Legislature(2005 - 2006)HOUSE FINANCE 519

04/04/2006 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 57(FIN) Out of Committee
Heard & Held
<Bill Hearing Postponed>
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                             HOUSE FINANCE COMMITTEE                                                                            
                                  April 4, 2006                                                                                 
                                    1:41 p.m.                                                                                   
          CALL TO ORDER                                                                                                       
          Co-Chair Meyer called  the House Finance Committee meeting to                                                         
          order at 1:41:03 PM.                                                                                                
          MEMBERS PRESENT                                                                                                     
          Representative Mike Chenault, Co-Chair                                                                                
          Representative Kevin Meyer, Co-Chair                                                                                  
          Representative Bill Stoltze, Vice-Chair                                                                               
          Representative Richard Foster                                                                                         
          Representative Mike Hawker                                                                                            
          Representative Jim Holm                                                                                               
          Representative Reggie Joule                                                                                           
          Representative Mike Kelly                                                                                             
          Representative Beth Kerttula                                                                                          
          Representative Carl Moses                                                                                             
          Representative Bruce Weyhrauch                                                                                        
          MEMBERS ABSENT                                                                                                      
          ALSO PRESENT                                                                                                        
          Pete Ecklund, Staff,  Representative Kevin Meyer; Eddy Jeans,                                                         
          Director,   Education   Support   Services,   Department   of                                                         
          Education and Early  Development; Representative Bill Thomas;                                                         
          Kaci  Schroeder,  Staff to  Representative  Bill Thomas;  Ron                                                         
          Miller,  Executive  Director, Alaska  Industrial  Development                                                         
          and  Export Authority  (AIDEA); Peter  Crimp,  Project Manger                                                         
          for Alternative  Energy and Energy Efficiency,  Department of                                                         
          Commerce,   Community    and   Economic   Development;   Sara                                                         
          Gilbertson,  Legislative  Liaison,  Department  of  Fish  and                                                         
          Game; Kathie  Wasserman, Alaska Municipal  League; Paul Fuhs,                                                         
          City and Borough of Yakutat.                                                                                          
          PRESENT VIA TELECONFERENCE                                                                                          
          John  Schnabel, Haines; Mike  Harper, Deputy  Director, Rural                                                         
          Energy, Alaska  Energy Authority; Rueben  Loewen, Development                                                         
          Specialist;  Becky Gay,  Project Manager,  AEA;  Dick Mylius,                                                         
          Deputy   Director,  Division   of  Mining  Land   and  Water,                                                         
          Department  of  Natural   Resources;  Eddy  Jeans,  Director,                                                         
          Education  Support  Services,  Department  of  Education  and                                                         
          Early  Development;   Larry  Wiget,  Director  of  Government                                                         
          Relations,   Anchorage   School   District;   Mary   Francis,                                                         
          Executive Director,  Alaska Council of School Administrators;                                                         
          Chris  Rose,  Executive  Director,  Renewable  Energy  Alaska                                                         
          Project;  Meera  Kohler,President  and  CEO,  Alaska  Village                                                         
          Electric Co-op; Josh  Larose, Southwest Municipal Conference.                                                         
          SSHB 57   "An Act relating  to the sale of certain state land                                                         
                    to adjacent landowners."                                                                                    
                    CSSSHB 57(FIN) was REPORTED OUT of Committee with                                                           
                    an indeterminate fiscal note (DNR) and individual                                                           
          HB 493    "An  Act  relating  to reimbursement  of  municipal                                                         
              bonds for school construction."                                                                                   
                    HB 493 was HEARD and HELD in Committee for further                                                          
          HB 445    "An  Act relating to  the alternative  energy grant                                                         
                    fund and to alternative energy grants."                                                                     
                    HB 445 was HEARD and HELD in Committee for further                                                          
          SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 57                                                                            
               "An Act relating to the sale of certain state land to                                                            
               adjacent landowners."                                                                                            
          REPRESENTATIVE  WEYHRAUCH, SPONSOR,  spoke to  the bill.   He                                                         
          explained  that the bill was  introduced to induce  the state                                                         
          to purchase federal  lands for sale in January, 2006, as well                                                         
          as to clear the way  for right away disputes over development                                                         
          of  private interests.   He noted  that his own  family often                                                         
          visited wilderness  experiences in Alaska  and commended John                                                         
          Schnable from  Haines who operates a small  tourist gold mine                                                         
          in Haines,  Alaska.  Mr. Schnable is  experiencing difficulty                                                         
          with  state lands adjacent  to his property.   Representative                                                         
          Weyreuch explained  that the bill would  allow the Department                                                         
          of Natural  Resources to negotiate sales  of isolated parcels                                                         
          of  government owned  land at fair  market value  to adjacent                                                         
          land-owners.  The land  must be smaller than twenty acres and                                                         
          completely enclosed.   He expressed that  he did not normally                                                         
          participate in "special  interest bills", but speculated that                                                         
          this  bill  did  not harm,  but  rather  made  a fair  market                                                         
          transaction   possible.    He   also  mentioned   a  proposed                                                         
          amendment by  the Department of Natural  Resources that would                                                         
          further  protect  the State's  interests  by  adding a  "best                                                         
          interest  finding"  in  the event  of  public  easement.   He                                                         
          proposed  that this  added a  level of government  oversight,                                                         
          while allowing an "arms' length" transaction.                                                                         
          1:45:28 PM                                                                                                          
          JOHN   SCHNABEL,   HAINES,   TESTIFIED   VIA   TELECONFERENCE                                                         
          regarding the  bill.  He stated that the  reason he wished to                                                         
          negotiate a  sale as opposed to an outcry  auction was due to                                                         
          the prohibitive upfront  costs involved in such auctions.  He                                                         
          explained  that he  was developing  80 acres  into  a tourist                                                         
          destination,  and  did not  wish this  work  to be  disturbed                                                         
          should  another  party  wish  to purchase  the  small  parcel                                                         
          contained in  his property.  He noted he  had invested over a                                                         
          million dollars  to keep his land in  pristine condition, and                                                         
          wished to  keep it so.   He mentioned he had  no problem with                                                         
          any right  of way through the land, or  any trail designation                                                         
          if that should become applicable.                                                                                     
          1:47:47 PM                                                                                                          
          DICK  MYLIUS, DEPUTY  DIRECTOR, DIVISION  OF MINING  LAND AND                                                         
          WATER,   DEPARTMENT  OF   NATURAL  RESOURCES   testified  via                                                         
          teleconference.  He  explained that in most cases, when state                                                         
          lands  were  sold  it  was  through  a  competitive  process,                                                         
          although  in certain  circumstance state  law  allows dealing                                                         
          with one  individual through "preference rights".   This bill                                                         
          adds to a current preference  right bill.  He noted that this                                                         
          usually took place when  an individual had significant rights                                                         
          or investment  in the property.  He noted  that in this case,                                                         
          the state had acquired  a parcel of land through foreclosure,                                                         
          making it  a self-contained parcel, completely  surrounded by                                                         
          Mr.  Schnable's other  land.   He explained  it could  not be                                                         
          sold  under  existing  preference  right  statutes,  and  the                                                         
          public would  not be interested  since it was  included in an                                                         
