Legislature(2021 - 2022)GRUENBERG 120

02/08/2022 03:00 PM House STATE AFFAIRS

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Heard & Held
-- Testimony <Invitation Only> --
Heard & Held
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**Streamed live on AKL.tv**
         HB  94-PROHIBITED COMMERCIAL LEASE PROVISIONS                                                                      
3:35:36 PM                                                                                                                    
CHAIR KREISS-TOMKINS  announced that the final  order of business                                                               
would  be HOUSE  BILL  NO. 94,  "An Act  prohibiting  the use  of                                                               
certain restrictive  provisions in  leases of space  for business                                                               
use  in  certain  federally  established  zones;  and  adding  an                                                               
unlawful act  to the Alaska  Unfair Trade Practices  and Consumer                                                               
Protection Act."                                                                                                                
3:35:58 PM                                                                                                                    
PAUL  LABOLLE, Staff,  Representative Neal  Foster, Alaska  State                                                               
Legislature, on  behalf of Representative Foster,  prime sponsor,                                                               
explained  that  HB  94  would  prohibit  contract  clauses  that                                                               
prevent  or  limit  either  partys   ability  to  participate  in                                                               
business  that compete  with the  other  party.   In essence,  it                                                               
would add  noncompete clauses to Alaskas   Unfair Trade Practices                                                               
for lease agreements  in HUBZones.  He noted  that  HUBZones  are                                                               
defined by  the United State Small  Business Administration (SBA)                                                               
under 15 U.S.C. 657a (HUBZone Act of 1997).                                                                                     
CHAIR KREISS-TOMKINS asked Mr. Labolle  whether he wanted to make                                                               
any additional refresher comments on the bill.                                                                                  
MR. LABOLLE addressed questions from the previous bill hearing                                                                  
pertaining to HUBZones and where they are located.  He noted                                                                    
that at that time they were under review; however, that process                                                                 
has been frozen until June 30, 2023, due to pending U.S. Census                                                                 
3:37:46 PM                                                                                                                    
REPRESENTATIVE VANCE  inquired about  the specific  instance that                                                               
highlighted the need for this legislation.                                                                                      
MR.  LABOLLE  conveyed  that  the  local  Native  corporation  in                                                               
Mountain Village had  entered into a lease  agreement with Alaska                                                               
Commercial (AC)  Company; however, due to  the noncompete clause,                                                               
they couldnt   open a smaller  store that would compete  with AC.                                                               
He  explained  that in  rural  areas,  it's  hard enough  to  get                                                               
competition to begin with because  the population base is so low.                                                               
He said the  added barrier to competition is what  the bill hopes                                                               
to remove.                                                                                                                      
3:39:19 PM                                                                                                                    
REPRESENTATIVE CLAMAN  asked whether this legislation  raises any                                                               
equal protection issues.                                                                                                        
TERRY BANNISTER,  Legislative Legal  Services, confirmed  that it                                                               
does  raise equal  protection  issues as  everyone  would not  be                                                               
treated equally.                                                                                                                
REPRESENTATIVE CLAMAN pointed out  that the population within the                                                               
HUBZone would be treated the  same and the population outside the                                                               
HUBZone  would be  treated  the  same.   He  questioned why  that                                                               
doesnt resolve the equal protection issue.                                                                                      
MS. BANNISTER remarked   Because the people outside  the zone are                                                               
treated differently than the people inside the zone.                                                                            
REPRESENTATIVE  CLAMAN   contended  that  the   equal  protection                                                               
problem  would  be  a  federal  issue,  as  it  pertains  to  the                                                               
3:40:25 PM                                                                                                                    
MS.  BANNISTER said  she  had  not examined  federal  law on  the                                                               
HUBZones yet.                                                                                                                   
REPRESENTATIVE CLAMAN  asked whether there are  issues related to                                                               
delegation of authority to the federal government.                                                                              
MS.  BANNISTER  answered yes.    She  said  the bill  depends  on                                                               
establishing  operation  of  the  HUBZones, which  is  a  federal                                                               
activity.  She  added that Alaska provisions would  depend on the                                                               
federal  governments  actions  as  they relate  to the  HUBZones.                                                               
