Legislature(2013 - 2014)CAPITOL 106
03/25/2014 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB132 | |
| SB106 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 132 | TELECONFERENCED | |
| + | HB 296 | TELECONFERENCED | |
| + | SB 106 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 106-STATE LAND DISP./LEASEHOLDER PREFERENCE
8:11:27 AM
CHAIR LYNN announced that the final order of business was CS FOR
SENATE BILL NO. 106(STA), "An Act providing for certain
individuals who have erected a building on land leased from the
state to receive a preference right to purchase certain state
land without competitive bid."
8:11:54 AM
SENATOR KEVIN MEYER, Alaska State Legislature, as prime sponsor,
introduced SB 106. He acknowledged that Representative
Gabrielle LeDoux had the House companion to SB 106. He said the
proposed legislation is necessary for the protection of state
land lease holders who have invested in businesses that depend
on the land for their livelihood. He said SB 106 came about
when one of his constituents brought to his attention that
current state statutes do not provide a way for state lease
holders to purchase the property in which they have invested -
up to millions of dollars of retirement money - prior to the
land then being conveyed to a municipality or borough in an
entitlement land selection. Senator Meyer remarked that it is
not uncommon for people to take early retirement and take the
money to build a fishing lodge in remote Alaska. He explained
that when municipalities or boroughs form, they are allowed to
choose land, and occasionally they pick the same land on which
leaseholders have invested money to build a hunting or fishing
lodge. The person who has built the lodge has no way to recoup
his/her investment or purchase the land from the state prior to
it being conveyed. He stated his belief that these Alaskans
deserve protection.
8:13:54 AM
SENATOR MEYER stated that under SB 106, an individual would be
allowed to receive a no-bid, first right of refusal preference,
upon meeting the following conditions: The person must have
erected a building on the land, used the land for a bona fide
purpose for at least the past 10 years, and relied on the
business for at least 25 percent of his/her total income over
the previous 10 years. He said representatives were present
from the Department of Natural Resources (DNR), and the
department anticipated that there may be 10-15 individuals
impacted by the proposed legislation. He noted that SB 106 just
passed on the Senate floor, with no opposition from the majority
or minority. He said the money from the sale of land to the
individual would go to the municipality or borough, not the
state.
8:15:29 AM
REPRESENTATIVE GATTIS questioned why the bill proposed giving
the individuals the right to purchase certain state land without
competitive bid.
SENATOR MEYER deferred to his staff.
8:16:01 AM
EDRA MORLEDGE, Staff, Senator Kevin Meyer, Alaska State
Legislature, on behalf of Senator Meyer, prime sponsor, stated
that the proposed legislation would apply to those who had
originally obtained their leases through a competitive bid
process, and then the chance to purchase the land - if it was
put up for sale - would be through a noncompetitive first right
of refusal.
REPRESENTATIVE GATTIS indicated that if she was the lodge owner
who had leased the land, she would want the first right of
refusal, giving her the ability to buy the land at fair market
value. She said she understood the reasons that it would not be
fair to have a competitive bid, where a competing lodge owner
might "whipsaw this bid up there." She relayed, "I have been
... part of bids that have done that, and it doesn't seem fair."
She said she was wondering what the reason was for "the
competitive versus the noncompetitive."
8:18:10 AM
SENATOR MEYER suggested Representative Gattis' question might be
better answered by someone from DNR.
8:18:40 AM
WYN MENEFEE, Chief of Operations, Central Office, Division of
Mining, Land and Water (DMLW), Department of Natural Resources
(DNR), stated that "the lease that would be eligible for this
has to be offered competitively." He continued as follows:
The point at which a municipality comes and selects
the land, and then you're going to have to make a
disposal to that lessee under the preference right,
there's no competition; there's no bidding at that
point; it's just appraised for market value sale. The
only competitiveness is initially when the person
applied to get a lease; that's when the competition
occurred. ... As long as that person prevailed and
got the lease, and then invested all that income to
that, then there's no more competition after that
point.
8:19:43 AM
REPRESENTATIVE GATTIS clarified that she understood that there
is no competition after the initial competitive bid, but
explained that she would like to know why.
MR. MENEFEE replied that a preference right recognizes that
there is no competition. He stated, "The bill, as it was
brought forward by the sponsor, said that it was to essentially
recognize the investment that the person had put into the land,
and because of that, award them a preference."
8:20:31 AM
REPRESENTATIVE ISAACSON asked if there has ever been a situation
in which someone leased land, but did not develop it as a
business venture.
MR. MENEFEE answered that public and charitable leases are under
AS 38.05.810; however, the preference right proposed under SB
106 addresses only those leases obtained competitively under AS
38.05.070. In response to a follow-up question, he recollected
that under AS 38.05.810, there is a capability to lease or sell,
as appropriate for the area, the classification of the area, and
under DNR's management plan.
