Legislature(2003 - 2004)

04/08/2003 03:40 PM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               SCR  6-LOCATION OF NEW SEAFOOD LAB                                                                           
                                                                                                                              
CHAIR GARY STEVENS asked Senator Wagoner to introduce the bill.                                                                 
                                                                                                                                
SENATOR  THOMAS  WAGONER,  bill sponsor,  stated  there  are  two                                                               
current issues pertaining to the resolution.                                                                                    
   · The lease on the existing seafood lab located in an old                                                                    
     Piggly Wiggly Store in the Matanuska Valley is not                                                                         
     available for releasing.                                                                                                   
   · The Alaska Industrial Export Authority currently owns a                                                                    
     250,000 square foot underutilized,  state of the art seafood                                                               
     processing facility in Anchorage.  There is no evidence that                                                               
     indicates the processing  unit will be used  to process fish                                                               
     in the foreseeable future.                                                                                                 
                                                                                                                                
He paraphrased from the sponsor statement:                                                                                      
                                                                                                                                
     The funding  history for replacement  of the  lab began                                                                    
     in  FY  1999  with   a  $145,700  appropriation  for  a                                                                    
     feasibility study. In  FY 2001, at a  cost of $240,000,                                                                    
     the    Department    of   Environmental    Conservation                                                                    
     contracted  for  a  conceptual  design.  A  state-owned                                                                    
     parcel adjacent  to the Anchorage Department  of Health                                                                    
     and Social  Services public  health lab  was determined                                                                    
     as the  most accessible and  economical site for  a new                                                                    
     lab. In FY  2002, an appropriation of  $1.3 million was                                                                    
     allocated for a complete design.                                                                                           
                                                                                                                                
     This year, the legislature is  being asked to approve a                                                                    
     bond  bill  for  construction  costs  of  some  $14.285                                                                    
     million.                                                                                                                   
                                                                                                                                
     This  resolution suggests  that a  better use  of state                                                                    
     funds  would be  to incorporate  the proposed  lab into                                                                    
     the  existing  AIDEA   owned  building  that  currently                                                                    
     houses Alaska Seafood International (ASI).                                                                                 
                                                                                                                                
     AIDEA  has provided  $50 million  for construction  and                                                                    
     long-term  financing for  the  processing building  and                                                                    
     retains  a  29  percent  equity  position  in  ASI  and                                                                    
     ownership of the plant and land underlying the plant.                                                                      
                                                                                                                                
     The  state could  realize substantial  cost savings  by                                                                    
     construction  of the  lab  within  this existing  state                                                                    
     owned facility.                                                                                                            
                                                                                                                                
                                                                                                                                
SENATOR JOHN COWDERY understood Alaska Seafood International                                                                    
does some lab work in the facility and wondered whether this                                                                    
would become an extension of that lab or remain separate.                                                                       
                                                                                                                                
SENATOR WAGONER advised the proposal was exploratory in nature                                                                  
but the design called for the two to remain separate. He                                                                        
remarked $15 million is a lot of  money for the state to spend on                                                               
a lab particularly when much of  the lab, as designed, is devoted                                                               
to office space.                                                                                                                
                                                                                                                                
SENATOR COWDERY  asked how many  square feet were needed  for the                                                               
lab and  whether it was  available in the AIDEA  building without                                                               
jeopardizing ASI needs.                                                                                                         
                                                                                                                                
SENATOR  WAGONER replied  they  need a  little  more than  20,000                                                               
square  feet  and  it  wouldn't   jeopardize  ASI  needs  in  the                                                               
foreseeable future.                                                                                                             
                                                                                                                                
CHAIR GARY STEVENS asked Doug Bell to speak to the ASI position.                                                                
                                                                                                                                
SIDE B                                                                                                                          
4:25 pm                                                                                                                         
                                                                                                                                
DOUG BELL,  Alaska Seafood International  representative, advised                                                               
they are neutral with regard to  the resolution. They do have the                                                               
room and would be willing to share the space.                                                                                   
                                                                                                                                
CHAIR  GARY  STEVENS  asked  for  confirmation  that  this  would                                                               
present no  conflict and  ASI would  be comfortable  working with                                                               
the seafood lab.                                                                                                                
                                                                                                                                
MR. BELL assured him there were no space issues.                                                                                
                                                                                                                                
SENATOR  FRED DYSON  asked for  the square  footage of  the AIDEA                                                               
building.                                                                                                                       
                                                                                                                                
MR. BELL  replied the building  has 202,000 square feet  and they                                                               
occupy about 25 percent.                                                                                                        
                                                                                                                                
SENATOR COWDERY asked  whom the seafood lab would pay  for use of                                                               
the facility.                                                                                                                   
                                                                                                                                