          individual's  property.     He  noted  it  had  already  been                                                         
          surveyed,  and a  best  interest finding  would be  completed                                                         
          before the sale.                                                                                                      
          1:50:20 PM                                                                                                          
          Representative Chenault   asked whether  this  was  the  only                                                         
          parcel  in this  circumstance statewide.   Mr.  Mylius stated                                                         
          that  his  Department   was  unaware  of  any  other  similar                                                         
          parcels,  although he  speculated that  there might  be other                                                         
          parcels  in this situation.   He  noted that most  State land                                                         
          was  acquired   in  large  tracts,  and   this  had  been  an                                                         
          exception,  acquired  under  foreclosure  during  the  mining                                                         
          registration law of the early 1960's.                                                                                 
          Responding  to a  follow-up, Mr.  Mylius confirmed  that this                                                         
          bill could be used for such a circumstance in the future.                                                             
          Representative Kelly  observed that the bill permitted rather                                                         
          than instructed the  Director.  He asked what the price for a                                                         
          twenty-acre parcel  might be.  Mr. Mylius  responded that the                                                         
          largest   expense  in  this   case  was  the   public  notice                                                         
          requirement,  which cost roughly $1 thousand,  in addition to                                                         
          a $2  thousand in staff  time.  He  noted that last  year two                                                         
          new  positions were  established to  deal  with a  backlog of                                                         
          preference rights.   He explained that this accounted for the                                                         
          zero fiscal note.                                                                                                     
          1:52:57 PM                                                                                                          
          Responding  to  a  follow-up  by  Representative  Kelly,  Mr.                                                         
          Mylius  noted that the  applicant would  not pay  staff time,                                                         
          but rather the newspaper publication costs.                                                                           
          1:53:30 PM                                                                                                          
          Representative Kerttula   observed that  with  best  interest                                                         
          findings, the Department  could protect against an individual                                                         
          attempting  to  purchase a  parcel  with unique  value.   Mr.                                                         
          Mylius  confirmed that  the  Department could  decide  not to                                                         
          grant the right to purchase.                                                                                          
          1:54:18 PM                                                                                                          
          Representative Holm   asked whether  a  sunset provision  was                                                         
          appropriate  since  this was  a unique  parcel.   Mr.  Mylius                                                         
          responded  that it  might be a  helpful tool  to have  in the                                                         
          future for a similar circumstance.                                                                                    
          1:54:50 PM                                                                                                          
          Representative  Hawker referred to  the "sale of  an isolated                                                         
          parcel" as  referred to in the bill and  asked how they would                                                         
          interpret   "isolated".     Mr.  Mylius   stated   that  they                                                         
          interpreted  this as being unattached  to any other  block of                                                         
          state land,  since in this case it was  totally surrounded by                                                         
          private lands.                                                                                                        
          Responding  to another  question, Mr.  Mylius  confirmed that                                                         
          the  current  preference   right  that  deals  with  isolated                                                         
          parcels most  often have pertained to urban  parcels that had                                                         
          no public value and were unattached to other state lands.                                                             
          1:56:40 PM                                                                                                          
          Representative Hawker     asked whether this would apply to a                                                         
          municipality that owned  land that surrounded state property,                                                         
          allowing  them  to petition  for  a  preference  right.   Mr.                                                         
          Mylius noted  that municipalities already  had other statutes                                                         
          that  allow  the State  to  transfer land  to  them, such  as                                                         
          municipal  entitlement.   He noted that  to his  knowledge no                                                         
          municipality  had ever applied  under the  current preference                                                         
          rights statutes.                                                                                                      
          1:57:54 PM                                                                                                          
          Representative Hawker     asked   whether   there   was   any                                                         
          exposure  to  the  state  that should  be  considered  before                                                         
          passing  the  bill.   Mr.  Mylius stated  that  there was  no                                                         
          additional   exposure,  and      referred   to  the  proposed                                                         
    amendment, which ensured the best interest finding.                                                                         
          1:58:26 PM                                                                                                          
          Representative Foster     commented  that he  had  a  10-acre                                                         
          Native  allotment surrounded  by State  Land and  wondered if                                                         
          this provision  would apply.   Mr. Mylius noted  that in this                                                         
          circumstance, if an  allotment were surrounded by state land,                                                         
          it would not apply.   He noted that a sale in this case would                                                         
          be done through a competitive process.                                                                                
          1:59:39 PM                                                                                                          
          Representative Kelly  asked whether,  if several  individuals                                                         
          were  interested  in  the  same parcel,  the  "best  interest                                                         
          finding"  would apply.   Mr.  Mylius confirmed  that  in this                                                         
          case  the  public  process  would  help  determine  the  best                                                         
          2:00:27 PM                                                                                                          
          REPRESENTATIVE  BILL THOMAS, HAINES, testified  in support of                                                         
          the bill.   He expressed  his knowledge of John  Schnabel and                                                         
          applauded his efforts over the years to develop the parcel.                                                           
          Co-Chair Meyer closed public testimony.                                                                               
          2:02:16 PM                                                                                                          
          Representative Weyhrauch  MOVED Amendment  #1, 24-LS0319\Y.1,                                                         
     Bullock, 3/31/06.  Representative Joule OBJECTED.                                                                          
          Representative Weyhrauch   noted  that   the  Department   of                                                         
          Natural Resources had  suggested the amendment after the bill                                                         
          had moved out of the  House Resources Commitee.  He explained                                                         
          that  it was intended  to provide  further protection  to the                                                         
          State's  interests, especially  in providing access  to State                                                         
          SARA GILBERTSON, LEGISLATIVE  LIAISON, DEPARTMENT OF FISH AND                                                         
          GAME, testified about the amendment.                                                                                  
          2:03:45 PM                                                                                                          
          Ms.  Gilbertson noted  that the  Department  of Fish  of Game                                                         
          worked  with  the Department  of  Natural  Resources and  the                                                         
          Department  of Law to  create the  amendment.   She explained                                                         
          that   there  were  instances   of  small  parcels   of  land                                                         
          completely  surrounded  by State  land, when  the State  land                                                         
          contained  a  water  source.   She  stressed  that the  State                                                         
          wished  to ensure access  to water,  and suggested  that they                                                         
          add the proposed language,  demanding a best interest finding                                                         
          to be  made by the Director  before conveying a  parcel.  She                                                         
          concluded that  the finding would not  affect the transaction                                                         
          in question in Haines.                                                                                                
          2:04:13 PM                                                                                                          
          The  OBJECTION was REMOVED.   There  being no  objection, the                                                         
          Amendment PASSED by unanimous consent.                                                                                
          Representative Stoltze    asked about  the  suggestion  of  a                                                         
          sunset provision.  Representative  Weyhrauch  reminded    the                                                         
          Committee that the testimony  referred to the future need for                                                         
          such a tool.                                                                                                          
