Legislature(1997 - 1998)

04/27/1998 01:08 PM House TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 476 - LEASE OF AIRPORT LAND                                                 
                                                                               
Number 0005                                                                    
                                                                               
CHAIRMAN WILLIAMS announced HB 476, "An Act relating to leases of              
state-owned or state-controlled airport or air navigational                    
facility land," is before the committee.                                       
                                                                               
Number 0007                                                                    
                                                                               
REPRESENTATIVE NORMAN ROKEBERG, Alaska State Legislature, came                 
before the committee.  He stated he is interested in this subject              
because he is from the airport district in Anchorage, and the fact             
that he spent some 25 years, in his career, for being known as the             
"dean of leasing" in the state of Alaska and specialized in real               
property of lease activities.  So this is an area of a speciality              
in the law that he is quite familiar.                                          
                                                                               
Number 0011                                                                    
                                                                               
REPRESENTATIVE ROKEBERG said, "In the Nineteenth Legislature, ...              
HB 543 was an endeavor to clarify the state leasing polices as                 
related to the airports in the state, particularly the                         
international airports in Anchorage and Fairbanks.  In the course              
of that particular bill, there was some discussion about how this              
would be implemented and so forth as it relates to the existing 55-            
year statutory requirement in statute.  Our consensus was that we              
did not want to restrict a current leaseholder, nor from extending             
their lease, nor do we want to exclude him from having a right                 
without having to put the property out for bid to even enter into              
a new lease."                                                                  
                                                                               
REPRESENTATIVE ROKEBERG stated, "The concern that's been expressed             
was because of that particular language - the clarity of what was              
intended by the legislature has been interpreted two different                 
ways.  And as evidence to that, I included it in the package                   
although it wasn't earmarked so it's easy to find, in the back of              
it is the existing draft regulations that the airport's putting                
forward.  I included those as part of your package to show the                 
problems, if one examines them, of the direction the state has gone            
in these new regulations.  We passed about a two-page bill and then            
came in with 185 pages of regulations.  The aviation interest in               
the state are just livid, there's been a two-year battle to get                
these regulations implemented so the intent of the legislation -               
passed two years ago could be put into place because it's having a             
dilatory effect on the development of the airports in the state and            
the aviation community."                                                       
                                                                               
REPRESENTATIVE ROKEBERG said, "So then the issues I (indisc.) in my            
sponsor statement is whether or not we need the clarification on               
this - I have a legal opinion from our legal council indicating                
that remedial legislation is necessary and to make sure it's                   
absolutely abundantly clear so they can write the regulations                  
accordingly and that was - as I (indisc.) was a tenant allowed to              
extend an existing lease and enter into a new lease prior to                   
expiration of the existing lease if it was in the best interest of             
the state?  Or was the lease term not exceeding 55 years, including            
extensions and periods of holdover which is now under regulation."             
                                                                               
REPRESENTATIVE ROKEBERG continued.  "It's clear that the intention             
of the Nineteenth Legislature was to select the first alternative              
there allowing for existing businesses to be able to extend their              
leases and or enter into new leases.  There is provisions in the               
existing law that provide that - if there is - if one were to step             
out of that lease into a new lease that that lease - the only way              
this could work is unless he was in compliance with terms and                  
conditions of the existing hold (indisc.) over lease and the                   
continued use of that lease so by that particular tenant unless he             
is consistent the written airport operation policies and their                 
long-range plans, and that it's in the best interest of the state.             
These are major hurdles that have to be accomplished.  So,                     
therefore, the state has the ability - if they have a best interest            
finding - finding if it was not, that they would be able to stop               
that alleged lease of perpetuity."                                             
                                                                               
