Legislature(1997 - 1998)
04/17/1997 01:34 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 159 NEW BUSINESS INCENTIVE PROGRAM
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee
meeting to order at 1:39 p.m. and announced SB 159 to be up for
consideration.
MR. JORDAN KOKO, Intern to Senator Pearce, sponsor, said she
introduced this as a program that would encourage economic
development in the State of Alaska, especially in industries that
are unrepresented. This program would be used under the Alaska
Industrial Development and Export Authority and will be used to
allocate funds every year to help develop certain programs in the
State. There is a need to generate cargo and cargo capabilities,
including capitalizing on Alaska's locational advantages in
transferring cargo and encouraging that sort of development. This
would hopefully diversify Alaska's corporate tax base and encourage
more manufacturing in the State through other sorts of development
than oil. This would also encourage high value jobs that encourage
full time employment in the State.
MS. PATTY DEMARCO, President, Anchorage Economic Development
Corporation, said she does accept the amendment offered by CHAIRMAN
LEMAN. The dollar amount up to or not to exceed $3 million would
be no deterrent to the bill. This legislation is a way to
establish net new jobs in Alaska for manufacturing and other value
added kinds of activities. It doesn't require any expansion of
existing government staff and will be a divided responsibility
among the private sector proponent and the municipality that will
be host to the business, and hopefully the State of Alaska as well.
She said this is a bill that is a catalyst for action and it's a
way to give us a broader base for future growth of our economy.
There are a number of safeguards drafted into this legislation.
MS. DEMARCO said that there are 32 programs in other states that
compete with us for the same businesses. Statements from Federal
Express and Alyeska Alloys give the committee an idea of the
implications this program would have on the future growth of these
companies.
SENATOR HOFFMAN asked how she thought this would help rural areas
of the State. MS. DEMARCO replied that they are hopeful that by
having a way for broad areas of the State to attract a business in
the form of making land available and helping to support
infrastructure development.
MR. MIKE BRADY said this program allows infrastructure to be
created which is not necessarily economically viable without it.
He explained that Alaska, when viewed in the context of being the
cheapest place possible in which to establish a business, comes out
less favorable than a lot of other areas. This program would allow
the State to make up that difference for a period of time in order
to allow a business decision to be made that would be favorable to
the business position. Development in Anchorage is very expensive.
They have to move a lot of dirt and there is no value in moving it
until there is a facility there.
MR. SCOTT THOMPSON , CEO, Alaska Power Systems, said they are
currently in the middle of a project that's rather unique. Through
the Alaska Science and Technology Foundation they have developed a
power generation operating system that's being looked at throughout
the world for reduction in power cost in a deregulation
environment. They've got about 70 people employed in Anchorage now
and they are looking for a place to assemble this product. It's
basically a microprocessor board which is a value added product
that has an operating system or firmware and software added to it
after the board is assembled. This is what Federal Express and UPS
needs to anchor a transportation area.
MR. THOMPSON said one of the problems they have found, and has been
pointed out to them by Emerson, is that they do not have an
economic development partnership program with industry. Most
countries in the world today actually have a development
infrastructure program which basically offsets the cost for
industry to develop products within their country. These
countries, such as Ireland and Malaysia, actually host large
companies to do assembly of product. The development money that is
put forth puts the infrastructure in and the return to the country
or state is the jobs that are guaranteed over a certain period of
time.
Emerson has indicated to them on their 40,000 unit order per year,
that they don't care where they build the system. They just don't
want to pay any extra for it. This forces them to look off-shore
to build the hardware. Once the hardware has been established, for
instance in Mexico or Malaysia, it makes the most sense to move all
of the software and firmware jobs to where the hardware is being
developed. It's easier to move management to where the hardware
core is.
The problem with developing this concept here is that there's
absolutely no infrastructure to build the facilities to move the
dirt, to get the people from the lower 48, if they are qualified to
do board assembly. He said there is a great logistics organization
here which has to do with the northern polar route for Federal
Express and UPS, but there's no infrastructure to provide this.
He said these are good paying jobs like $80,000 - $130,000. Most
of the assembly process is all automated along with the handling
and shipping.
MR. THOMPSON said that in Kodiak, for instance, it would make sense
for Tyson to do value added breading of fish sticks.
Number 190
MS. DONNA TOLLMAN, Glennallen, supported SB 159 and said they just
had a meeting where a large representation from Cordova talked
about value added and the cost of site development in rural
communities and the difficulty they are having in coming up with
higher value jobs. In dealing with welfare to work issues, their
residents are finding it difficult to see the value in coming off
of welfare when the jobs they can get are for less money.
She said they have been approached by a number of businesses and
the first question they are asked is what sort of business
incentive program they have. She said they welcome the opportunity
to compete with other states.
Number 237
MS. KATELYN OBNER-MARKLEY, Alaska Industrial Development and Export
Authority, supported SB 159. They believe it is a very good
concept and there are specific things that need to be put in in
terms of objective standards.
CHAIRMAN LEMAN asked her if she had suggestions for objective
standards. She said she would provide that to the committee.
MR. GREG WOLF , AEDC, said he spends a good part of his time talking
to companies about establishing new businesses in the Anchorage
area in the area of distribution, manufacturing, and final assembly
which aren't very well represented now. He said that it is
inevitable that the question of community incentives is raised.
It's the way the game is played; it's a competitive world. This
program is a way of leveling the playing field and pointed out that
they are talking with large companies and small, alike.
MR. TOM LAWSON, Department of Commerce and Economic Development,
said they supported this bill; however, they are concerned about
where the money comes from. He had one technical point in Section
45.81.010 (a)(3) to clarify if a local government doesn't have the
resources to provide any financial backing and supports the bill,
that they don't have to put up money. He thought this bill worked
great for the urban areas, but in other areas, like Glennallen and
Copper River Valley, there aren't any local governments at all.
He thought it shouldn't be limited to just cash from local
governments, but to include land and property tax abatement.
CHAIRMAN LEMAN asked if he had seen the proposed amendments. MR.
LAWSON replied he had and supported both of them. CHAIRMAN LEMAN
said in the second amendment he was trying to create flexibility
within the department so they may put in the grant terms a
repayment plan, if that were to be appropriate.
MS. DEMARCO added that she supported them also.
CHAIRMAN LEMAN said he would set aside SB 159 and work on it until
another meeting.
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