          Representative Hawker     pointed out  that  that the  fiscal                                                         
          note  was indeterminate,  rather than a  zero fiscal  note as                                                         
          previously referenced.                                                                                                
          Representative Weyhrauch  expressed his  hope that  the state                                                         
     of Alaska would create revenue through this bill.                                                                          
          Representative  Kelly  questioned whether  the  title of  the                                                         
          Bill  should refer to  State land  rather than  Federal Land.                                                         
          Representative Weyrauch  noted that the original title of the                                                         
          bill referred to purchase of Federal Land.                                                                            
          Representative Foster     MOVED  to  REPORT  HB   57  out  of                                                         
          Committee as Amended  with an Indeterminate Fiscal Note (DNR)                                                         
          and  individual recommendations.   There being  NO OBJECTION,                                                         
          the motion PASSED by unanimous consent.                                                                               
          HOUSE BILL 493                                                                                                      
          "An Act relating to reimbursement of municipal bonds for                                                              
          school construction."                                                                                                 
          2:08:07 PM                                                                                                          
          PETER ECKLUND, STAFF  TO REPRESENTATIVE KEVIN MEYER testified                                                         
          regarding the  bill.  He explained that  the bill proposes to                                                         
          allow  municipalities  to bond  for  school construction  and                                                         
          renovation projections  beginning November 1, 2006 and ending                                                         
          November 1,  2008.  He noted that  under current legislation,                                                         
          any  municipality  could  ask  their  electorate  to  approve                                                         
          funding  for  school capital  projects.    The principal  and                                                         
          interest payments would  then be eligible for partial payment                                                         
          by  the State.   Municipalities  would be  reimbursed  for 60                                                         
          percent of  the cost of all  projects that met  all the space                                                         
          allocation   guidelines  set  forth  by   the  Department  of                                                         
          Education  and Early Development.   Mr. Ecklund noted  that a                                                         
          40 percent  reimbursement rate  would apply to  projects that                                                         
          exceeded  the space  allocation guidelines.   He  stated that                                                         
          currently there were  over $146 million in projects submitted                                                         
          to the Department that  could qualify for this reimbursement.                                                         
          Co-Chair Meyer asked  for  an explanation  of  how the  60/40                                                         
          percent  was arrived  upon,  rather than  the previous  70/60                                                         
          formula.  Mr. Ecklund  explained that in 2002, the passage of                                                         
          HB   2003   opened  a   two-year   period   of  school   debt                                                         
          reimbursement.    He stated  that $699  million  of debt  was                                                         
          authorized to  be reimbursed by the Department  -- 55 percent                                                         
          at  the 70 percent  rate, and  45 percent  at the  60 percent                                                         
          rate.   It  followed  that nearly  half of  the schools  took                                                         
          advantage of  the 60 percent rate.   The Department concluded                                                         
          therefore that the 60  percent rate must have proven fair and                                                         
          attractive to municipalities.                                                                                         
          Co-Chair Meyer referred  to the current program, in which the                                                         
          State  paid  for  70 percent  of  costs  of a  Department  of                                                         
          Education  approved  project, and  asked if  the program  was                                                         
          still in effect until October 1, 2006.                                                                                
          Mr. Ecklund  stated that there was a  non-capped program open                                                         
          between  December of  2002 and  December of  2004.   He noted                                                         
          that   currently  there   were  $192   million   of  projects                                                         
          authorized  to be  bonded until  October  of this  year, with                                                         
          different caps  for schools with different  enrollment rates.                                                         
          He explained that the  current program finances 70 percent of                                                         
          the cost  of approved projects, and 60  percent of unapproved                                                         
          projects, expiring in October of 2006.                                                                                
          2:11:52 PM                                                                                                          
          Co-Chair Meyer clarified  that under the proposed program, if                                                         
          a project  was on the approved list, it  would qualify at the                                                         
          60  percent rate,  with no caps.   He  asked if  the proposed                                                         
          lower  rates of  reimbursement  were related  to the  current                                                         
          level  of indebtedness.   Mr.  Ecklund stated  that  the debt                                                         
          service  payments  for previously  authorized  debts was  $94                                                         
          million,  which did  not include the  nearly $300  million in                                                         
          projects  that have  been authorized but  not requested.   He                                                         
          also noted  that for every  $100 million in  debt authorized,                                                         
          the State's  debt service  payments increased $6  million per                                                         
          year for  twenty years.  He concluded that  if all authorized                                                         
          projects  requested payments,  it could increase  the State's                                                         
          debt payments by $18 million annually.                                                                                
          Responding to a follow-up by Co-Chair Meyer, Mr.      Ecklund                                                         
          confirmed that currently the debt level was uncertain.                                                                
          2:13:40 PM                                                                                                          
          Co-Chair Meyer speculated  that since this  bill proposed the                                                         
          lower rate, it would result in a lower overall debt.                                                                  
          Representative Stoltze    observed that a project  would need                                                         
          to meet  requirements after  it was submitted.   He expressed                                                         
          certain frustrations  with the capital project process of the                                                         
          Department  of Education  and Early  Development in  terms of                                                         
          waiting time and expense.                                                                                             
          2:14:38 PM                                                                                                          
          Representative Joule  asked if  a  tax  relief  or  community                                                         
          dividend  bill  might  be  a  companion  to  this  bill,  and                                                         
          observed  that   this  seemed  to  pass   a  debt  burden  to                                                         
          communities,  which often resulted in  higher property taxes.                                                         
          He   acknowledged  that  while   his  comment   was  somewhat                                                         
          facetious, it also pointed  out a real issue.  He asked if an                                                         
          earlier  debt  reimbursement  bill  connected  to  a  General                                                         
          Obligation  (GO) bond.      Mr. Ecklund  confirmed that  a GO                                                         
          Bond package  on the ballot  in 2002 addressed  previous debt                                                         
          2:16:31 PM                                                                                                          
          Representative Joule  observed   that   there   was   current                                                         
          construction in rural  Alaskan schools that pertained to this                                                         
          Co-Chair Meyer pointed  out the $25 million  in the budget to                                                         
          complete  maintenance items from  the previous year,  and his                                                         
          awareness  of  other rural  construction  or repair  projects                                                         
          that would need to be addressed by the capital budget.                                                                
          2:17:21 PM                                                                                                          
          Representative Joule      asked for  clarification  about the                                                         
          section  of  the bill  that  was funded  at  40 percent.  Mr.                                                         
          Ecklund  responded  that  during  the last  two-year  period,                                                         
          there were  70 and 60 percent debt  reimbursement provisions.                                                         
          He reiterated that during  that time, 45 percent were paid at                                                         
          the 60 percent level for unapproved projects.                                                                         
          2:18:19 PM                                                                                                          
          Representative Stoltze    noted an  earlier  proposal with  a                                                         
          50/50  proposition  in the  interior,  but  noted that  these                                                         
          could  not  be determined  without  certain  agreements.   He                                                         
          expressed  concern over whether  this represented  a "bidding                                                         