Number 0048                                                                    
                                                                               
REPRESENTATIVE ROKEBERG concluded, "This bill is brought forward as            
a technical correction to clarify that, what I believe to be the               
legislature's intent in the Nineteenth Legislature and it should be            
consistent with this legislature's intent that we want to see the              
airports in the state be healthy, robust, and not have any                     
constraints by regulations which in hinder that particular                     
objective.  For that reason, I would ask that you take out the                 
committee substitute, version H to the bill, which is different                
than the original bill."                                                       
                                                                               
Number 0055                                                                    
                                                                               
CHAIRMAN WILLIAMS stated for the record that Representative Kookesh            
is present.                                                                    
                                                                               
Number 0056                                                                    
                                                                               
REPRESENTATIVE BEVERLY MASEK made a motion to adopt proposed                   
committee substitute 0-LS1725\H, Bannister, 4/22/98 as a work                  
draft.  There being no objections, that version was before the                 
committee.                                                                     
                                                                               
Number 0069                                                                    
                                                                               
REPRESENTATIVE BILL HUDSON asked Representative Rokeberg to explain            
the basis of 55 years.  [Which reads]:                                         
                                                                               
     The duration of a new lease under this subsection, including              
     any extensions of that lease, may not exceed 55 years.  The               
     duration of an extension under this subsection, when added to             
     the lese being extended and to any earlier extensions of the              
     lease being extended, may not exceed 55 years.                            
                                                                               
REPRESENTATIVE ROKEBERG replied, "I've been in the leasing business            
for over 25 years now and studied the area.  I think it's more or              
less, I hate to use the term customary and traditional in a sense.             
It's basically arbitrary."                                                     
                                                                               
Number 0072                                                                    
                                                                               
REPRESENTATIVE HUDSON interjected the "subsistence" bill.                      
                                                                               
REPRESENTATIVE ROKEBERG replied "Yeah, right.  I think it was used             
in Anglo Saxton jurisprudence because it has to do with, I think               
the perceived life-time of an individual. ... He pointed out the               
recent expiration by the lease by the United Kingdom and Chinese               
Empire on Hong Kong was like some 250 years, it's not uncommon to              
see leases that are beyond 100 or 200 years in some instances,                 
particularly in Europe.  It's pretty common to see 110 year leases             
or leases beyond 55 years in the United States, normally long-term             
ground leases is what they are."                                               
                                                                               
REPRESENTATIVE HUDSON noted the bill tries to set up some sort of              
a fixed total - cumulative time period.  If it were in the state's             
best interest, is there a procedure to where they can go beyond                
that period of time.                                                           
                                                                               
Number 0088                                                                    
                                                                               
REPRESENTATIVE ROKEBERG replied this bill provides that you can                
extend your existing leasehold up to 55 years and then step-out and            
request a new lease.  He pointed out one of the distinctions he                
made in the prior bill is, one of the advantages of just extending             
your existing leasehold is that you could have the terms and                   
conditions to be the same as were in that particular document.  He             
indicated his expectation is that if you stepped out of that and               
requested a new lease, which is provided under the bill - and was              
provided in the last bill we passed, was that you may be subject to            
the new terms and conditions and provisions of a new lease                     
document.  That was particularly important in the Anchorage airport            
where there were some new environmental standards that had come                
into play and had been adopted for the new leases (indisc.).  As a             
result there may have been and advantage of people wanting to                  
extend their lease rather than enter into a new lease..."                      
Representative Rokeberg gave a history on some of the leaseholders             
in Anchorage that are coming up on that 55-year period.                        
                                                                               
Number 0119                                                                    
                                                                               
REPRESENTATIVE MASEK asked what is the standard lease term is in               
other states.                                                                  
                                                                               
REPRESENTATIVE ROKEBERG replied it's his understanding that there              
are much shorter lease terms in some airports, particularly JFK and            
LAX which are major airports - might even have five-year terms.  He            
suspects they will use a finance able term for construction of                 
improvements which would be a minimum of 30 or 35 years.  If                   
there's existing improvement on land, he understands that some of              
the policies are short as a five-year turnaround so they can have              
the ability to raise their rent.  He mentioned most of those                   
airports are not owned or operated by state governments.                       
                                                                               
