Legislature(2001 - 2002)
02/13/2001 03:35 PM Senate STA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 24-LEGIS APPROVAL OF SEAFOOD/FOOD SAFETY LAB
CHAIRMAN THERRIAULT asked Janice Adair if she was ready to testify
via teleconference.
MS JANICE ADAIR, Director of Environmental Health for the
Department of Environmental Conservation (DEC), said that SB 24
allows for the sale of bonds or certificates of participation to
replace the seafood and food safety lab in Palmer. The lease for
the current facility expired in December 2000 and there are two
one-year extensions. State law prohibits long-term extensions
without a substantial reduction in the lease payments. The
reductions were given during a previous extension and the owner
isn't willing to give another substantial reduction and has the
building on the market. The current lease amount is $1.03 per
square foot and has been that since December 1998. Her letter had
given an incorrect figure per square foot.
She said that the lab is the only one in the state testing for
paralytic shellfish poisoning (PSP) so that shellfish and crab can
be sold in interstate and international commerce. DEC tests
shellfish growing waters to ensure that they comply with the
National Shellfish Sanitation Program. DEC also evaluates dairy
products that are processed in Alaska and sold elsewhere. The lab
also certifies private labs that runs drinking water analyses for
public water systems and works with commercial food industries to
develop safe food products, such as smoked fish and other shelf
stable products.
In FY99 and FY01 the legislature appropriated capital funds to the
department to do planning for the replacement of the lab. DEC
hired an independent contractor, Livingston Sloan, and was told
that the most cost effective replacement would be a state-owned
laboratory. Building the lab on state-owned land would provide
additional savings. A state-owned site near the airport in
Anchorage was selected to facilitate transportation to the lab of
statewide test samples. Approximately 80 percent of the work done
in the lab is seafood related, some of which is time sensitive.
Testing must be completed before any of the food may be sold.
Number 1937
The economic analysis confirms that owning is more economical than
leasing. Since labs are highly individual and specialized, any
lease space would require extensive remodeling prior to use.
The new lab would result in an overall decrease in operating costs
for shellfish growers. There are 11 approved shellfish farms in
Southeast, 22 in Southcentral and nine geoduck growing areas in
southeast. Since growers must ship their water and fish samples to
the lab at their own expense, locating the lab near the airport
would save courier costs from the Anchorage airport to the lab in
Palmer.
There will be no increased cost to the dairy industry because
inspectors pick up samples when they visit the dairies.
The lab performs most of the tests for free but there are charges
for tests for foods for export and tests made at the request of
food manufacturers.
If the bill isn't passed this session, the lab will have no
alternative but to look for lease facilities this summer or fall to
ensure a place of business when the current lease extension comes
to term in two years. Lease costs are expected to be high.
Number 1839
CHAIRMAN THERRIAULT asked whether the Governor's capital budget
submittal included a $310,000 appropriation to finance the lease
along with the sale of bonds.
MS. ADAIR said yes, the whole project has $13.6 million from bond
sale proceeds and $310,000 from the general fund.
CHAIRMAN THERRIAULT asked what was on the proposed site.
MS. ADAIR said there was a gravel pad with a Department of Motor
Vehicles/Department of Transportation building next door.
CHAIRMAN THERRIAULT asked Julie Decker to testify next.
JULIE DECKER, executive director of the Southeast Alaska Regional
Dive Fisheries Association, supports SB 24. She represents divers,
processors and communities of Southeast Alaska, all of whom use the
seafood and food safety laboratory in Palmer. They pay for many of
its services.
Relocating the lab next to the airport in Anchorage would be
beneficial to users in Southeast in particular due to the 30 hour
time limit on water samples. The trip from the airport to Palmer
has made the difference between getting the sample to the lab on
time and going over the 30 hour limit.
CHAIRMAN THERRIAULT called for questions.
SENATOR PHILLIPS asked what percent the fisheries' industry would
contribute toward the project since 80 percent of the business is
seafood related.
MS. ADAIR said that users pay for a portion of the maintenance and
operation of the facility.
SENATOR PHILLIPS said he'd like users to pay for more of the
facility itself.
MS. ADAIR said she wasn't sure "the way the fee statutes are
structured we could even include that in a fee."
CHAIRMAN THERRIAULT asked for size of the proposed lab noting that
the current lab is 9,000 square feet.
MS. ADAIR said the new lab would be 20,500 square feet.
CHAIRMAN THERRIAULT said that was more than double the size. He
then said that current costs are $115,000 per year and are
anticipated to go to $1.2 million per year with the new facility.
In addition, Department of Environmental Conservation will pay
operational costs of $178,000 to $180,000 per year.
MS. ADAIR said that was correct but it must be understood that the
$115,000 figure would rise regardless of whether the new facility
is built or not. Also, laboratories are highly specialized and it
will be expensive to build one or to remodel a building to house a
modern lab. There are specific and specialized requirements for
things such as ventilation and the keeping and care of live mice
used in testing.
SENATOR PEARCE asked whether a survey was done of available
buildings in Anchorage that would meet code and could be used as
laboratories.
