Legislature(2003 - 2004)
05/13/2003 01:40 PM Senate STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 215-SEAFOOD AND FOOD SAFETY LABORATORY
ERNESTA BALLARD, Commissioner of the Department of Environmental
Conservation, said she would testify to the program aspects of
the bill. She gave the following testimony:
Imagine it is 5:00 pm on Friday, you are a dairy
processor and your pasteurization equipment breaks
down. The scenario is not uncommon. To fulfill your
school and military contracts, FDA requires that a
state lab certify your equipment is operating
correctly again and test the product to make sure.
Milk can't wait until Monday morning. The Seafood and
Food Safety Laboratory staff is there to make sure
your product is safe for consumption and makes it to
market while it's fresh. Ours is the only lab
certified in Alaska to test dairy products to ensure
successful pasteurization so they can be sold to the
military and schools.
SB 215 provides the funding mechanism to build a new
Seafood and Food Safety Lab. The expense is already in
our proposed capital budget. The facility we have
leased for 34 years will not be available after 2006.
It is overcrowded and not fully compliant with safety
codes and laboratory design standards. It was
developed in Palmer when the principal lab business
was agriculture and dairy. In recent years
entrepreneurs in coastal Alaska have developed a wide
variety of value added seafood products adding a
significant and time sensitive testing responsibility
for our lab. Our proposed new lab will be in Anchorage
where valuable hours can be saved between sample
collection and test results for raw and live seafood
industries.
A core function of government is protection of human
health and the environment. Government must be
prepared to respond to unanticipated outbreaks of
disease or the presence of contamination in food,
water and animals. The Alaska seafood and food safety
laboratory fulfills these functions. We analyze raw,
finished, and value-added food products for bacteria,
chemicals, and toxic contaminants.
The laboratory protects Alaskans by monitoring animals
for zoonotic diseases-transferred from animals to
humans-such as brucellosis. Lab technicians test food
products for botulism, salmonella, listeria and fecal
coliforms and also test public drinking water for
giardia, a common contaminant found in surface water,
and cryptosporidium.
The laboratory supports the seafood, dairy and
shellfish industries.
To successfully market Alaska's high quality shellfish
and seafood, the public must be assured they are safe.
Federal requirements for shellfish are very strict
because the health risks are great. Through monitoring
and testing the lab assures the safety of Alaska's
growing shellfish industry, including geoducks,
mussels and oysters. Through new PSP sampling and
testing procedures, live geoduck sales have begun to
enable the industry to ship approximately 50-60
percent of its geoduck quota live, increasing its
value three fold. When the industry reaches its goal
of 85 percent live shipment, the industry's value will
be worth approximately $2.5 million.
A perfect example of how this lab has and will
continue to help Alaska's economy grow is the farmed
oyster industry. As I'm sure you all know, Alaskan
oysters are top quality and easily merit their good
wholesale price. In the recent past, this industry did
not exist. DEC lab staff are some of the experts who
helped oyster farmers get started. With our
assistance, farmers set up operations that met
National Shellfish Sanitation standards, which must be
met to sell raw product. Those standards require that
DEC sample the growing water to ensure it is free from
contamination. As the industry grew, it became more
difficult for our staff to travel to remote locations
for the collection of water samples. We developed a
method for harvesters to collect their own water
samples thereby increasing the opportunity for growing
areas to be approved. The laboratory is also providing
proof that Alaska's commercial fish species are of the
highest quality and free of contaminants by monitoring
commercially caught species for pollutants. Over 600
samples were collected last year and the results will
be available next month.
The laboratory supports Alaska's private labs by
certifying them to conduct drinking water analysis. We
train 190 private lab staff a year on how to test
drinking water according to EPA standards, and assist
private laboratories in obtaining certification and
approval to perform federally regulated tests.