Number 0132                                                                    
                                                                               
REPRESENTATIVE ROKEBERG noted the Anchorage airport has additional             
lands, and the capability, and the marketing opportunity right now.            
For example, in air cargo which we need to be aggressive and                   
provide a long-term financial lease term so improvements can be                
financed and constructed on those particular parcels.                          
                                                                               
Number 0136                                                                    
                                                                               
REPRESENTATIVE MASEK referred to page 2, line 4, of the committee              
substitute.  She asked if the policy is the same for the airport in            
Anchorage, as in Big Lake, or in Willow.  Is it the same written               
policy statewide?                                                              
                                                                               
     (2) the continued use of the leasehold is consistent with                 
     written airport operation policies and is in the state's best             
     interest.                                                                 
                                                                               
REPRESENTATIVE ROKEBERG replied no, we have a separate rules and               
policies for the international airports as opposed to local or                 
rural airports.  He pointed out the leasehold applies to both                  
groups.                                                                        
                                                                               
REPRESENTATIVE MASEK asked it does.                                            
                                                                               
REPRESENTATIVE ROKEBERG replied, "Yes, it's a perk, there's no                 
reason that the flying service up in Nome, or another rural area -             
it's on a state airport - shouldn't have this ability to enter                 
under the same lease terms because their conditions and                        
circumstances are the same."                                                   
                                                                               
Number 0145                                                                    
                                                                               
REPRESENTATIVE MASEK read:                                                     
                                                                               
     (1) the lessee is in compliance with the terms and conditions             
     of the existing or holdover lease; and                                    
                                                                               
REPRESENTATIVE MASEK asked how many they have jeopardized the terms            
or conditions in the past.                                                     
                                                                               
REPRESENTATIVE ROKEBERG replied that particular language is what we            
basically call "border-plate" in the sense that, in order to enter             
into a new lease or extension, you have to be in compliance and not            
in breech of your existing lease.  He didn't know how many have                
been jeopardized.  You can have a breech of a lease for a                      
relatively minor thing but then you need to be able to correct it              
which is done pretty commonly.  The biggest one is not paying your             
rent.                                                                          
                                                                               
Number 0156                                                                    
                                                                               
JOHN STEINER, Assistant Attorney General, Civil Division,                      
Department of Law, provided information on HB 476 via                          
teleconference.  He said he would like to explain for the benefit              
of the committee and provide a little understanding of putting this            
into the context of some constitutional provisions and some Federal            
Aviation Administration(FAA) matters which may not lead to an                  
(indisc.) up or down as to whether the bill ought to be acceptable.            
                                                                               
MR. STEINER stated the committee substitute would appear to provide            
for a (indisc.) basically in perpetuity to lease and release the               
airport land subject to the two findings that are listed which have            
been mentioned already with regard to the state's best interest and            
the compliance to an existing lease.                                           
                                                                               
MR. STEINER noted there would be a 55-year maximum tenancy under               
particular lease language but at the end of that 55 years, with new            
lease language, there could be renewal.  There was a mention a few             
moments ago about the desire by some tenants to possibly extend a              
term rather than getting a new lease because they would like to                
take advantage of existing lease language.  It is important to the             
airport, and legally to the Department of Law having a concern that            
there be some period of time that's not too far, at least certainly            
longer than 55 years, in which a new lease language would be                   
required so that you don't wind up with a lease continuing to exist            
in lease language which applied 60 years ago and is no longer                  
relevant to today's situations.  There needs to be a turnover so               
that, whether it be for environmental or other adjustments                     
according to changes in the law, otherwise - in conditions and new             
kinds of aircraft, or new kinds of operations, whatever, that that             
language can be updated.                                                       
                                                                               