Therefore,  the  issue of  delegating  authority  to the  federal                                                               
government is raised.                                                                                                           
3:41:51 PM                                                                                                                    
CHAIR   KREISS-TOMKINS  asked   whether  ultimately,   these  are                                                               
constitutional problems.                                                                                                        
MS. BANNISTER answered yes.   She noted that the equal protection                                                               
issue also  concerns local  and special  legislation, which  is a                                                               
state  constitutional issue.   Further,  she said,   the improper                                                               
delegation would be the activity  that the legislature is allowed                                                               
to   perform   their   activities,    which   is   ultimately   a                                                               
constitutional issue.                                                                                                           
CHAIR KREISS-TOMKINS  asked Ms. Bannister  to speak to  the local                                                               
and special legislation consideration.                                                                                          
MS. BANNISTER stated  that the bill would only  apply to HUBZones                                                               
in certain  areas of the state.   She explained that  a provision                                                               
in the constitution indicates that  the legislature cannot pass a                                                               
law  that only  applies locally.   Alternatively,  a general  law                                                               
could be  made applicable at the  will of the courts.   She added                                                               
that if  the courts would  decide whether  the bill bears  a fair                                                               
and substantial relationship to legitimate state purposes.                                                                      
CHAIR KREISS-TOMKINS asked Ms. Bannister  to opine on whether the                                                               
legislation  bears   a  fair  and  substantial   relationship  to                                                               
legitimate state purposes.                                                                                                      
MS. BANNISTER said she has no opinion at this time.                                                                             
CHAIR  KREISS-TOMKINS asked  whether she  has an  opinion on  the                                                               
broader constitutionality of the bill.                                                                                          
MS. BANNISTER answered no.  She  said she didnt  have enough time                                                               
to consider the facts.                                                                                                          
CHAIR  KREISS-TOMKINS  sought  to   confirm  that  she  was  just                                                               
flagging them as issues.                                                                                                        
MS. BANNISTER  confirmed that she  was merely  bringing attention                                                               
to issues that may be raised.                                                                                                   
3:45:08 PM                                                                                                                    
REPRESENTATIVE  CLAMAN asked  whether  the constitutional  issues                                                               
that  have   been  identified  are   state  related   or  federal                                                               
constitutional issues.                                                                                                          
MS.  BANNISTER said  the  equal protection  issue  might raise  a                                                               
problem with federal legal protection laws.                                                                                     
REPRESENTATIVE  CLAMAN asked  whether Ms.  Bannister agrees  that                                                               
the  Alaska equal  protection provisions  are  stronger than  the                                                               
federal equal protection provisions.                                                                                            
MS. BANNISTER answered yes.                                                                                                     
3:45:57 PM                                                                                                                    
REPRESENTATIVE  VANCE asked  where  the HUBZones  are located  in                                                               
MR.  LABOLLE said  HUBZones  cover all  of  Alaska for  different                                                               
reasons.   Generally  speaking, he  said, Anchorage,  Mat-Su, and                                                               
Fairbanks are the areas outside the HUBZones.                                                                                   
REPRESENTATIVE  VANCE  sought  to  confirm  that  it's  the  bill                                                               
sponsors  interpretation  that the  bill would not  conflict with                                                               
Alaska statutes.                                                                                                                
MR.  LABOLLE said  the thought  process behind  the bill  is that                                                               
equal  protection  provisions  can  be violated  if  there  is  a                                                               
compelling state interest.   In this case, he  indicated that the                                                               
compelling interest  would be socioeconomic.   He added  that the                                                               
bill  sponsor stuck  with the  federally defined  HUBZones rather                                                               
than  site   specific  ones  in  consideration   of  the  special                                                               
legislation provision.                                                                                                          
3:48:02 PM                                                                                                                    
REPRESENTATIVE EASTMAN directed attention  to Section 2 and asked                                                               
why  not make  the  law apply  to  every area  of  the state,  as                                                               
opposed to only in HUBZones.                                                                                                    