          2:19:06 PM                                                                                                          
          Co-Chair Meyer noted  that this  was  the highest  amount the                                                         
          State  felt  they could  reimburse  based  upon current  debt                                                         
          loads.   He suggested  that in the  past years, with  a lower                                                         
          debt load, the State  was able to reimburse up to 70 percent,                                                         
          but   that  currently,  a   60  percent  ratio   seemed  more                                                         
          Representative  Stoltze commented that the  Matsu Borough and                                                         
          School  Board  had   experienced  frustration  in  trying  to                                                         
          receive  the   State  funding  needed   to  adequately  house                                                         
          students.   He expressed  the need  for discussion  about the                                                         
          proper ratio of reimbursement funding.                                                                                
          2:20:32 PM                                                                                                          
          EDDY JEANS, DIRECTOR,  EDUCATION SUPPORT SERVICES, DEPARTMENT                                                         
          OF  EDUCATION AND EARLY  DEVELOPMENT testified  regarding the                                                         
          bill.   He complimented  Mr. Ecklund  for his  explanation of                                                         
          the bill's  history.  He  then pointed out  the indeterminate                                                         
          fiscal  note  prepared   by  his  Department,  since  it  was                                                         
          currently unclear  which schools or projects  would apply for                                                         
          this  reimbursement.   In  response  to  an earlier  question                                                         
          about  how  many  projects  were  currently  outstanding,  he                                                         
          stated  that currently  $100 million  had been  authorized by                                                         
          voters  and  the Department  of  Education.    He noted  that                                                         
          municipalities  had  not yet  issued  these bonds.   He  also                                                         
          stated  that an additional  $200 million had  been authorized                                                         
          last  year,  partially  approved  by  the Department  and  by                                                         
          voters.  He confirmed  Mr. Ecklund's earlier observation that                                                         
          for every $100 million  in the 70 or 60 percent reimbursement                                                         
          ratio, the estimated  annual debt payment to the State was $6                                                         
          million  for  approximately  20 years.    He emphasized  that                                                         
          currently  the State's debt  burden was $94 million,  with an                                                         
          additional  $18 million  estimated  for the  next two  years,                                                         
          putting   the   State's   debt   reimbursement   program   at                                                         
          approximately $112 million.                                                                                           
          2:21:51 PM                                                                                                          
          Mr.  Jeans  then  pointed  out  that  at the  ratios  in  the                                                         
          proposed legislation,  the State's debt program would drop to                                                         
          approximately   $5   to  $5.5   million   per  $100   million                                                         
          Co-Chair  Meyer referred  to  a handout  pertaining  to State                                                         
          Capital  Funding, provided  by the  Department  of Education,                                                         
          and  asked  if  the  Department recommended  the  60  percent                                                         
          Mr.  Jeans  responded that  the  recommendation  made in  the                                                         
          report  was  for  a greater  variance  between  reimbursement                                                         
          levels for  those projects that met, as  opposed to exceeded,                                                         
          the Department  approved space  guidelines.   He  pointed out                                                         
          that  nearly half of  the projects  authorized under  HB 2003                                                         
          exceeded   space  guidelines,   leading  the   Department  to                                                         
          conclude  that a  ten percent  differential  did not  seem to                                                         
          matter  to districts.   They  therefore recommended  a larger                                                         
          span between percentages.                                                                                             
          Co-Chair Meyer concluded  that the  Department  was concerned                                                         
          more with  the span than  the actual percentages.   Mr. Jeans                                                         
          stated that the Department  would leave it to the legislators                                                         
          to decide the reimbursement  levels, but pointed out that the                                                         
          impression  that  a  ten  percent  differential  would  deter                                                         
          districts  from department from  space guidelines  had proven                                                         
          2:24:10 PM                                                                                                          
          Representative  Kelly asked  whether  the amount  of projects                                                         
          exceeding space  guidelines created a financial  burden.  Mr.                                                         
          Jeans  responded that when  HB 2003  was passed in  2003, the                                                         
          Department  knew  there  were  projects that  exceeded  space                                                         
          guidelines, but did  not anticipate that nearly half the debt                                                         
          reimbursement would  fall under that category.  He reiterated                                                         
          that  the  ten  percent  difference  did  not seem  to  deter                                                         
     districts from building outside space guidelines.                                                                          
          2:25:06 PM                                                                                                          
          Representative  Stoltze referred to past  contention over the                                                         
          development of criteria,  and asked if enough weight had been                                                         
          placed on  areas with documented  rates of growth.   He asked                                                         
          if in effect there existed a penalty for pre-planning.                                                                
          Mr. Jeans  acknowledged that in the current  system there was                                                         
          not   a   provision   to   encourage   future   planning   in                                                         
          municipalities.   He  noted  that they  currently focused  on                                                         
          reacting to problems  of overcrowding.  He noted however that                                                         
          they did  allow for six or seven year  enrollment projections                                                         
          when applying for new  space.  He conceded that in areas like                                                         
          Matsu, the system was  not currently able to keep up with the                                                         
          level of growth.                                                                                                      
          2:26:29 PM                                                                                                          
          Representative Stoltze  suggested that it might be helpful to                                                         
          provide reimbursement  for land acquisitions  in advance.  He                                                         
          noted the increasing  difficulty to find adequate parcels, as                                                         
          well   as  contentious  legislative   efforts  in   the  past                                                         
          attempting to lower costs.                                                                                            
          2:27:18 PM                                                                                                          
          Representative  Joule  asked  if  grant  funding  to  schools                                                         
          unable  to bond  had  ever exceeded  space  guidelines.   Mr.                                                         
          Jeans  responded that  there had  not.  Representative  Joule                                                         
          followed up  by observing that negotiating  space differences                                                         
          occurred  prior to the  Department issuing its  priority list                                                         
          for the year.                                                                                                         
          2:28:20 PM                                                                                                          
          Mr. Jeans  noted that grant  projects must fall  within space                                                         
          guidelines,  and only under HB  2003 and SB 73  last year did                                                         
          the  State   allow  debt  reimbursement   for  projects  that                                                         
          exceeded space guidelines.                                                                                            
          2:28:43 PM                                                                                                          
          Responding to  a question by Representative  Kelly, Mr. Jeans                                                         
          confirmed   his  Department's   belief  that  a   20  percent                                                         
          differential  would   affect  the  number  of  projects  that                                                         
          exceeded space guidelines.                                                                                            
          2:29:03 PM                                                                                                          
          LARRY  WIGET,  DIRECTOR  OF GOVERNMENT  RELATIONS,  ANCHORAGE                                                         
          SCHOOL  DISTRICT  testified  online.    He commented  on  the                                                         
          success  of  the  school   debt  reimbursement  program,  and                                                         
          pointed out that higher  reimbursement numbers made it easier                                                         
          to  pass bonds  with  voters. He  confirmed  that the  School                                                         
          District supported the  bill, but stated that they would like                                                         
          to  extend the  time for  the new  program, from  November 1,                                                         
          2008,  to November  30,  2008 to  allow for  the election  to                                                         