We cannot depend on private laboratories to maintain
testing and analytical capabilities for situations
when there is no profit margin. When private markets
develop, our laboratories get out of the business. For
example, the Seafood and Food Safety Laboratory does
not test drinking water for fecal coliform because
private labs are capable of conducting those tests.
The DEC laboratory only conducts tests that are
federally required to be done by a state lab or are
not provided elsewhere in the state.
The health of Alaskans and the success of Alaska's
seafood, shellfish and dairy industries are contingent
upon the smooth and continued operation of the seafood
and food safety laboratory. Through our testing,
monitoring, and technical support, the laboratory
assures the health of Alaskans and our environment,
and supports the development of our abundant
resources.
CHAIR GARY STEVENS announced he had a memo from legal counsel
suggesting an amendment to change the title. He asked for a
motion to adopt the committee substitute (CS).
SENATOR JOHN COWDERY made a motion to adopt CSSB 215 \D version.
There being no objection, it was so ordered.
SENATOR COWDERY asked why certificate of participation bonds
(COPs) rather than general obligation bonds were suggested as
the financing mechanism.
DEVEN MITCHELL, Treasury Division Debt Manager with the
Department of Revenue, explained that COPs are a type of
financing tool that are used for specific projects that don't
warrant a statewide election. The Legislature authorizes the
appropriation of the lease payment on an annual basis. They are
a lower obligation than general obligation bonds (GO), which
carry the full faith and credit of the state.
SENATOR COWDERY referred to the fees listed on page 2 and asked
whether they were typical for this type of funding and where the
fees go.
MR. MITCHELL explained the costs associated with COPs are the
project itself and the cost of issuing the bonds. [Balance
indiscernible due to background noise.]
SENATOR COWDERY asked if the fees would go directly to the lab.
MR. MITCHELL said the fees on page 2, lines 12-17 are
interrelated. They are the sizing of the COPs and anticipate the
reinvestment of bond proceeds over the course of the project
period. There is a $140,000 estimate on earnings on those
proceeds so the issuance amount is $14,145,000 identified on
line 9. That is added to the $140,000 in anticipated earnings
for a project total size of $14,285,000. The $1,391,000 on line
15 is the anticipated principal and interest payments for the
COPs that would be paid on an annual basis. The $20,862,000 on
line 16 is the total principal and interest repayment that would
occur over the 15 year life of the certificates.
SENATOR COWDERY asked whether any pass-through federal funding
was available.
COMMISSIONER BALLARD said they were not aware of any.
SENATOR COWDERY asked how many employees were in the existing
lab and how many would be in the new lab.
KRISTIN RYAN, Director for the Division of Environmental Health,
replied there are 25 employees in the Palmer lab. Eleven
positions are specifically lab related and would move to the new
facility. Fourteen would remain in the Palmer facility and one
additional wastewater specialist would join that facility.
SENATOR COWDERY said he thought the lease was due to expire at
the Palmer lab.
MS. RYAN replied the current lease expires in 2006. Some non-lab
related personnel have already moved to another facility and
more would do so.
SENATOR FRED DYSON referred to the 1997 Department of
Administration (DOA) determination regarding long-term leases
and statutory rent reduction requirements and asked for an
explanation.
COMMISSIONER BALLARD admitted there was no one present that
could provide an explanation.
SENATOR DYSON remarked it would be easier to change the statutes
than to move to a new facility. He reviewed the Department of
Revenue (DOR) fiscal note and asked if it was correct that
$200,000 per year would pay back the COPs.
MR. MITCHELL admitted the numbers in the fiscal note from DOR
and those in the bill differ slightly. The fiscal note shows
$1,362,800 being paid annually for debt service.
SENATOR DYSON asked where that money would come from.
MR. MITCHELL said it would come from the general fund.
SENATOR DYSON asked what the annual total would be for operating
expenses, including debt reduction, utilities and other costs.
MS. RYAN explained it would be a combination of the operating
costs and the debt servicing costs.
SENATOR DYSON noted that would amount to roughly $1.6 million
per year. He asked where the public health lab is located.