MR. BELL  wasn't sure those  arrangements had been made  but they                                                               
were open to the discussion.                                                                                                    
                                                                                                                                
SENATOR COWDERY  asked what  the state  was currently  getting in                                                               
return for its  $50 million investment in the  AIDEA building. He                                                               
said, "I know you had about 80 something in it."                                                                                
                                                                                                                                
MR. BELL  replied he  was correct.  Currently AIDEA  is deferring                                                               
ASI rent and that will continue until October 2003.                                                                             
                                                                                                                                
SENATOR  COWDERY asked  whether  the seafood  lab  rent would  be                                                               
similarly deferred.                                                                                                             
                                                                                                                                
MR. BELL advised AIDEA would have to speak to that question.                                                                    
                                                                                                                                
SENATOR COWDERY asked whether ASI  would have any problems paying                                                               
rent beginning in October.                                                                                                      
                                                                                                                                
MR. BELL  was unable  to give  a definitive  answer but,  at this                                                               
point, is would be difficult.                                                                                                   
                                                                                                                                
SENATOR COWDERY  stated for  the record  he hosted  a legislative                                                               
lunch using ASI donated product.                                                                                                
                                                                                                                                
CHAIR GARY STEVENS  asked if an AIDEA  representative was present                                                               
and was advised they were on line.                                                                                              
                                                                                                                                
SENATOR GRETCHEN  GUESS asked whether  the operating  costs would                                                               
remain the same regardless of where the lab was located.                                                                        
                                                                                                                                
SENATOR WAGONER  said personnel costs  would probably  remain the                                                               
same and lab costs are basic. He  advised it would be a three way                                                               
process between ASI,  AIDEA and DEC and AIDEA could  speak to the                                                               
costs better than anyone else.                                                                                                  
                                                                                                                                
SENATOR COWDERY  asked him to  state for the record  exactly what                                                               
the lab would do.                                                                                                               
                                                                                                                                
SENATOR  WAGONER explained  the lab  runs a  variety of  tests on                                                               
dairy products, on animal meats  and meat products, and shellfish                                                               
products.  Any  food tests  the  state  is  required to  run  are                                                               
handled in the lab.                                                                                                             
                                                                                                                                
SENATOR GUESS  advised one  of the arguments  for moving  the lab                                                               
into Anchorage was to provide better access to the airport.                                                                     
                                                                                                                                
SENATOR  WAGONER agreed  time is  of the  essence when  testing a                                                               
food product. This is a more  complex issue than he was initially                                                               
aware.                                                                                                                          
                                                                                                                                
CHAIR  GARY STEVENS  added  this is  extremely  important to  the                                                               
seafood   industry  particularly   when  testing   for  paralytic                                                               
shellfish poisoning.                                                                                                            
                                                                                                                                
He  announced   Matt  Tanaka  from   DOT,  Tom   Livingston  from                                                               
Livingston Sloan  Architects, Elise Hsieh from  the Department of                                                               
Law, Ron Miller and Sara  Fisher-Goad from AIDEA were all on-line                                                               
and available to answer questions.                                                                                              
                                                                                                                                
He  asked  an AIDEA  representative  to  speak to  the  questions                                                               
regarding payments.                                                                                                             
                                                                                                                                
RON  MILLER, AIDEA  representative in  Anchorage, testified  they                                                               
have  discussed  the  DEC  and  DOTPF  proposed  plans  and  have                                                               
proposed  rental rates  for  that portion  of  the building.  The                                                               
arrangement would be a lease between  AIDEA and DEC for the space                                                               
in the facility.                                                                                                                
                                                                                                                                
CHAIR GARY STEVENS asked how ASI fit into the picture.                                                                          
                                                                                                                                
MR.  MILLER explained  AIDEA owns  the building,  ASI leases  the                                                               
building and the lease payments  are deferred until October 2003.                                                               
Should DEC move into the building  and ASI continue to occupy the                                                               
building after  October, AIDEA would  make some  lease adjustment                                                               
to ASI since they would be  occupying less space. They would make                                                               
a separate lease agreement with DEC.                                                                                            
                                                                                                                                
There were no further questions for Mr. Miller.                                                                                 
                                                                                                                                
KRISTIN  RYAN,  Director  for   the  Division  for  Environmental                                                               
Health,  explained  DEC  started  a process  with  DOTPF  to  see                                                               
whether SJR  6 was feasible.  DOTPF manages state leases  and DEC                                                               
does not.  A significant portion  of the funds have  already been                                                               
allocated to  design the lab  that would be built  on state-owned                                                               
land next  to the public  health facility  so they wanted  to act                                                               
quickly  to  determine  the feasibility  of  this  proposal.  The                                                               
current lease expires  in December 2006 and a new  lab must be in                                                               
place on or before that time.                                                                                                   
                                                                                                                                
