Legislature(2009 - 2010)
04/02/2009 03:06 PM House FIN
| Audio | Topic |
|---|---|
| Start | |
| HB199 | |
| HB161 | |
| HB3 | |
| HB98 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 161
"An Act relating to the Alaska Mental Health Trust
Authority Subport Office Building; authorizing the
issuance of certificates of participation for
construction of the building and authorizing the use of
up to $25,000,000 from the mental health trust fund for
construction of the building; approving leases of all
or part of the building by the Department of
Administration; and providing for an effective date."
3:14:22 PM
Representative Foster spoke in support of the bill.
REPRESENTATIVE CATHY MUNOZ, SPONSOR, addressed specific
questions that had been asked previously by committee
members. She referred to additional materials covering cost
comparison data, due diligence information, and a
construction analysis.
Representative Munoz addressed concerns that the proposed
building was considered Class A space. She detailed that the
proposed construction cost was $315 per square foot, which
is considered Class B space when compared to office space
around the state. New office space ranges from $200 to $500
dollars per square foot.
Representative Munoz turned to the question of square
footage price and reported that a ceiling had been
established at $3.50 per square foot; the intent was to
negotiate down from the ceiling. She pointed to extensive
data regarding cost comparisons for Anchorage and Juneau.
She reminded the committee that the square footage costs do
not include investments that the state makes on lease space
to make the space meet information technology (IT),
lighting, and other requirements. For example, the Frontier
Building in Anchorage is leased at $3.00 per square foot,
but recently required over $1 million in upgrades to make
the space adequate.
Representative Munoz discussed concerns raised about the
owner of the Department of Labor and Workforce Development
(DLWD) building. She noted that the state is not interested
in renegotiating a lease contract at the site because of
environmental and repair issues.
Representative Munoz emphasized that the proposed project
provided great opportunity for the state of Alaska and for
the Mental Health Trust; the state would save $13 million
and the trust would be able to develop a key asset.
Representative Munoz mentioned a proposed amendment that
would allow the Alaska Housing Finance Corporation (AHFC) to
purchase an administrative building in Anchorage using AHFC
funds.
3:19:54 PM
Vice-Chair Thomas puzzled over the location of the building
and questioned the price that would be paid. He thought for
the price the building should be where the subport building
used to be. Representative Munoz responded that the project
architects could speak specifically to site issues; she was
presenting the mental health trust's proposal.
Co-Chair Stoltze noted that the bill would be heard again
the next day.
Representative Kelly commented that his previous questions
had been answered completely.
3:23:15 PM
Co-Chair Hawker stated some of his concerns for the record.
He had questions regarding cost, value, quality issues,
financing alternatives, and the structure of the bill.
Representative Crawford requested a short explanation as to
why it would be to the state's advantage to have someone
else build, own, and operate the building instead of owning
the building itself. He understood that the deal would be
increasingly good for the mental health trust over time and
wondered how the state would benefit.
Representative Munoz emphasized that the mental health trust
and the state should be regarded as partners. The state
works very closely with the trust and encourages it to
develop its assets. She thought the project provided the
trust with an opportunity to develop their portfolio and
provide a revenue stream to beneficiaries over the course of
the project. The state would benefit as a funding partner
with the trust.
REPRESENTATIVE BETH KERTTULA, SPONSOR, added that another
advantage to the state would be saving $13.5 million.
3:25:59 PM
Representative Crawford did not understand how the state
would save $13.5 million. He thought the trust could gain by
selling the land and investing the earnings. He had been
told that the state had paid over $50 million in rent for
the DLWD building. He asked why the state should rent rather
than buy and why the state should not appropriate money
directly to the trust instead of give it money through rent.
Representative Munoz responded that the proposal involves
three different sites. The Department of Public Safety (DPS)
building on Whittier Street, was built in 1970 to last ten
years, but has been occupied by the state for nearly 40
years. Renovation of the DPS building and the second
building, the Department of Fish and Game (DFG) building in
Douglas, would cost much more than $8.5 million. She added
that the $13 million savings does not include replacement
costs that the state foresees for both the DPS and DFG
buildings.