COMMISSIONER BALLARD replied it is next door to the proposed
lab.
SENATOR DYSON asked how much is paid for the current lease at
the Palmer facility.
COMMISSIONER BALLARD said it is considerably less.
MS. RYAN estimated current payments were closer to $100,000 per
year.
SENATOR DYSON asked when the state would finish principal
payments for the COPs.
COMMISSIONER BALLARD advised the term is 15 years.
CHAIR GARY STEVENS thanked Senator Dyson for comparing the
projected $200,000 payment to the current $100,000 lease
payment.
SENATOR GRETCHEN GUESS said the department was speaking of
$200,000 per year in utilities and maintenance, but they said
the lease purchase was $100,000, not the utilities and
maintenance.
She asked why there was such a difference between the current
operating costs and the projected costs.
MS. RYAN explained that the new facility meets all codes for
heating, ventilation and air handling and includes an auxiliary
power source. All of which accounts for the cost differential.
SENATOR GUESS stated she was surprised that only half the
employees would move from the Palmer facility and asked which
jobs would stay.
MS. RYAN said there are two food safety inspectors, four
pesticide program employees, a state and a federal veterinarian
and a variety of indirectly related DEC positions that don't
necessarily rely on the lab services.
SENATOR GUESS asked about the resolution to examine a facility
near the airport for the lab.
CHAIR GARY STEVENS said Mr. Mitchell's letter addresses the ASI
consideration [SCR 6]. He asked the commissioner to comment on
the status of that resolution.
COMMISSIONER BALLARD explained that the department conducted a
side-by-side analysis of remodeling some of the facility
occupied by Alaska Seafood International that is located by the
airport versus the stand-alone facility that is on state owned
property at Tudor and Boniface and next to the public health
lab. Upon reviewing the analysis, the governor recommended that
DEC proceed with the stand-alone facility.
SENATOR GUESS requested a copy of the analysis and asked if
there was a reason to set the amount in statute rather than an
giving an "up to" figure. She then asked what assurance the
public has that the cost would be at or below the projection.
MR. MITCHELL said that, from his perspective, the "sum certain"
is the requirement, by law, that the Legislature approves an
amount. It could be expressed as a "not to exceed amount" but
the Legislature has preferred to know more definitively how much
they would spend. This bill has had a lot of effort expended to
accomplish the new facility and to help that DOR provided an
estimate of investment earnings on the proceeds while they are
being drawn down. Although it's only $140,000, current budgetary
conditions make it desirable to make sure that the authorizing
body of the Legislature is aware of where the money would go.
COMMISSIONER BALLARD informed the committee the site is
prepared, the utilities are stubbed to the site, and the
drawings are at 70 percent completion. The project has been in
the works for seven years so many of the design and construction
uncertainties have already been addressed.
JOHN MACKINNON, Deputy Commissioner with the Department of
Transportation & Public Facilities, said the state health lab
was recently completed and is a similar facility with regard to
code and laboratory requirements. They have accurate numbers on
the cost of that facility and the proposed lab would likely be
similar in square foot costs. There are contingency pockets in
the overall budget process to take up any unforeseen
circumstances.
SENATOR COWDERY asked if there were private sector facilities
that could meet the need.
DEPUTY COMMISSIONER MACKINNON said he would compare leasing a
facility to use as a food lab to taking a warehouse and turning
it into a hospital. It would be a tremendous amount of work to
meet the code requirements.
SENATOR COWDERY asked if anyone had approached the private
sector.
TOM LIVINGSTON, project architect, said his company did a
feasibility study for leasing versus building several years ago
and they determined they would be faced with constructing a
building within a building if they were to lease space. Overall,
lease costs were higher than ownership costs.
SENATOR COWDERY said he supported the need for the facility.
SENATOR GUESS asked how lab use would differ in the proposed
facility because the operating expenses are projected to be ten
times higher.