          occur  that  year  for  approving  bonds  without  holding  a                                                         
          special election.                                                                                                     
          Co-Chair Meyer proposed    that   they    create   CONCEPTUAL                                                         
    AMENDMENT changing the end date of the legislation.                                                                         
          2:31:17 PM                                                                                                          
          Representative Hawker     asked whether, if they approved the                                                         
          shift in  percentage reimbursements, it  would reflect poorly                                                         
          on the legislative support of schools.                                                                                
          2:31:46 PM                                                                                                          
          Mr.  Wiget  expressed   appreciation  of  the  program  being                                                         
          currently put  forth by the legislation.   He reiterated that                                                         
          the  greater the  level  of participation  by  the State  the                                                         
          easier  it was  for districts  to pass  bonds,  but expressed                                                         
          appreciation for the reimbursement program.                                                                           
          2:32:31 PM                                                                                                          
          Representative  Stoltze  noted  that  the April  election  in                                                         
          Anchorage, as  opposed to an October election  in other parts                                                         
          of the State, seemed  to cause problems of non-conformity, in                                                         
          this case necessitating an amendment.                                                                                 
          Co-Chair Meyer expressed  the  desire  to  HOLD  the bill  in                                                         
          order to address further amendments.                                                                                  
          2:33:27 PM                                                                                                          
          Representative  Holm referred to very  large school projects,                                                         
          and  asked if  a more  standard school  system in  Alaska was                                                         
          more  cost effective  for the  state, rather  than individual                                                         
          2:34:15 PM                                                                                                          
          Mr.  Jeans  explained  that  the  Bond  Reimbursement  Review                                                         
          Committee had  examined the issue of  prototype schools. They                                                         
          found  that in  larger communities  like Anchorage,  protypes                                                         
          worked well at the elementary  school level, since there were                                                         
          so  many  schools.   However,  the State  has  not adopted  a                                                         
          standard prototype for high schools.                                                                                  
          2:35:24 PM                                                                                                          
          Responding  to another question  by Representative  Holm, Mr.                                                         
          Jeans noted that examination  of this issue led to prototypes                                                         
          being used  in Anchorage and Fairbanks.   He noted that there                                                         
          was not enough construction  in the state of large schools to                                                         
          make prototype models economically favorable.                                                                         
          Representative Holm  observed that all schools have a similar                                                         
          function,  and  suggested  that  the  cost  for  construction                                                         
          should  not change  by changing  the appearance  of  a unique                                                         
          school.   He expressed  that a $54  million high  school made                                                         
          him uncomfortable.                                                                                                    
          2:36:43 PM                                                                                                          
          Mr.  Jeans  reiterated  that  the Bond  Reimbursement  Review                                                         
          Committee  had  examined  prototype  schools and  found  them                                                         
          ineffective at the high  school level.  He stressed that they                                                         
          used  such  models  effectively  for  elementary  schools  in                                                         
          Anchorage and Fairbanks.                                                                                              
          2:37:48 PM                                                                                                          
          MARY  FRANCIS, EXECUTIVE DIRECTOR,  ALASKA COUNCIL  OF SCHOOL                                                         
          ADMINISTRATORS,  (ACSA), testified  regarding the bill.   She                                                         
          noted  a resolution  in support  of extending  the  bond debt                                                         
          reimbursement  program  and  expressed  appreciation  to  the                                                         
          committee.   She also stated that ACSA  members would like to                                                         
          see a higher reimbursement rate.                                                                                      
          Co-Chair Meyer closed public testimony.                                                                               
          Co-Chair  Meyer MOVED  Amendment #1, 24-LS1752\G.1,  Mischel,                                                         
          3/20/06,  changing  the  end  date of  the  legislation  from                                                         
          November  1, 2008,  to  November 30,  2008.   There  being NO                                                         
          OBJECTIONS the Amendment was ADOPTED.                                                                                 
          HB 493, as Amended, was HEARD and HELD.                                                                               
          2:40:07 PM                                                                                                          
          Representative  Stoltze, following  up  on the  discussion on                                                         
          school  design uniformity,  asked for a  list of  schools and                                                         
          populations  to be provided by  Mr. Jeans.  He  noted that in                                                         
          his district, school populations ranged from 700 to 2,200.                                                            
          HOUSE BILL NO. 445                                                                                                  
               "An Act relating to the alternative energy grant fund                                                            
               and to alternative energy grants."                                                                               
          2:40:54 PM                                                                                                          
          Representative Stoltze    MOVED  to  ADOPT  Work   DRAFT  24-                                                         
          LS1311\X,  Cook,  3/31/06.   There  being  NO OBJECTIONS  the                                                         
          Committee Substitute (FIN) was ADOPTED.                                                                               
          2:42:00 PM                                                                                                          
          REPRESENTATIVE  BILL THOMAS,  Sponsor, introduced  his staff,                                                         
          Kaci  Schroeder  and   testified  regarding  the  bill.    He                                                         
          explained  that  the  bill proposed  to  take  ten cents  per                                                         
          barrel from  oil price revenue  sharing and place  it into an                                                         
          alternative   energy  fund,   to  be   administered   by  the                                                         
          Alternative  Energy  Authority  (AEA).    He noted  that  AEA                                                         
          already  had  the  infrastructure   necessary  to  administer                                                         
          grants.     He  estimated   that  the  fund   would  generate                                                         
          approximately  $30 million  per year.    The  program funding                                                         
          mechanism could be in  place only if the price of oil was $35                                                         
          per  barrel or  higher.   The program  funding  could sustain                                                         
          itself  if left  alone.    He  explained that  the  AEA would                                                         
          direct  the  funding  to support  alternative  and  efficient                                                         
          energy  projects.   Grants may  not exceed  $20  million, but                                                         
          grantees may  be eligible for more than  one grant over time.                                                         
          Projects are to be submitted  to the AEA, who would use their                                                         
          existing criterion to  determine project viability.  Grantees                                                         
          must match funding at  25 percent.  He defined an alternative                                                         
          energy  project as "a  project that  produces energy  for the                                                         
          production  of electricity,  heat or  medical  power, derived                                                         
          from   renewable  or  local   resources  other   than  liquid                                                         
          petroleum, primarily  diesel."   He went  on to define energy                                                         
          efficiency  project as one  that "improves the  efficiency of                                                         
          energy generation,  transmission or use  at facilities across                                                         
          the  state".   This  includes  facility installation,  energy                                                         
          efficient  lighting, and  improved  use of  diesel fuel.   He                                                         
          defined  an  electric utility  as  "an  entity that  provides                                                         
          power for  public consumption  and has been certified  by the                                                         
          Regulatory Commission of Alaska (RCA)".                                                                               
          2:46:42 PM                                                                                                          
          Representative Thomas  noted that the legislation was crafted                                                         
          following  a trip to Yakutat,  where the cost of  fuel was an                                                         
          issue,  and residents  expressed a  desire to  utilize nearby                                                         
          natural gas,  but lacked the financial resources  to create a                                                         
          system.  He pointed  out that when Haines converted to hydro-                                                         