3:28:25 PM
Vice-Chair Thomas queried whether the buildings would have
60-foot atriums and whether they would meet the new state
energy efficiency codes being proposed because of the
stimulus funds.
Co-Chair Stoltze thought the architect could address the
question.
Co-Chair Stoltze MOVED Amendment 1, 26-LS0605\W.1, Cook,
4/2/09 (copy on file):
Page 1, lines 2-3:
Delete "the Alaska Mental Health Trust Authority"
Insert "a separate trust land development account"
Page 1, line 6, following "Administration;":
Insert "authorizing the Alaska Housing Finance
Corporation to acquire the building that it
occurpies for an amound that does not exceed
$14,500,000;"
Page 5, following line 20:
Insert a new bill section to read:
"*Sec.8. The uncodified law of the State of Alaska is
amended by adding a new section to read:
AUTHORIZING THE ALASKA HOUSING FINANCE CORPORATION
TP ACQUIRE A BUILDING. The Alaska Housing Finance
Corporation is authorized to acquire the building in
Anchorage it occupies on the effective date of this Act
for an amount that does not exceed $14,500,000. This
section constitutes the approval required by AS
18.55.100(d) and AS 18.56.090(d) for that acquisition."
Renumber the following bill sections accordingly.
Co-Chair Hawker OBJECTED for DISCUSSION.
JOHN BITNEY, STAFF, REPRESENTATIVE JOHN HARRIS, SPONSOR and
CHAIRMAN, LEGISLATIVE COUNCIL, reported that the intent of
the amendment was to bring forth a proposal. He explained
that the Anchorage Legislative Information Office (LIO) is
on a year-to-year lease and needs office space.
Conversations with AHFC about space and financing options
led to a cost-savings idea. The corporation has needed space
as well and had calculated costs for a mortgage that could
result in savings of several million dollars.
3:34:04 PM
DAN FAUSKE, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, provided a memo
regarding the proposal (copy on file). He provided history,
explaining that AHFC has owned 4.3 acres in midtown
Anchorage since 1995; the corporation had planned to build
office space but the contract was cancelled. In 1997, AHFC
entered into an agreement to lease office space. In 1999,
AHFC unsuccessfully sought legislative approval to acquire
the property. Tatitlek Corporation bought the building for
$6 million and has been open to sell the property to AHFC.
The native corporation wants the 4.3 acres that AHFC owns
and AHFC wants the building they are currently leasing from
Tatitlek.
Mr. Fauske continued that there have been negotiations to
trade assets. Appraisals on the building show that it is
worth about $14.5 million. No cash will be required from the
legislature, lease payments will be reduced, and AHFC will
acquire an asset. In addition, the increased net income will
increase the dividend available to the state.
Mr. Fauske added that the governor's office had not objected
to the idea of AHFC purchasing the building. He referred to
a spread sheet with detailed descriptions and figures
related to the properties (copy on file).
3:39:59 PM
JOE DOOGLER, CHIEF FINANCIAL OFFICER, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, summarized that the
net present value savings [of the trade] would be
approximately $7.5 million, and possibly $12 million. He
continued that the purchase price includes $2 million for
needed upgrades.
Representative Foster cited experience with city taxes, and
reported that most of a city can be tax-exempt. He asked how
the proposal would affect tax income for Anchorage. Mr.
Fauske responded that the building would be tax exempt as
AHFC would own it as a state entity. He referred to similar
discussion regarding other property.
Co-Chair Stoltze asked if the taxable and tax-exempt aspects
would cancel each other out. Mr. Fauske replied that it was
possible.
3:43:54 PM
Representative Gara asked whether the building was currently
not taxed because it was owned by Tatitlek Corporation. Mr.
Fauske thought it was being taxed.
Representative Gara wondered how much property tax revenue
the municipality would lose. Mr. Fauske responded that he
did not know but would find out.
Representative Gara asked if Anchorage would end up
collecting less money. Mr. Fauske replied that the city
would collect less money. He defended AHFC regarding taxes
because the corporation brings a lot of assets to Anchorage.
He thought the issue was more a state issue. He referred to
past debates with the legislature regarding taxes.