MS. RYAN explained the current laboratory does not meet
laboratory or OSHA standards, which means their results are at
risk and could be refuted. Although there might be an increase
in samples tested at the new lab, the main thing the public is
getting for the increased cost is knowledge that the results are
accurate.
ROGER PAINTER, representative of the Alaska Shellfish Growers
Association, spoke in support of SB 215. With regard to
contracting services to the private sector, he said that there
are no private labs in the country that conduct paralytic
shellfish poison tests or that can process water quality samples
for marine waters.
Since the lab facilities were originally leased in Palmer, the
clientele has shifted from agriculture to seafood. Because
seafood samples must be in the lab within 30 hours from the time
they are collected, having the lab in Anchorage rather than
Palmer would make it easier for businesses such as his to fit
within the time constraints.
He commented that the current lab was hopelessly antiquated when
he visited it last 15 years ago.
ROGER SHANNON from Kenai asserted that the lab should be placed
in the ASI [Alaska Seafood International] building.
JULIE DECKER, executive officer from the Southeast Regional Dive
Fishers Association, testified via teleconference in support of
the bill. She said the proposed lab is economically vital to the
dive fishery and the current lab staff does excellent work.
SENATOR COWDERY made a motion to move CSSB 215(STA) and attached
fiscal notes from committee with individual recommendations and
asked for unanimous consent.
CHAIR GARY STEVENS asked for a roll call.
SENATOR DYSON asked to speak to the issue and stated it almost
defies logic to build a new stand-alone lab rather than placing
it in the state owned building that houses ASI. Second, he said
he is intimidated by the 15 year obligation and has trouble with
the engineering estimates that make it almost as expensive to
put the lab in the existing building as it is to build a new
free standing building. In his view, the ASI building is a
monument to how poorly government does when it gets involved in
areas that should be left to the private sector.
SENATOR GUESS asked what the design costs were for the state
owned building.
MR. MACKINNON said about $1 million was spent in design costs
for the stand alone building and those design costs aren't
adaptable to putting the facility in the ASI building.
SENATOR GUESS asked if a true analysis would show that one would
be about $15 million and the other about $13.3.
MR. MACKINNON agreed if you were to start from ground zero.
SENATOR GUESS said, sunk costs are sunk costs, but from the
marginal cost perspective the ASI building looks to be a better
long term option. She questioned why the Administration decided
on the stand-alone building.
CHAIR GARY STEVENS asked Senator Cowdery to remove his motion so
Mr. MacKinnon could answer the question.
SENATOR COWDERY removed his motion to move the bill from
committee.
MR. MACKINNON stated that the ASI building would be a better
option if the seafood lab were needed for just 15 years, but at
the end of 15 years there would be operating costs to consider.
SENATOR COWDERY commented placing the lab in the ASI building
would limit future tenants.
CHAIR GARY STEVENS noted Mr. Mitchell wrote a memo on March 28,
2003 that said the seafood lab would use just five percent of
the ASI building and locating the lab there would make it
difficult to find a tenant for the rest of the space.
SENATOR DYSON asked what portion of the operating costs would be
recovered through customer fees.
COMMISSIONER BALLARD replied they might recover between 25 and
30 percent in fees by next year. They are raising fees as
quickly as possible, but some of the projected increases require
statutory change. Current fee income is about $100,000 per year
and with statutory changes they hope to increase it to about
$300,000.
She added that AIDEA (Alaska Industrial Development and Export
Authority) only considered housing the lab in the ASI building
in the last year and by that time the $1 million to design the
stand-alone building was already spent, which is why there isn't
a true side-by-side comparison.
CHAIR GARY STEVENS said the current questions were of a
financial nature and he would like the Finance Committee to
address them.
SENATOR COWDERY made a motion to move CSSB 215(STA) and attached
fiscal notes from committee and asked for unanimous consent.
CHAIR GARY STEVENS asked if there was any objection. There being
no stated objection, CSSB 215(STA) moved from committee.
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