          electric  power,   although  some  were   skeptical,  it  has                                                         
          provided  steady  rates  in  the current  climate  of  rising                                                         
          costs.   He expressed  the desire for  the State to  plan for                                                         
          the future.                                                                                                           
          Representative  Thomas proposed  that the bill  would benefit                                                         
          urban as well  as rural communities.  He  noted that in South                                                         
          Central  Alaska, natural  gas was running  low.   He stressed                                                         
          that  using current resources  to solve these  problems would                                                         
          save money  in the future.   He stated that  some communities                                                         
          in  his district  use over  a million  gallons of  diesel per                                                         
          year.   He suggested that  with a grant program,  a community                                                         
          could  bond their share  and recoup the  funds over a  six or                                                         
          eight year period, using  technologies such as wind and tidal                                                         
          surge.   He  also proposed  that it  could  free up  some PCE                                                         
          Additionally,  Representative  Thomas  noted that  decreasing                                                         
          energy  costs to consumers puts  money back into  the Alaskan                                                         
          economy.  He referenced  the Fire Island project, and Chugiac                                                         
          Electric that sought  to harness geothermal power at a nearby                                                         
          hotsprings,  as well  as some  southeast communities  looking                                                         
          into using  wood fire to heat swimming pools  and cut down on                                                         
          wood waste.   He concluded  his presentation by  pointing out                                                         
          that  projects  would  be screened  by  the  AEA rather  than                                                         
          approaching  the legislature  directly, thereby  streamlining                                                         
          the funding process.                                                                                                  
          2:50:23 PM                                                                                                          
          Representative  Thomas expressed his  usual stance  as a pro-                                                         
          industry  legislator, and conceded  that a  new environmental                                                         
          focus  was novel  for his  office.   Co-Chair Meyer  observed                                                         
          that  using  hydro  energy  seemed  wise  for  Representative                                                         
          Thomas' district and  asked if there was reference to nuclear                                                         
          energy  in  the bill.    Representative  Thomas stated  that,                                                         
          although  there was  allowance  for nuclear  projects  in the                                                         
          bill, the AEA did not currently allow such projects.                                                                  
          2:51:46 PM                                                                                                          
          Representative  Holm asked about the criterion  that would be                                                         
          adopted  to determine  economic viability  of a project.   He                                                         
          maintained   caution  in   giving  authority   to  regulatory                                                         
          agencies,  and  asked for  assurances  of  fair and  unbiased                                                         
          decision making.                                                                                                      
          2:52:35 PM                                                                                                          
          Representative   Thomas  reiterated  that   AEA  already  had                                                         
          established  criteria  in place,  as  well as  a process  for                                                         
          reviewing projects.   He cited several communities that would                                                         
          benefit from the proposed program.                                                                                    
          Representative  Hawker  referred  to  earlier  comments,  and                                                         
          asked  for clarification  of  the  idea of  the State  having                                                         
          "extra" wealth.   Representative Thomas referred  to the vote                                                         
          to reserve  $600 million and proposed that  if the State used                                                         
          $20 to  $30 million  to support alternative  energy projects,                                                         
          communities  could be weaned from dependence  on diesel fuel.                                                         
          He  referred to  several communities  that were  being helped                                                         
          with small  grants to retire debt and go  forward with energy                                                         
          projects.   He observed that oil prices  were not expected to                                                         
          decline, and  suggested it would be wise  to use reserves for                                                         
          pro-active  programs.    Responding  to  another  comment  by                                                         
          Representative  Hawker, Representative  Thomas  mentioned the                                                         
          PPT bill  and the perception that $1 billion  to $2.3 billion                                                         
          in revenue  would be raised by the State.   He suggested that                                                         
          some  of the monies  should be  used to  make the  State more                                                         
          energy independent.   He maintained that  the funding for his                                                         
          bill  would be generated  by the  State's royalties,  if they                                                         
          were at  a level over $35  per barrel.  He  proposed that, if                                                         
          adopted,  the  program would  use  ten cents  per barrel  for                                                         
          energy projects.   He stressed  that he did not  believe that                                                         
          the  entire $20  to $30 million  per year  would be  spent on                                                         
          2:56:38 PM                                                                                                          
          Representative Hawker  insisted upon clarifying the notion of                                                         
          "extra"  wealth.   He referenced  the "prevailing  price", or                                                         
          West Coast  price, of $35 per barrel.   He proposed that more                                                         
          than  $45  per  barrel  was  needed to  balance  the  State's                                                         
          budget,  and maintained  that by  taking  ten cents  from the                                                         
          amount  it increased  the State's  deficit.   He  stated that                                                         
          there   was  not  currently   adequate  funding   for  social                                                         
          services,  and proposed that  taking $100 million  out of the                                                         
          budget would result in deficit spending for the State.                                                                
          Representative Thomas  replied that projects would ultimately                                                         
          be channeled  through the legislative  budget process, giving                                                         
          legislators  the opportunity not  to fund them if  funds were                                                         
          not  available.  He  emphasized that  since his  district was                                                         
          dependant upon diesel,  it was a priority for him to see them                                                         
          replace this with alternative energy.                                                                                 
          Representative  Hawker  expressed concern  that  even with  a                                                         
          large increase in taxes  on the oil industry, the funding was                                                         
          already  spent.  He  debated the idea  that the State  was in                                                         
          the position of having "extra" wealth.                                                                                
          2:59:01 PM                                                                                                          
          Representative   Thomas   emphasized   that   this   was   an                                                         
          appropriation  bill,  and  would  come before  the  Committee                                                         
          yearly for approval.  He urged approval.                                                                              
          Vice-Chairman  Meyer agreed that the bill  was timely and had                                                         
          merit, and suggested  that the funding source would be worked                                                         
          out in the legislative process.                                                                                       
          Representative Joule  commented on the hope for the gas line.                                                         
          He noted that  a benefit of the gas pipeline  would be access                                                         
          to that  energy for Alaskans  in various areas  of the State.                                                         
          He  stressed  that the  proposed  legislation  is to  explore                                                         
          alternative energy to  areas that will not have access to the                                                         
          gas  line reserves.    He emphasized  the appropriateness  of                                                         
          these areas seeking  alternative energy methods.  He observed                                                         
          that  the bill attempted  to liberate these  communities from                                                         
          dependence on diesel fuel.  He encouraged the legislation.                                                            
          3:01:44 PM                                                                                                          
          Co-Chair  Meyer agreed that  especially in remote  areas like                                                         
          Kotzebue, such alternative sources would be very helpful.                                                             
          3:02:24 PM                                                                                                          
          RON   MILLER,    EXECUTIVE   DIRECTOR,    ALASKA   INDUSTRIAL                                                         
          DEVELOPMENT AND EXPORT  AUTHORITY (AIDEA) testified regarding                                                         
          the  bill.   He agreed  that the  bill did  not create  a new                                                         
          program,  but rather  created another  source of  funding for                                                         