REPRESENTATIVE ISAACSON questioned whether [public and
charitable leases] should be added to SB 106 so that any
investment on leasehold land would be protected.
8:23:34 AM
MR. MENEFEE said he thinks that is a separate issue. He
suggested Representative Isaacson consider that somebody who
invests in land does not necessarily lose his/her investment.
He clarified that the term of length of a lease is contingent
upon what the person will be doing with the land and the amount
of investment the person makes. He said the division amortizes
the investment to figure out how long it will take the person to
recoup the investment. He said all the leases require the
person to "remove everything ... after you're done with that
term"; therefore, the person has made a business decision in
investing on state land to recoup the investment during the
lease period. He said if things go well, the division could
renew the lease, at which point the person would be making pure
profit. He continued as follows:
However, we lay over top of that the municipal
entitlement. If a municipal entitlement comes along,
the issue ... is that the lease doesn't go away at the
point of municipal entitlement. If we convey land
over to a municipality, the municipality has to honor
all the terms of the lease. If it was a 35-year
lease, and in year 10 of the lease it conveyed over to
the municipality, they still have those 25 years that
they're going to have all their terms honored so they
can recoup all their investment. So, they're not
"losing out on anything," but do they have longevity
as in purchasing the land? And the answer would be -
for a public and charitable - no, but ... the reason
why public and charitables typically don't end in a
sale is because they're supposed to be used for that
public and charitable purpose. If you put it over
into a sale, and they own the land, you haven't met
that purpose, because they get [a] discounted price;
they oftentimes - ... public and charitibles - get it
less than fair market value, ... or free, to use state
land. And, because of that, even if they're
investing, they've already gotten a discount to have
that investment on the land for a public and
charitable sale.
8:26:43 AM
REPRESENTATIVE ISAACSON referred to the proposed requirement
that the lessee must have made at least 25 percent of his/her
total income from the leased land to qualify for the preference
right. He suggested that a successful dentist who also owns a
hunting lodge that runs for 8 weeks a year, would not be making
at least 25 percent of his/her income from the lodge, but would
have made a significant investment in the lodge. He indicated
that that person would not get the same preference as "the next
person." He asked for an explanation as to why the 25 percent
barrier was chosen.
MR. MENEFEE answered that the barrier was modeled after another
preference right already in statute. He offered his
understanding that the reason is to preserve the capability of
people who "make their livelihood off of this." He said he
thinks there was not as much concern for people who "dabble in
it." He said, "They can still realize their investment over the
period of their lease; they just wouldn't be able to purchase it
forever."
REPRESENTATIVE ISAACSON asked Mr. Menefee if he thinks it makes
sense not to protect those who invest, regardless of the
percentage of income they derive.
MR. MENEFEE said DNR believes that anyone who gets a lease has
already protected his/her investment, because the lease term
itself is the protection. He continued as follows:
If somebody's going to make a business investment on a
lease, they already know that they have to end at the
end of the term of the lease; they have to realize
that that is their investment; so, they're already
protected. Anything on top of that, ... if the
legislature says we want to be able to sell it to that
individual to even further that investment, that is
what we would consider over the top of the original
business risk analysis.
REPRESENTATIVE ISAACSON said he is thinking of survivability,
but remarked that Mr. Menefee had offered a satisfactory answer
that the lease itself sets the term.
8:30:18 AM
REPRESENTATIVE HUGHES directed attention to existing language in
statute, [beginning on page 1, end of line 14, through page 2,
line 4], which read as follows:
If the director determines in a written finding that
the purchase or lease of the land would interfere with
public use by residents of the area, the director may
condition the purchase or lease to mitigate the
adverse effects on the public use or may reject the
application for the preference right.
REPRESENTATIVE HUGHES said she is trying to "synch that up" with
proposed new language [in Section 2], which she said addresses a
municipality or local government selecting land. She continued
as follows:
And now we have a private person who's leasing who has
the right for a noncompetitive bid, and it's a
municipality or local government seeking the land, so
I would think that would be for public use. And so,
I'm concerned about that ... private individual
application being considered, because it seems like it
would be easy for the director to make the argument
that this is for public use, so we're going to reject
it.
REPRESENTATIVE HUGHES asked how that would work.
8:31:32 AM
MR. MENEFEE said he thinks that mitigating the adverse effects
on the public and rejecting the application for the preference
right does not necessarily mean the public use of that parcel.
He continued as follows:
Let's say you have a very narrow valley, and a lease
sits right at the ... only place you can access
through there, and the use is constricted so that it
has to cross through that parcel: That would be [a]
public use idea where you would say if there's not an
easement or something that goes through that,
conceivably you could block other use of other state
lands.
MR. MENEFEE asked Representative Hughes to keep in mind that
while the original lease may be for 20 acres, "either of these
preference rights are only granting ... five acres"; therefore,
there is no guarantee that a person would get everything through
the preference right that he/she originally had as a lessee.