3:45:31 PM
Representative Gara wanted to know the position of the
municipality. Mr. Fauske did not know.
Co-Chair Stoltze noted that the municipality is not asked in
other similar situations.
Representative Fairclough spoke on the taxing issue. In her
experience, taxes do not go up but are spread across the
entire body. There are many components: property values
might go up or down, the mill rate goes up or down,
depending on Anchorage's budget; but government spending is
not cut back when less tax income is available.
Representative Gara asked for clarification. Representative
Fairclough responded that state government has a bill for
various items; if revenue declines, people who have the
ability pay in. She pointed to other variables, such as a
mini-permanent fund that draws interest.
Representative Gara asked whether AHFC's fund and ability to
further its mission would be impacted if AHFC purchased the
building.
3:48:17 PM
Mr. Fauske responded that there would only be a cash
displacement and other programs would not in any way be
affected.
Representative Fairclough asked whether there would be a
small increase in income to the state. Mr. Fauske replied
that there would be a positive increment because AHFC would
be spending less in operating expenses and 75 percent of the
corporation's net income is available for appropriation by
the state.
Vice-Chair Thomas asked for clarification about the trade.
Mr. Fauske responded that the amount of the land value,
estimated at between $4.5 million and $5 million, would be
deducted from the $14.5 million and AHFC would owe the
difference. The additional revenue from the second piece of
land would also be deducted.
Vice-Chair Thomas asked whether the amendment would give
legislative authority to release the assets. Mr. Fauske
explained that AHFC needs authority to purchase a building.
He stressed that in the present proposal AHFC would be
exchanging and not disposing an asset.
Mr. Doogler interjected that AHFC would be disposing an
asset as well. He added that AHFC also has the statutory
authority to dispose of assets. Mr. Fauske clarified that
AHFC cannot sell assets as a private entity would; there is
a public process.
Mr. Doogler pointed out that Anchorage would get more taxes
from the land when it is developed, which would replace
taxes lost by AHFC acquiring the building.
3:51:54 PM
Co-Chair Hawker asked about the quality and desirability of
the exchanged land in the Anchorage market. Mr. Fauske
th
responded that land on 34 street was appraised in 2008 at
$4,168,000; current market value would put it closer to
between $4.7 million and $5.1 million. As of February 2008
the 1.4 acres at Boniface and DeBarr was appraised at
$511,000; current market value could be slightly higher.
Co-Chair Hawker queried the probability of the property
being developed. Mr. Fauske responded that there was a very
high probability that Tatitlek Corporation would develop the
site. Co-Chair Hawker confirmed that the property would be
developed for taxable commercial purposes.
Co-Chair Hawker asked whether AHFC would be the only
occupant of the building acquired. Mr. Fauske replied that
one tenant, the Alaska Public Safety Employees Union,
occupies a small space. Co-Chair Hawker confirmed that there
was no commercial plaza involved.
Mr. Fauske stated that AHFC needs to own a building. He did
not want higher leases and thought the opportunity was good
as the location is centrally located and the property will
only increase in value. He did not feel the amendment would
harm HB 161.
3:55:59 PM
Co-Chair Hawker noted that questions he had had regarding
deferred maintenance and other issues had been answered. He
hoped negotiations would continue in such a way that the
state would receive the best value possible. Mr. Fauske
agreed.
Co-Chair Stoltze spoke to personal experience with an AHFC
purchase and appreciated the open process.
Representative Gara stated his support but wanted to hear
from the municipality. Mr. Fauske replied that he would get
the information.
3:59:04 PM
Representative Salmon asked which native corporation owned
the building. Mr. Fauske responded Tatitlek Corporation, a
subsidiary of Chugach Alaska Corporation.
Representative Kelly asked if there would be further issues.
Mr. Bitney stated that "this is it." Mr. Fauske explained
that the purchase of the building was originally going to be
a stand-alone bill.
Co-Chair Hawker WITHDREW his OBJECTION. There being no
further objection, Amendment 1 was ADOPTED.
HB 161 was HEARD and HELD in Committee for further
consideration.
4:02:30 PM AT EASE
4:06:22 PM RECONVENED
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