          existing  alternative  energy programs.   He  noted  that the                                                         
          program was currently  funded primarily by federal funds, but                                                         
          was completing an outside  solicitation.  He stated that they                                                         
          used   an  established  set   of  guidelines   in  evaluating                                                         
          potential  projects.   Their  primary  focus is  on the  life                                                         
          cycle savings  of a project.  He referred  to the Alternative                                                         
          Energy Newletter,  and described projects  such as the Prince                                                         
          of  Wales   Island  hydro  electric  project,   funded  by  a                                                         
          combination  of grant fund and  funds from the  power project                                                         
          loan fund.   He noted  that this project would  displace over                                                         
          half a million gallons  of diesel annually for that area.  He                                                         
          expressed support of the bill.                                                                                        
          3:04:37 PM                                                                                                          
          Representative Holm  asked what  criteria  were  employed  to                                                         
          decide which areas and projects would be funded.                                                                      
          PETER  CRIMP,  PROJECT  MANGER  FOR  ALTERNATIVE  ENERGY  AND                                                         
          ENERGY  EFFICIENCY,  DEPARTMENT  OF COMMERCE,  COMMUNITY  AND                                                         
          ECONOMIC  DEVELOPMENT  responded  that  they  conducted  life                                                         
          cycle  economic analayses  for each  project, looking  at the                                                         
          overall  savings  for   its  life.    He  noted  that  for  a                                                         
          hydroelectric  project with  a span  of  40 years,  the costs                                                         
          were  compared over  a horizon  to an  existing  project, for                                                         
          example  a diesel  power  project,  and then  to the  present                                                         
          value  of savings.   He  noted that  they ranked  projects by                                                         
          benefit to costs ratios  and allocated resources according to                                                         
          these ratios.                                                                                                         
          3:06:09 PM                                                                                                          
          Representative Holm  asked how various  communities  would be                                                         
          chosen.    Mr.  Crimp   noted  that  they  would  choose  the                                                         
          community  project  with the  most  savings  compared to  the                                                         
          least costs.                                                                                                          
          Representative  Holm asked  if any  biases existed,  and only                                                         
          strict  calculations were  used.  Mr.  Crimp noted  that they                                                         
          made  every effort to  conduct "arms' length"  assessments of                                                         
          projects, using  a financial analysis as  well as an analysis                                                         
          of technical merit.                                                                                                   
          3:07:27 PM                                                                                                          
          Representative  Holm  noted  a  concern expressed  about  the                                                         
          project at Fire Island,  regarding loss of wildlife and other                                                         
          deterrents.    He  speculated  that  projects  might  contain                                                         
          possible problems not  addressed from a financial standpoint.                                                         
          He asked how these concerns were taken into account.                                                                  
          3:08:27 PM                                                                                                          
          Mr.  Crimp  explained  that before  Alaska  Energy  Authority                                                         
          provided  any   funding  for  projects,   they  required  all                                                         
          necessary  permits.  He noted  that before Fire  Island could                                                         
          be  approved, it would  need permits  from Fish  and Wildlife                                                         
          service,  as well  as possibly  the FAA,  Core  of Engineers,                                                         
          etc.  Balanced financing for the project is also required.                                                            
          3:09:21 PM                                                                                                          
          Representative Kerttula   observed that the ultimate  goal of                                                         
          the bill  was not only to  provide good sources  of energy to                                                         
          various  areas Statewide,  but also  long-term  cost savings.                                                         
          Mr.  Crimp  confirmed   that  this  was  the  thrust  of  the                                                         
          Authority's   program  -  to  reduce  the   overall  cost  of                                                         
          providing energy to the State.                                                                                        
          3:10:19 PM                                                                                                          
          Representative Joule      asked about the progress of the Ing                                                         
          River  project.    Mr.  Crimp explained  that  a  feasibility                                                         
          analysis  was being  conducted for the  project in  Knik Arm,                                                         
          that would  use tidal flow  turbon technology. He  noted that                                                         
          the  same technology  could be employed  in the  Yukon River.                                                         
          Although  the  economics were  currently  unclear, he  stated                                                         
          that the  overall effort has been useful  in producing common                                                         
          assumptions, and projected 3 to 5 years for completion.                                                               
          3:11:38 PM                                                                                                          
          Representative Hawker     referred to Page 2,  Lines 8 to 13,                                                         
          which  discusses criterion for  grant projects. He  asked for                                                         
          clarification  of "economically viable" as  well as "services                                                         
          of the  grantee".  He  also asked how  economically liability                                                         
          was determined if a  project proved unviable, as had been the                                                         
          case in some past projects.                                                                                           
          Mr. Crimp  referred to earlier testimony  by Mr. Miller about                                                         
          the ranking  of proposals.   He noted that the  services that                                                         
          reduce costs for consumers  would receive the focus.  He also                                                         
          stressed   that  the  current   program  required   a  match,                                                         
          sometimes  as much  as 60  percent, involving  out  of pocket                                                         
          match as well as financing.                                                                                           
          3:14:17 PM                                                                                                          
          Representative Hawker     noted the  current  bill  contained                                                         
          only  a 25  percent match,  and asked  if a performance  bond                                                         
          would  be  required  equal  to  State  funding.    Mr.  Crimp                                                         
          responded  that there  was no  requirement for  a performance                                                         
          bond,  but emphasized  that the  recipient's investment  in a                                                         
          project was an incentive for project success.                                                                         
          Representative Hawker     maintained that while  providing an                                                         
          incentive  for programs, the  State remained liable  for lost                                                         
          3:15:14 PM                                                                                                          
          Representative  Holm asked if  these projects were  under the                                                         
          supervision  of the  Regulatory Commission  of  Alaska (RCA).                                                         
          Mr. Miller  stated that some utilities were  not regulated by                                                         
          3:16:08 PM                                                                                                          
          Representative  Kelly referred to a presentation  given about                                                         
          the  small, interconnected  hydro power  plants  for exchange                                                         
          into  the  Northwest.   He  observed  that  in major  Alaskan                                                         
          communities in  Southeast this might be a  viable option.  He                                                         
          cited  personal experience  with various  experimental energy                                                         
          projects,  and noted that  hydro-electric power tended  to be                                                         
          the most proven resource,  as opposed to other projects which                                                         
          were more  speculative.  He asked if this  project focused on                                                         
          hydro power as a solution for Alaska.                                                                                 
          3:17:54 PM                                                                                                          
          Mr. Miller  responded that they had not  been approached with                                                         
          such  a  proposal,  and  speculated  that, especially  as  an                                                         
          export  project, it  would have  to prove  cost effectiveness                                                         
          for Alaska.  Representative Kelly noted       that     diesel                                                         
          efficiency  and hydro  projects seemed  to have  the greatest                                                         
          amount  of improvement,  but  observed  that sometimes  these                                                         
          projects  might be  adversely affected  by climate  and other                                                         