MS. ADAIR said that was part of the analysis done by contractors
Livingston/Sloan and they determined there were not any suitable
buildings in the Anchorage area.
CHAIRMAN THERRIAULT asked about the time gap between the two years
in extensions left on the current lab and the FY2005 projected
opening date of the new lab.
MS ADAIR said there is a one year gap and it is a great concern.
Number 1392
CHAIRMAN THERRIAULT referred to notes from a power point
presentation outlining the pros and cons of owning versus leasing.
He asked how flexible the interior of a lab is in terms of
reconfiguration since this was listed as a reason to own rather
than lease.
MS. ADAIR said she would like Tom Livingston to answer the
question.
CHAIRMAN THERRIAULT asked for other questions for Ms Adair before
Mr. Livingston answered.
SENATOR PEARCE asked whether the lab might be asked to vacate the
premises before the end of the lease term if the building is sold.
MS. ADAIR said she didn't believe so.
CHAIRMAN THERRIAULT called upon Mr. Livingston.
MR. TOM LIVINGSTON with Livingston/Slone Inc. said that his firm
had just designed the new public health lab in Anchorage so he is
familiar with the issues discussed. It is critical that labs are
design flexible because technology, equipment and safety features
change fairly frequently. Things such as walk in freezers;
ventilation hoods, bio-safety cabinets and equipment hoods may all
have to be repositioned because of procedural changes that occur
over time. Needs for water, power, steam and ventilation are all
variable and this is one of the reasons labs are so specialized. A
building that is able to support this kind of flexibility is
complex.
CHAIRMAN THERRIAULT asked Mr. Livingston to talk about the search
for available buildings that would support the facility.
Number 1266
MR. LIVINGSTON said his firm did a survey of buildings in South
Central Alaska to determine their suitability for this type of
activity. The conclusion was that there are building shells that
would need extensive interior finishing but that there is nothing
on the market now that could be readily used. The design criteria
and bid specifications that would go out to potential landlords for
such a remodel are specific and extensive enough that there would
be considerable upfront cost to the state. Preparing such a package
would require an extension of the lease term in order to recoup
those costs.
After weighing the factors, it was decided that building a custom
designed facility that is state owned is the most cost effective
over time.
CHAIRMAN THERRIAULT asked if he took part in the decision to make
the new building 20,500 square feet, which is more than twice the
size of the current building.
MR. LIVINGSTON said that he prepared the analysis. The current
space is very inadequate and there really isn't enough space there
to conduct the procedures that are being performed there now. Good
science isn't being compromised but the staff has to work far
harder than necessary to maintain the standards expected by
industry.
CHAIRMAN THERRIAULT said he knew that they were under pressure in
the lab but wanted to know if the increased size comes from
industry standards for specific lab space or something else.
MR. LIVINGSTON said yes, they did a detailed analysis of the
current lab procedures and then looked at the new labs such as the
Anchorage Public Health Lab, the Seward Sea Life Center and the
National Oceanic and Atmospheric (NOAA) fisheries lab in Juneau.
With that data base, they came up with a figure for the square
footage needed for each of the labs activities and the utilities
needed to support those activities. Catering to the needs for
personal safety and conducting quality science were of primary
concern.
Number 1035
SENATOR PHILLIPS has a problem adding between 13 and 14 million
dollars to the state budget when he has a constituency that thinks
more should be cut from the budget. He asked for a response to
that.
MR. LIVINGSTON said that the cost of the state owned facility
compared to a leased facility over a twenty year term makes sense.
SENATOR PHILLIPS asked how other states pay for this type of
facility.
MS. ADAIR said that Washington and Oregon labs are general funded.
There are no fees paid by the users, it all comes from state
revenue.
CHAIRMAN THERRIAULT asked if there was a tax on the industry in
either of those states to add money to the general fund.
MS. ADAIR said she hasn't done a complete analysis. She knows that
Washington has a fairly heavy processors fee but she doesn't know
whether that applies to shellfish or not.
SENATOR PHILLIPS said his constituency wants budget cuts and that
80 percent of the business the lab conducts involve fisheries. He
thinks most of his constituents would say, "Let the users pay for
the services that they're asking for." He said he'd be interested
in knowing how other states pay for the structure and operation and
maintenance of the facilities.
CHAIRMAN THERRIAULT said that the industry pays for the tests but
questioned whether they should they have to pay for the facility as
well. Public health labs require payment for services but the cost
of the facility itself isn't factored in.
SENATOR PHILLIPS said, "public health is different. This is for one
industry. Why don't we do this for the oil industry or tourism? Who
is going to pay for all these things?"
Number 797
SENATOR PEARCE said that we all face those questions. However, to
expand and diversify the economy of Alaska, the State is going to
have to provide service and it is already doing so. One death from
PSP will kill the industry in the state and the state could well
end up being the "deep pocket" and spend much more in legal and
liability fees than the building costs. She believes that
laboratories for the public health are the responsibility of the
state. She has no problem asking users to pay for the tests they
have run but they shouldn't be expected to pay for the costs of the
building itself. To her knowledge, no other industry is asked to
pay for state building costs as an add-on to the fees, licenses,
permits and services they pay for. She used the oil industry as an
example.