Number 0178                                                                    
                                                                               
MR. STEINER stated to put this in context with a true, perpetual or            
preference right if it were absolute, would probably be                        
inconsistent with Article 9, Section 6 of the Alaska Constitution              
which forbids the transfer of public property except for a public              
purpose.                                                                       
                                                                               
MR. STEINER said a true perpetual right of a preference would                  
possibly also violate Article 8, Section 2 of the Alaska                       
Constitution which requires that the legislature provide for use of            
public lands in the maximum benefit of the people.  And the state's            
best interest finding may help to preserve that it is difficult to             
determine how you can know whether particular uses at the maximum              
benefit of the people if there's not competition to consider what              
other uses might arise out of the public.                                      
                                                                               
Number 0188                                                                    
                                                                               
MR. STEINER mentioned there's also some concern in Article 8,                  
Section 10 of the Alaska Constitution.  It forbids disposal of                 
leases without safeguards of the public interest and there's a                 
concern that if there were no safeguards, if this were truly a                 
perpetual preferential lease, then all three of these sections                 
might be violated.                                                             
                                                                               
MR. STEINER said, "I hasten to add that the two provisions at the              
end of this statute, which were imposed by the previous HB 543,                
which require state's best interest finding and require continued              
compliance of the lease terms may be sufficient to satisfy these               
constitutional questions, but I believe it's important for the                 
committee to know that we're kind of on a balancing-line                       
constitutionally, so you're just aware of that, there are some                 
issues there that put a limit, and that the legislature cannot rent            
by continued preferences without making sure that at least there is            
something to keep us within these limitations."                                
                                                                               
Number 0199                                                                    
                                                                               
MR. STEINER addressed the concern about FAA grant assurances.  He              
stated the FAA imposes on the state branch assurance requirements.             
These are agreements that the state must make in order to be                   
eligible for him to receive federal airport and improvement program            
funds from the FAA which have been important in redeveloping                   
airports and doing airport projects - capital projects.  Some of               
these assurances include that the airport make available for public            
use, on a fair and reasonable terms without unjust discrimination,             
lands of all types, kinds and classes of aeronautical uses.  This              
is limited to differences among aeronautical users, but it would be            
a violation if the airport were to allow it's land to be tied up if            
certain users - which might exclude other aeronautical users.  He              
remarked that's "grant assurance number 22."                                   
                                                                               
Number 0208                                                                    
                                                                               
MR. STEINER pointed out "grant assurance number 23" requires that              
the airport makes sure that there is no exclusive rights for use of            
the airport by anyone providing aeronautical use to the public.  In            
most cases we're probably not going to run into this because there             
would almost always be additional land available so that there                 
could be competitive services offered on separate lease lots.  But             
their concern would be that if one vendor - one lessor had the only            
lots that were suitable for certain kinds of uses, and someone else            
came along wanting to offer the same kind of uses, and there was               
not land available because the land was tied up in a long-term                 
lease, it could (indisc.) airports ability to make sure that they              
haven't allowed a defacto monopoly to occur in aeronautical uses.              
                                                                               
Number 0216                                                                    
                                                                               
MR. STEINER said there's also a requirement, in "grant assurance               
number 24," that a rental structure be (indisc.) which will make               
the airport as self-sustaining as possible under the circumstances             
at the airport taking into account factors such as traffic volume              
and economy of collection.  Now our current leases at the                      
international airports, he believes most of all them have provision            
for updating rental amounts every five years.  there not                       
necessarily at a market rate right now but they are adjustable.                
It's important that there not be a lease that would lock in rental             
prices at an amount they would not be able to be shifted to                    
maximize revenue along the market rate unless we wind up violating             
the FAA rent requirements.                                                     
                                                                               
Number 0226                                                                    
                                                                               
MR. STEINER referred to "grant requirement number 5," it indicates             
that an airport's sponsor, which is the State of Alaska for the                
state airports, will not take or permit any action which would                 
operate to deprive it with any of the rights and powers necessary              
to perform any of the other assurances under the grant agreement.              
In other words, it's important that a sponsor to the state of                  
Alaska not tie its hands and be able to fulfill the other grant                
assurances.                                                                    
                                                                               