The lessee with more than five acres would have to choose which
part of the land was the most important. He continued as
follows:
Like in the new statute, if the director determines
the purchase of the land would interfere with public
use of residents of the area, we would not, under the
lease itself, assume that if you're going to sell a
five-acre parcel, or typically when you have the
lease, you've given, more or less, an exclusive right
to that acreage already. So, the use has been
restricted in some way, but I think you start talking
about physical constraints to the other land
surrounding - is it going to impact that?
MR. MENEFEE stated that when a municipality selects land, it can
do it in order to gain revenues or for multiple other reasons.
He said the language in the bill does not ask DNR to determine
why the municipality selected the land, "and that's not part of
... the decision on this."
8:34:08 AM
REPRESENTATIVE HUGHES asked if there was a narrow definition of
public use that would apply so that the individual would know,
or whether it was "just to the discretion of the director."
MR. MENEFEE answered that it currently is to the discretion of
the director. He added that "we don't have a specified
definition for that, so it's an interpretation."
REPRESENTATIVE HUGHES expressed concern that ["public use"] was
not defined.
8:35:25 AM
MELVIN GILLIS indicated that he is one of the people whom the
proposed legislation is intended to help. He said SB 106 would
protect himself and others like him from investing money
building on land only to have a borough decide it wants the
land. He imparted that he spent a couple million dollars. He
said he has been trying to buy the property since 1984, and the
borough decided it wanted the land he was using because it had
access and value. He explained that the access was the landing
strip he and his son took three years to build, and the value
was his lodge. He said he thinks there are even more people in
the state than estimated by Mr. Menefee that have "this
problem." He indicated that the proposed legislation would be a
good first step in protecting those Alaskans that make a living
in the Bush. In response to Chair Lynn, he said his lodge is
located approximately 480 miles west of Anchorage, between Cold
Bay and Port Heiden. Mr. Gillis, regarding entitlement, said
under law, "they" can only have vacant, unappropriated, and
unreserved land. He emphasized the need for a definition of
"vacant." He stated, "Five acres with a million and a half [to]
two million dollars-worth of investment is vacant according to
DNR."
8:38:04 AM
REPRESENTATIVE GATTIS said she has spoken with Mr. Gillis and
thinks "he's on to something." She indicated that he had helped
her "fully understand what the issue is."
8:38:47 AM
CHAIR LYNN, after ascertaining that there was no one else who
wished to testify, closed public testimony.
8:39:16 AM
REPRESENTATIVE ISAACSON asked if the expressed need to clarify
the word "vacant" is necessary for the passage of SB 106.
8:39:41 AM
SENATOR MEYER said he does not think so.
8:40:00 AM
MS. MARLIS echoed Senator Meyer's response. She suggested that
the issue could be addressed in the future when addressing a
separate statute about how a municipal entitlement is conveyed.
8:40:26 AM
REPRESENTATIVE KELLER expressed his appreciation to the sponsor
for bringing forward the proposed legislation, because he said
he approves of getting "land into the hands of Alaskans."
8:40:43 AM
SENATOR MEYER related that Mr. Gillis is his constituent and,
while the proposed legislation would not help his situation, it
would help future Alaskans in similar situations.
8:41:04 AM
REPRESENTATIVE KELLER moved to report CSSB 106(STA) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 106(STA) was
reported out of the House State Affairs Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01 SB 132 Version A.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 132 |
| 01a CS SB132 (STA).pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 132 |
| 02 CS SB132(STA) Sponsor Statement.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 132 |
| 03 SB 132 Summary of Changes-CS(STA).pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 132 |
| 04 SB 132 Leg Research Report.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 132 |
| 05 SB 132 Fiscal Note VerA DOA.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 132 |
| 01 HB296-verU.pdf |
HSTA 3/25/2014 8:00:00 AM |
HB 296 |
| 01a HB296-verA.pdf |
HSTA 3/25/2014 8:00:00 AM |
HB 296 |
| 02 HB296-Sponsor Statement.pdf |
HSTA 3/25/2014 8:00:00 AM |
HB 296 |
| 03 HB296-Changes from Version A to Version U.pdf |
HSTA 3/25/2014 8:00:00 AM |
HB 296 |
| 04 HB 296 Fiscal Note-DNR.pdf |
HSTA 3/25/2014 8:00:00 AM |
HB 296 |
| 01 SB 106 STA CS Version C.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 106 |
| 02 SB 106 Sponsor Statement.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 106 |
| 03 SB 106 Changes to Version C.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 106 |
| 04 SB 106 Legal Memo 10.31.13.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 106 |
| 05 SB 106 STA CS Fiscal Note.pdf |
HSTA 3/25/2014 8:00:00 AM |
SB 106 |