With regard  to Senator Cowdery's  questions about  lab functions                                                               
she explained  it tests raw  dairy product  to make sure  the fat                                                               
content is  correct and to  ensure the pasteurization  process is                                                               
working. Every  portion of  dairy products that  are sold  to the                                                               
military and  to schools  must be state  certified. The  lab also                                                               
tests shellfish  for paralytic shellfish poisoning,  and reindeer                                                               
and other large  animals shipped out of state  for brucelosis. It                                                               
also performs  the Fish Monitoring  Project analysis to  test for                                                               
persistent organic pollutants such as heavy metals.                                                                             
                                                                                                                                
DOT  director Matt  Tanaka contracted  with  Livingston Slone  to                                                               
analyze the AIDEA building as an  option to relocate the lab. She                                                               
noted  preliminary information  was  in the  packets  and page  2                                                               
provides a comparative analysis.                                                                                                
                                                                                                                                
CHAIR GARY STEVENS asked if she  was referring to the Seafood and                                                               
Food Safety Laboratory Replacement spreadsheet dated 4/3/03.                                                                    
                                                                                                                                
MS. RYAN said  that was correct. It compares building  the lab as                                                               
planned to  building it in a  portion of the AIDEA  building that                                                               
is leased by ASI.                                                                                                               
                                                                                                                                
Putting the lab in that building  would save the state a bit more                                                               
than $700,000. The reason the savings  is not greater is that the                                                               
state has already  spent $1 million in design work  and that is a                                                               
sunk cost.  If the  lab were  to share the  ASI space,  the state                                                               
would  have to  start over.  Only $2  million could  be saved  in                                                               
construction costs  because the requirements  for a lab  are very                                                               
specific. All  heating and ventilation  systems would have  to be                                                               
completely  separate and  the only  existing infrastructure  that                                                               
could be  used is the floor  and one wall. Contingency  costs are                                                               
about $500,000  more to put  the lab  in the building  ASI leases                                                               
because of the unexpected costs to modify an existing structure.                                                                
                                                                                                                                
SENATOR COWDERY asked if she said  it would cost $500,000 more to                                                               
put the lab in the existing facility.                                                                                           
                                                                                                                                
MS. RYAN responded  it would cost about $700,000 less  to use the                                                               
ASI leased building. The $500,000 covers contingencies.                                                                         
                                                                                                                                
They  worked  with  the  Department of  Revenue  to  analyze  the                                                               
impacts to  the funding options.  For one thing,  certificates of                                                               
participation  couldn't  be  used  to modify  an  existing  state                                                               
facility,  which means  the construction  costs  would require  a                                                               
$13.2 million general fund appropriation.                                                                                       
                                                                                                                                
SENATOR DYSON asked, "As opposed to what?"                                                                                      
                                                                                                                                
MS.  RYAN explained  the lab  that is  already designed  could be                                                               
funded with certificates of participation.  They could sell bonds                                                               
and  debt service  would assume  the annual  cost of  paying back                                                               
that  bond debt.  The  Governor  is introducing  a  bond bill  to                                                               
provide  that  option if  the  Legislature  elects to  take  that                                                               
route.                                                                                                                          
                                                                                                                                
If the lab were built in  the ASI leased building, DEC would have                                                               
concerns  about vibration  to their  microscopes and  scales from                                                               
ASI or  other tenants. Fulcrum  scales that measure one  part per                                                               
billion are so sensitive that a  person walking into the room can                                                               
impact the reading.  DEC has discussed these  concerns with AIDEA                                                               
with regard to  ASI and other tenants. The lab  would occupy just                                                               
ten percent of  the building and house 14 people.  Labs are built                                                               
as stations  for each  type of  analysis that  is done  with each                                                               
station representing a function.                                                                                                
                                                                                                                                
SENATOR  COWDERY  asked  if  sharing  the  building  would  cause                                                               
problems.                                                                                                                       
                                                                                                                                
MS. RYAN replied  it might because lab equipment  is sensitive to                                                               
vibration and fumes.                                                                                                            
                                                                                                                                
CHAIR GARY  STEVENS asked about  the seafood  processing business                                                               
already on the premises.                                                                                                        
                                                                                                                                
MS.  RYAN replied  ASI business  is compatible  with the  lab but                                                               
there could be  ethical issues because the lab  would oversee and                                                               
regulate ASI.                                                                                                                   
                                                                                                                                
SENATOR COWDERY  asked whether another food  vending entity would                                                               
have an impact on the lab.                                                                                                      
                                                                                                                                
MS. RYAN  said they regulate  any food processing and  might test                                                               
their  products.  AIDEA  would  have to  determine  the  possible                                                               
conflicts with every potential tenant.                                                                                          
                                                                                                                                
