, HB 418. Representative Kelly encouraged more focus on cost overruns, which the Department has responded with scale-backs. He pointed out that in the old bonding package, there is $21 million remaining dollars dedicated to Fairbanks. He believed that some of the funds were available for switching over. He stated that there is support from both communities on the facility project & wanted to see the bill move forward. He offered to work with Co-Chair Meyer. 2:51:46 PM Co-Chair Meyer acknowledged the efforts put forward by the departments. He observed that they had met last year and that he had hoped a resolution could have come forth earlier in the session. Vice-Chair Stoltze apologized for the comments he had made to Representative Kelly. Co-Chair Chenault referenced the fiscal note, questioning if the debt service would come from the capital or operating budget. Mr. Mitchell advised that the debt service was scheduled to come out of a combination of the surcharge collection remaining $500 thousand dollars operational commitment for the next eight years. Presently, the total is about $1.5 million dollars and the balance would then come from General Fund dollars. Co-Chair Chenault clarified that it would be included in the operating budget until 2026. Co-Chair Meyer thought it could be off-set by a cash infusion from the capital budget. Representative Kelly pointed out that by adding the item in, it would not increase the fishing license fee, but instead extends it. Mr. Mitchell said yes, pointing out those fees are established in statute. The amount is more punitive on out of State sport fishers and that a one year out of state license costs $100 dollars. 2:56:10 PM HB 418 was HELD in Committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|