Number 0231                                                                    
                                                                               
MR. STEINER informed the committee the effort to clarify that the              
preference to (indisc.) statute does not have a limit.  It's                   
somewhat troubling to the extent that it is at least conceptually,             
not necessarily consistent with the general policies enshrined in              
the Alaska Constitution and imposed by the FAA grant assurances and            
reflected in other public land law.  He suggested, for references              
purposed, the committee members might be interested in looking at              
Alaska Statue 38.05.073 and the other statute in that vicinity                 
which deal with renewal of natural resource lands under the                    
auspices of the director of the Division of Lands with the State of            
Alaska, under the Department of Natural Resources.  Which does also            
allow a preference or allowed the possibility of a preference, but             
not the requirement of a preference if it's in the state's best                
interest and has numerous safeguards in terms of the manner in                 
which there's preferences for the possibility of those preferences             
are to be noticed to the public and carried out only if they're in             
the state's best interest.                                                     
                                                                               
Number 0243                                                                    
                                                                               
MR. STEINER said the constitutional provisions, the conditions in              
number one and number two as he mentioned may well satisfy the                 
actual constitutional requirements such as this, if it were                    
enacted, would withstand constitutional scrutiny.  It's not                    
altogether clear whether those would be satisfactory to the FAA or             
the Office of the Inspector General to do an audit of this state.              
But it is my opinion that the Department of Transportation and                 
Public Facilities could work with those two conditions and make                
sure that the FAA grant assurances are not violated on their face.             
                                                                               
Number 0250                                                                    
                                                                               
MR. STEINER said the final comment that we have is that we want to             
make awfully sure that it is (indisc.) and perhaps either by a                 
specific comment or proprietary language in the bill or at least in            
the intent in the legislative record that there is no attempt by               
the legislature to create a property right of receiving a                      
preference that might be constitutionally compensable in the event             
that the airport for redevelopment focuses on or whatever needed to            
take the property in order to reorient a road or something like                
that.  That the property interest that any individual would have in            
a lease would be limited to the actual lease and not the                       
possibility of future extensions or renewals unless we wind up                 
being required to compensate tenants for what is effectively a fee             
interest in the property despite the fact that the state is the                
owner of the (indisc.).                                                        
                                                                               
Number 0259                                                                    
                                                                               
MR. STEINER concluded that the important thing to remember in all              
of this is that this state land is held by the state specifically              
as an airport.  That being said, we have to abide by certain                   
requirements imposed by federal law in the operation of the                    
airport.  The basic fundamental principal of those requirements is             
that the airport be self-sustaining, maximize revenues in order to             
not be a burden on the aviation or the traveling public.  He                   
reiterated airports that get sizeable economic returns in their                
real estate properties in order to support the airports.  And it's             
relevant they should because it is basically a mandate of the FAA              
that the airport lands be used to maximize benefit and support of              
the airport rather than telling the traveling public or the                    
airlines to spend more than what otherwise would be necessary in               
order to provide aviation services to the public.  He added that               
Mr. Paul Bowers, Director, Statewide Aviation, Leasing, DOT, was               
also available to answer any questions.                                        
                                                                               
Number 0274                                                                    
                                                                               
REPRESENTATIVE ROKEBERG said, "I just point out for the record that            
the minutes for HB (indisc.) of the Nineteenth Legislature, which              
is an airport leasing bill indicated clearly that the intent of                
that legislation is embodied in this bill and in '090(c) 1 and 2'              
for the best interest findings in the words consistent with written            
airport operation policies means that airport's long-range plan, so            
the instant that Mr. Steiner mentioned about it if they needed it              
for a road or other improvement is included in that particular                 
language, and that's on the record.  So, there is nothing that an              
existing leaseholder or business couldn't be terminated or at its              
expiration not renewed because (indisc.) way of the long-range                 
plan."                                                                         
                                                                               