SENATOR DYSON  said he was  startled by  the cost to  convert one                                                               
quarter of the building. He  asked whether the heating system was                                                               
hot air.                                                                                                                        
                                                                                                                                
TOM  LIVINGSTON  with  Livingston Slone  Architects  replied  the                                                               
existing system  was built for manufacturing  and food processing                                                               
occupancy. The  lab would need  a separate ventilation  system to                                                               
prevent  mixing   and  contamination.   More  control   over  the                                                               
ventilation systems is also required.                                                                                           
                                                                                                                                
SENATOR  DYSON  restated  his   question  regarding  the  heating                                                               
system.                                                                                                                         
                                                                                                                                
MR.  LIVINGSTON replied  they  propose to  put  in a  stand-alone                                                               
heating  and ventilation  system  specifically for  the lab.  The                                                               
projected  cost per  square foot  is $85,  which is  commensurate                                                               
with Anchorage building costs.                                                                                                  
                                                                                                                                
SENATOR DYSON  asked if it  was correct that the  temperature and                                                               
environment in the lab had to be carefully controlled.                                                                          
                                                                                                                                
MR.  LIVINGSTON said  that was  true.  They designed  the lab  to                                                               
occupy a  corner of  the two-story building.  For economy  and to                                                               
utilize the  volume effectively they  propose a  two-story build-                                                               
out within that space. Two  insulated exterior walls and the roof                                                               
and floor  slab could be  used, but all interior  utility systems                                                               
would be independently provided. The  lab would be an independent                                                               
building with the opportunity to  expand the building outside the                                                               
current footprint at some point.                                                                                                
                                                                                                                                
SENATOR DYSON asked if the existing heating system was hot air.                                                                 
                                                                                                                                
MR. LIVINGSTON replied  it was hot air with an  air exchange rate                                                               
that is lower than required by the seafood lab.                                                                                 
                                                                                                                                
SENATOR DYSON  asked why they  couldn't use a heat  exchanger off                                                               
the  existing hot  air system  to  provide a  hydronic system  or                                                               
whatever was needed for the  proper environmental control in that                                                               
quarter of the building.                                                                                                        
                                                                                                                                
MR.  LIVINGSTON  advised  they are  trying  to  utilize  existing                                                               
systems wherever possible and would  tap into the emergency power                                                               
system.                                                                                                                         
                                                                                                                                
SENATOR   COWDERY  asked   whether  placing   an  environmentally                                                               
sensitive lab in the building  would jeopardize any other options                                                               
for usage.                                                                                                                      
                                                                                                                                
MR.  MILLER  responded it  is  a  concern  that  DEC would  be  a                                                               
preemptive tenant.  They also noted the  proposed footprint would                                                               
take up  two or three of  the current loading docks,  which might                                                               
serve as a disincentive for a future tenant.                                                                                    
                                                                                                                                
CHAIR GARY STEVENS asked him to  comment on what has already been                                                               
spent in  the design  phase of  a new  lab because  he understood                                                               
$145,000 was spent on a feasibility study.                                                                                      
                                                                                                                                
MR. MILLER explained that money was spent by DEC and DOTPF.                                                                     
                                                                                                                                
CHAIR  GARY  STEVENS  noted  $240,000  was  spent  on  conceptual                                                               
design. He asked  whether the $1.3 million appropriated  in FY 02                                                               
had been expended.                                                                                                              
                                                                                                                                
MR. MILLER  advised they were  not involved; DEC and  DOTPF might                                                               
be able to answer the question.                                                                                                 
                                                                                                                                
CHAIR GARY STEVENS  asked Mr. Tanaka whether the  $1.3 million FY                                                               
02 design appropriation had been expended.                                                                                      
                                                                                                                                
MR. TANAKA  replied part had  been expended. Footnote (1)  on the                                                               
spreadsheet states that if the  decision is made by 4/15/03 about                                                               
$650,000 would be available to carry  forward for the design of a                                                               
lab  in  the  building  ASI  leases.  To  date  they  have  spent                                                               
somewhere in  excess of  $700,000 on  the design of  a lab  to go                                                               
next  to the  existing  public  health lab  on  Tudor Road.  That                                                               
design effort would  be shelved if the direction  were changed to                                                               
pursue building  a lab  in the ASI  building. When  comparing the                                                               
two proposals  and including sunk  costs for the Tudor  Road lab,                                                               
the projects are a wash. Both would be $14 million projects.                                                                    
                                                                                                                                
SENATOR COWDERY noted  he wanted to move the bill  on to Finance,                                                               
but he  questioned whether  the change  of direction  proposed by                                                               
SCR 6 would actually save the state money.                                                                                      
                                                                                                                                
He made  a motion to  move SCR 6  from committee. There  being no                                                               
objection, it was so ordered.                                                                                                   

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