MR. LABOLLE said the bill sponsor  wouldn't be opposed to that if                                                               
it  is   the  will   of  the  committee.     He   explained  that                                                               
Representative  Foster is  looking  at the  issue  from a  rural-                                                               
centric  perspective  and  didnt    want  to  involve  Anchorage;                                                               
however,  if  Anchorage,  Mat-Su,  and  Fairbanks  wanted  to  be                                                               
included, it wouldnt pose any problems.                                                                                         
3:49:02 PM                                                                                                                    
CHAIR  KREISS-TOMKINS  asked whether  Sitka  and  Homer would  be                                                               
affected by the geographic scope of the proposed legislation.                                                                   
MR. LABOLLE offered to follow up with that information.                                                                         
3:49:30 PM                                                                                                                    
REPRESENTATIVE  CLAMAN, in  response  to Representative  Eastman,                                                               
surmised that if Anchorage, Fairbanks,  and Mat-Su were included,                                                               
property owners  would want to  control whos  on  their property.                                                               
For  example,  if  the  bill   were  to  pass  and  a  quick-stop                                                               
convenience store  was required to go  up in a mall  wherein Fred                                                               
Meyer was  located, Fred Meyer  would be concerned with  that, he                                                               
opined.   He shared  his belief  that its   different in  a small                                                               
community that  only has one  strip of  stores owned by  a single                                                               
CHAIR KREISS-TOMKINS,  in reference  to the HUBZones  Map located                                                               
on the  SBA website asked,   What is  designated by the  red, Mr.                                                               
MR. LABOLLE said the red  indicates that the HUBZone is qualified                                                               
as a county.                                                                                                                    
CHAIR  KREISS-TOMKINS  sought to  confirm  that  red signifies  a                                                               
MR.  LABOLLE  replied,  Not  just  red.     He provided  a  brief                                                               
explanation of how to use the interactive map.                                                                                  
CHAIR KREISS-TOMKINS  returned to  his original  question, asking                                                               
whether Sitka and Homer are qualified HUBZones.                                                                                 
MR. LABOLLE confirmed that they are both in HUBZones.                                                                           
3:51:31 PM                                                                                                                    
REPRESENTATIVE KAUFMAN  suggested that there could  be unintended                                                               
consequences  that may  dampen businesses   interest in  an area.                                                               
He opined  that monopolies arent   good unless its  the  only way                                                               
to get goods and services into an area.                                                                                         
3:52:30 PM                                                                                                                    
REPRESENTATIVE  EASTMAN suggested  that a  geographically neutral                                                               
way to  write the bill  would be to  base the limitations  on the                                                               
size of the business involved or the number of locations it has.                                                                
MR.  LABOLLE said  he is  unfamiliar with  any statutes  that use                                                               
that specific categorization.  He  said another route to consider                                                               
would be by population size.                                                                                                    
3:53:44 PM                                                                                                                    
REPRESENTATIVE VANCE  urged further consideration of  the impacts                                                               
to the affected boroughs or municipalities.                                                                                     
MR. LABOLLE  acknowledged that if  the committee decided  to look                                                               
at alternate methods  of application, that would  be an important                                                               
3:54:48 PM                                                                                                                    
REPRESENTATIVE EASTMAN said he is  always reticent of referencing                                                               
federal law in  state statute because it is subject  to change in                                                               
the  future.   He  conveyed that  he would  be  more amenable  to                                                               
implementing the legislation without  a reference to HUBZones due                                                               
to the level of uncertainty.                                                                                                    
MR. LABOLLE confirmed that he would  be following up on the issue                                                               
of delegating  authority to the  federal government.   He further                                                               
acknowledged that  the HUBZones  are subject  to change,  as they                                                               
are reassessed every five years.                                                                                                
3:56:37 PM                                                                                                                    
CHAIR KREISS-TOMKINS announced that HB 94 would be held over.                                                                   

Document Name Date/Time Subjects
HB 142 Response Letter to H STA 5.7.21 PFD.pdf HSTA 2/8/2022 3:00:00 PM
HB 142
HB 142 Fiscal Note DOR-PFD-2-4-22.pdf HSTA 2/8/2022 3:00:00 PM
HB 142
HB 94 Fiscal Note VAR-EXE-2-5-22.pdf HSTA 2/8/2022 3:00:00 PM
HB 94
HB 94 Additional Info Hubzone-Program-Improvements-FAQ.pdf HSTA 2/8/2022 3:00:00 PM
HB 94