SENATOR PHILLIPS said that the oil industry pays it's own way in
the state. He's concerned about adding more to the budget with no
plan for 10 to 15 years from now.
CHAIRMAN THERRIAULT said he agrees that costs must be considered.
However, this agency has been before the legislature and the
finance committee in two previous years and appropriations have
been made because it is known that the lab needs replacing. He does
have questions of his own about the total cost and the financing
mechanism.
SENATOR PEARCE said this is a renewable industry and efforts should
be made to "maintain it and grow it as we look to that 10 to 15
year period when Prudhoe Bay really is gone."
CHAIRMAN THERRIAULT asked for questions and there were none. He
asked Devin Mitchel to come forward.
MR. DEVIN MITCHEL, State Debt Manager for the Department of Revenue
(DOR), said that DEC would coordinate with DOT to build the
facility using private contractors. "It would be the State of
Alaska's credit that would be utilized directly to access the
capital market. So rather than relying on the private developer to
use our lease payments as a revenue stream to obtain capital, we
would do that directly. So the state bond committee of the State of
Alaska would issue that debt."
CHAIRMAN THERRIAULT asked whom we would be making our payments to
or if we would be paying the bond directly.
MR. MITCHEL said that the bill gives authorization for DEC to enter
into a lease with DOA. That lease would be secured to the state
rather than to a private developer. DOt is involved with the design
and construction of the facilities. The Department of Public
Services' new public health lab was constructed using the same
model.
The fiscal note anticipates lease payments of $1.2 million per year
but that is variable depending on the current interest rate.
Number 272
CHAIRMAN THERRIAULT called Caren Robinson forward to testify.
MS. CAREN ROBINSON, owner and partner in Tenass Pass Shellfish
Company of Prince of Wales and owner of a shellfish distribution
company in Juneau, testified in favor of SB 24. She stressed the
importance of quick and accurate product testing for this growing
industry. She referenced a letter in committee packets from her
partner, Roger Painter, outlining the difficulties involved in
getting samples from Prince of Wales to the Palmer Lab within the
30 hour time requirement. Having the lab closer to the airport in
Anchorage rather than in Palmer would eliminate one leg of the
journey and therefore save time. She emphasized the importance of
timely tests and said that anything that could be done to help the
industry would be appreciated. A lab in Anchorage is preferable to
the Palmer location.
Number 152
MS. ROBINSON said that they pay for the testing and the state
fisheries tax even though they pay for the spat and the shipping
costs and put the spat into the water themselves. They're willing
to pay their way but the industry is young and struggling.
CHAIRMAN THERRIAULT thanked Ms. Robinson for her testimony. There
were no questions. He then asked Ms. Adair about the statement that
the federal government wouldn't allow a private lab to perform
testing functions.
Tape 01-6, Side A
MS. ADAIR said that the Federal Drug Administration (FDA) has to
certify labs doing PSP and dairy testing. They certify state
laboratories but there is no private lab certification process or
program.
CHAIRMAN THERRIAULT asked if that meant that no state has a private
lab certified to do this type of testing and without testing the
shellfish couldn't be sold.
MS. ADAIR said that was correct, no state has private labs that are
certified and Alaska statute requires following National Shellfish
Sanitation Program Standards adopted by the federal government.
This requires a marine toxin monitoring program.
CHAIRMAN THERRIAULT said that changing the state law wouldn't
change the federal requirement. You must have the testing facility
or you can't have the industry.
MS. ADAIR agreed.
CHAIRMAN THERRIAULT asked for questions. He said there is no
committee substitute and there are three fiscal notes. The shift of
expense for operating would go to DEC; DOR makes the lease payments
and DOA shows the savings when the current lease isn't paid any
longer.
SENATOR PEARCE asked whether the department had considered putting
an addition of the public health lab in Anchorage rather than
building a new facility.
MS ADAIR said they had but funding for the public health lab was
set before there were plans for the seafood/food safety lab and the
property selected wasn't large enough for both facilities without
resorting to a second story. Because of ventilation requirements, a
second story lab is prohibited.
CHAIRMAN THERRIAULT asked for questions and there were none. He
said that they had discussed wording of the bill and an overview of
the fiscal notes. There were no amendments.
He asked for the will of the committee.
SENATOR PEARCE made a motion to move SB 24 from committee with
fiscal notes and individual recommendations.
SENATOR PHILLIPS objected and said he wants to find out how East
and West Coast states finances labs of this type before this amount
of money is committed.
CHAIRMAN THERRIAULT suggested that Senator Phillips indicate his
objection on the committee report. He went on to advise Ms. Adair
to gather that information for the finance committee. He told
Senator Phillips it was his preference to move the bill and asked
him whether he wanted to maintain his objection.
SENATOR PHILLIPS said he would maintain his objection due to the
lack of information.
CHAIRMAN THERRIAULT called for a roll call. Senator Phillips voted
nay and Senators Davis, Pearce and Chairman Therriault voted yea.
The motion passed 3:1.
The bill moved from committee.
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