REPRESENTATIVE ROKEBERG stated, "I just add further that I think               
that the six cents a square foot, or whatever it is they're                    
charging for Anchorage are way below fair market value as a matter             
of policy in the airport, and I would make a recommendation that               
the Department of Law - that they have a provision in any future               
leases in Anchorage, that this allows the profit-making on a                   
(indisc.) to another successor in interest on the lese and                     
therefore disallowing any profit between a lessee and a sublessee              
on a lease.  So that goes to say, if you have a lease now, and                 
sublet it to another party and charge them a market rent, which may            
be a dollar a foot higher than what the airports charging, or                  
whatever it would be, that that profit can't flow to the original              
tenant, it has to flow to the airport.  That's a very common                   
technique used and it should be adopted by the airport that way                
would overcome that problem.  And with that Mr. Chairman, I would              
like to ask the Department of Law whether they can support this                
language or not, yes or no."                                                   
                                                                               
Number 0291                                                                    
                                                                               
MR. STEINER replied in terms of supporting and...                              
                                                                               
UNIDENTIFIED SPEAKER interjected "live with it."                               
                                                                               
MR. STEINER remarked, "We're willing to live with it, yes, I guess             
we're not going to recommend that it should not be adopted because             
it would be intolerably illegal - or that it would be illegal.  We             
are prepared to live with it if the legislature deems to see fit to            
adopt it."                                                                     
                                                                               
Number 0295                                                                    
                                                                               
REPRESENTATIVE ELTON stated he would like to hear from Mr. Bower on            
what the implications may be on Rural airports.                                
                                                                               
CHAIRMAN WILLIAMS noted he is apparently not on line.                          
                                                                               
Number 0300                                                                    
                                                                               
REPRESENTATIVE ROKEBERG replied, "In my study of this I believe it             
does.  This particular provision of the statute does affect Rural              
airports.  Now - as a practical matter, I'm not certain what the               
differentiation is, I think that's what Representative was trying              
to get at."                                                                    
                                                                               
REPRESENTATIVE ELTON asked Chairman Williams what further referrals            
does this bill have.                                                           
                                                                               
CHAIRMAN WILLIAMS replied this is it.                                          
                                                                               
Number 0304                                                                    
                                                                               
REPRESENTATIVE ELTON asked Mr. Steiner if he could have Mr. Bowers             
get in touch with his office to let him know what the implications             
are on Rural airports he would appreciate it.                                  
                                                                               
MR. STEINER replied he would be glad to do that.                               
                                                                               
REPRESENTATIVE ROKEBERG asked Mr. Steiner if this bill will help               
straighten out any difficulties in drafting the new airport                    
regulation.                                                                    
                                                                               
Number 0306                                                                    
                                                                               
MR. STEINER said, "I believe the airport regulations pretty much               
assume the policy in this bill was going to be the policy of the               
regulations as well.  It would clarify that this is the                        
legislature's intent and eliminating any possibility, I guess, that            
the regulations might interpret this statute otherwise.  I don't               
believe that the DOT was intending to interpret this statute any               
differently on basically on what's in this bill.  And I'm told that            
Mr. Bowers called into this office indicating that he had been                 
knocked off [teleconference] and we'd be happy to try to get him to            
conference in."                                                                
                                                                               
CHAIRMAN WILLIAMS replied that's all right.  He asked if there was             
anybody else in the audience that would like to testify.                       
                                                                               
Number 0314                                                                    
                                                                               
REPRESENTATIVE HUDSON made a motion to move CSHB 476 as amended,               
with individual recommendations and attached fiscal zero note.                 
                                                                               
CHAIRMAN WILLIAMS asked if there were any objections.  There being             
no objections, CSHB 476(STA) moved from the House Transportation               
Committee.                                                                     

Document Name Date/Time Subjects