          environmental factors.                                                                                                
          3:19:19 PM                                                                                                          
          Mr.  Miller  noted  that  they  were  very  active  in  hydro                                                         
          electric   projects,  supporting   them  through   grant  and                                                         
          financing programs.   He noted two  successful hydro projects                                                         
          in Juneau,  as well  as on Prince of  Wales Island.   He also                                                         
          noted   that  diesel   efficiency   has  proven   successful,                                                         
          particularly  with   in-use  efficiencies  such  as  lighting                                                         
          retrofits.   He  noted  that Juneau  had some  of the  lowest                                                         
     energy rates in the States due to hydro projects.                                                                          
          3:20:33 PM                                                                                                          
          Vice Chairman Stoltze     opened   the   floor    to   public                                                         
          CHRIS  ROSE,  EXECUTIVE  DIRECTOR,  RENEWABLE  ENERGY  ALASKA                                                         
          PROJECT,  testified  via  teleconference  in support  of  the                                                         
          bill.   He observed  that 40  states have  incentive policies                                                         
          built in at the state  level for energy renewal.  He observed                                                         
          that the price of oil  was projected to remain high, and that                                                         
          communities  that relied  solely  on this  source would  face                                                         
          increasing   costs.     He   also  noted   that  there   were                                                         
          opportunities  for   improvements  in  the  rail  belt.    He                                                         
          explained that  his organization was educating  the public on                                                         
          the changes  in technologies.  For example,  in some areas of                                                         
          the country, wind was  the cheapest form of energy available.                                                         
          He  also noted  that  having a  policy like  this bill  would                                                         
          create a  future energy framework  for the state.   He stated                                                         
          that the  renewable energy market was the  fastest growing in                                                         
          the  country.   The "clean  energy market"  was  predicted to                                                         
          quadruple  in  nine  years'  time.    He  concluded  that  if                                                         
          policies  like  this  were  put  in  place,  consumers  would                                                         
          benefit  from fixed  rate power, such  as instituting  a wind                                                         
          generator in rural areas.   He emphasized that efficiency was                                                         
          also part  of the overall program needed.   He concluded that                                                         
          they  believed in  the merit  of the  policy, and  encouraged                                                         
          legislators  to use the amount  of oil as a  guidepost in how                                                         
          much was invested into alternative energy.                                                                            
          3:26:14 PM                                                                                                          
          MEERA KOHLER,PRESIDENT  AND CEO, ALASKA  VILLAGE ELECTRIC CO-                                                         
          OP testified via teleconference  in support of the bill.  She                                                         
          explained  that  they  were  a utility  providing  energy  to                                                         
          21,000 Alaskans  in 52 villages.  She observed  that the bill                                                         
          provided an  opportunity for communities dependent  on oil to                                                         
          develop  some   alternatives  to  rising   oil  costs.    She                                                         
          applauded  the bill's link to  the cost of oil,  and the high                                                         
          level  cap on  the grants,  as well  as the  25 percent  cash                                                         
          match.  She concluded  that the bill brought Alaska closer to                                                         
          energy independence and encouraged its support.                                                                       
          3:28:09 PM                                                                                                          
          Representative Kelly  asked  if  her  organization  would  be                                                         
          amenable  to assuming  the completion risk  of a  venture, or                                                         
          converting the 25 percent  match to a loan.  Ms. Kohler noted                                                         
          that 25 percent of the  cost of a project was absorbed by the                                                         
          utility,  and the other  costs were  covered by  the granting                                                         
          agency.  She noted that  the utility would retain the risk of                                                         
          the 25 percent, unless  they convinced the granting agency to                                                         
          share any additional costs.                                                                                           
          3:30:28 PM                                                                                                          
          Representative Kelly      observed  that  if  a  project  was                                                         
          unsuccessful,  a utility  would  need to  take on  completion                                                         
          costs  for a project  that was not  generating revenue.   Ms.                                                         
          Kohler concurred,  and added that if a  project was funded at                                                         
          $5 million,  and actually cost $6 million,  the utility would                                                         
          need  to  bridge  that  gap.   She  stated  that  they  might                                                         
          approach  the  federal  government,  but confirmed  that  the                                                         
          utility would somehow need to come forward.                                                                           
          3:31:38 PM                                                                                                          
          JOSH  LAROSE, SOUTHWEST  MUNICIPAL CONFERENCE,  testified via                                                         
          teleconference  in  support  of the  bill.    He referred  to                                                         
          current newspaper  articles about the prices  of diesel fuel,                                                         
          as well  as the rural  energy funding bills,  concluding that                                                         
          the   funding   for   rural   diesel   energy   would   prove                                                         
          unsustainable.  He pointed  out that the debate was regarding                                                         
          how to best provide  options to these rural areas.  He stated                                                         
          that  small   communities  were  facing   a  bleak  financial                                                         
          situation, and  that the bill presented immediate  as well as                                                         
          future relief.                                                                                                        
          3:33:46 PM                                                                                                          
          KATHIE  WASSERMAN,  ALASKA  MUNICIPAL  LEAGUE,  testified  in                                                         
          support  of the legislation.   She  stated that the  bill was                                                         
          forward  thinking, encouraging investigation  into utilities'                                                         
          future,  and  cost  savings  in  areas  such  as  educational                                                         
          facilities.   She cited  her experience  as mayor of  a small                                                         
          community,  and  recalled the  high  rate of  energy cost  to                                                         
          these areas.   She proposed that if more  communities had the                                                         
          option to study other means it would provide savings.                                                                 
          3:36:02 PM                                                                                                          
          Co-Chair Meyer asked  about the nature of  the hydro plant in                                                         
          her area.   Ms. Wasserman noted  that the was put  in place a                                                         
          long time  ago by the  cold storage company that  founded the                                                         
          community of Pelican,  and not paid for by the city or State.                                                         
          3:36:38 PM                                                                                                          
          Representative Hawker     pointed out  the $7  billion dollar                                                         
          liability to the pension  plan by the State.  He asked how he                                                         
          could  invest in this  program without addressing  this other                                                         
          legal liability.                                                                                                      
          3:37:17 PM                                                                                                          
          Ms.  Wasserman  suggested that  there  might  be other  areas                                                         
          where  monies could  be cut in  the budget.   She  offered to                                                         
          discuss these ideas with legislators.                                                                                 
          3:37:59 PM                                                                                                          
          PAUL FUHS,  CITY AND BOROUGH OF YAKUTAT,  testified about the                                                         
          costs  of energy  to smaller  communities.   He  recalled the                                                         
          importance of savings measures to these areas.                                                                        
          3:39:48 PM                                                                                                          
          Co-Chair Meyer  agreed that the legislation  was a good idea.                                                         
          He  offered  to  work  with  the  Sponsor  to  come  up  with                                                         
          alternative funding.                                                                                                  
          3:40:57 PM                                                                                                          
          HB 445 was HELD in Committee for further consideration.                                                               
          The meeting was adjourned at 3:41 P.M.                                                                                

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