Legislature(1995 - 1996)
04/20/1995 01:05 PM House CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE April 20, 1995 1:05 p.m. MEMBERS PRESENT Representative Ivan Ivan, Co-Chair Representative Alan Austerman, Co-Chair Representative Kim Elton Representative Al Vezey Representative Pete Kott MEMBERS ABSENT Representative Irene Nicholia Representative Jerry Mackie COMMITTEE CALENDAR HB 294: "An Act relating to the procurement of construction contracts for village safe water and hygienic sewage disposal facilities and to contributions by the users of the facilities." HEARD AND HELD HB 154: "An Act requiring the Department of Law to provide guidelines regarding unconstitutional state and municipal takings of private real property; relating to the taxation of private real property taken unconstitutionally by state or municipal action; establishing a time limit for bringing an action for an unconstitutional state or municipal taking of private real property; and providing for an effective date." PASSED OUT OF COMMITTEE WITNESS REGISTER WALTON SMITH, City Manager City of St. Mary's P.O. Box 163 St. Mary's, AK 99658 Telephone: (907) 438-2575 POSITION STATEMENT: Testified against HB 294 BOB CHARLES, Vice President of Operations Alaska Council of Village Presidents P.O. Box 219 Bethel, AK 99559 Telephone: (907) 543-3521 POSITION STATEMENT: Testified against HB 294 GREG CAPITO Village Safe Water Program Department of Community & Regional Affairs 400 Willoughby Avenue Juneau, AK 99801 Telephone: (907) 465-5137 POSITION STATEMENT: Testified against HB 294 TOM QUICK, Vice Mayor City of Ouzinkie P.O. Box 110 Ouzinkie, AK 99644 Telephone: (907) 680-2209 POSITION STATEMENT: Testified against HB 294 WILLIAM J. HUNTER, City Manager City of Bethel P.O. Box 388 Bethel, AK 99559 Telephone: (907) 543-2047 POSITION STATEMENT: Testified on HB 294 CHUCK EGGENER Box 232946 Anchorage, AK 99523 Telephone: (907) 349-1010 POSITION STATEMENT: Testified against HB 294 MARIE SANSONE, Assistant Attorney General Department of Law P.O. Box 110300 Juneau, AK 99811 Telephone: (907) 465-6726 POSITION STATEMENT: Testified on HB 294 TOM BOEDECKER, Borough Attorney Kenai Peninsula Borough 177 N. Birch Lane Soldotna, AK 99669 Telephone: (907)262-4441 POSITION STATEMENT: Testified against HB 154 JON ISAACS 308 G Street, No. 313 Anchorage, AK 99523 Telephone: (907) 349-1010 POSITION STATEMENT: Testified against HB 154 BEN SUDDATH Mile 1 Nash Road, Box 1291 Seward, AK 99664 Telephone: Not Available POSITION STATEMENT: Testified on HB 154 BILL CUMMINGS, Assistant Attorney General Department of Law P.O. Box 110300 Juneau, AK 99811 Telephone: (907) 465-4164 POSITION STATEMENT: Testified against HB 154 SARA HANNAN Alaska Environmental Lobby P.O. Box 22151 Juneau, AK 99801 Telephone: (907) 463-3366 POSITION STATEMENT: Testified against HB 154 TOM BOUTIN, Director Division of Forestry Department of Natural Resources 400 Willoughby Avenue Juneau, AK 99801-1754 Telephone: (907) 465-3379 POSITION STATEMENT: Testified against HB 154 CRAIG LYON, House Researcher Representative Vic Kohring Alaska State Legislature State Capitol, Room 428 Juneau, AK 99801 Telephone: (907) 465-2186 POSITION STATEMENT: Testified in support of HB 154 PREVIOUS ACTION BILL: HB 294 SHORT TITLE: BIDDING FOR VILLAGE WATER/SEWER FACILITY SPONSOR(S): REPRESENTATIVE(S) VEZEY JRN-DATE JRN-PG ACTION 04/05/95 1026 (H) READ THE FIRST TIME - REFERRAL(S) 04/05/95 1026 (H) CRA, LABOR & COMMERCE, FINANCE 04/11/95 (H) CRA AT 01:00 PM CAPITOL 124 04/18/95 (H) CRA AT 01:00 PM CAPITOL 124 04/18/95 (H) MINUTE(CRA) 04/20/95 (H) CRA AT 01:00 PM CAPITOL 124 BILL: HB 154 SHORT TITLE: REGULATORY TAKING OF PRIVATE PROPERTY SPONSOR(S): REPRESENTATIVE(S) KOHRING,Rokeberg,Kott JRN-DATE JRN-PG ACTION 02/03/95 237 (H) READ THE FIRST TIME - REFERRAL(S) 02/03/95 237 (H) CRA, JUD, FIN 02/16/95 (H) CRA AT 01:00 PM CAPITOL 124 02/21/95 (H) CRA AT 01:00 PM CAPITOL 124 02/21/95 (H) MINUTE(CRA) 03/01/95 550 (H) COSPONSOR(S): ROKEBERG 03/09/95 (H) CRA AT 01:00 PM CAPITOL 124 03/09/95 (H) MINUTE(CRA) 03/16/95 (H) CRA AT 01:00 PM CAPITOL 124 03/24/95 919 (H) COSPONSOR(S): KOTT 03/25/95 (H) CRA AT 01:00 PM CAPITOL 124 03/25/95 (H) MINUTE(CRA) 04/20/95 (H) CRA AT 01:00 PM CAPITOL 124 ACTION NARRATIVE TAPE 95-15, SIDE A Number 000 CO-CHAIR IVAN IVAN called the House Community and Regional Affairs Committee meeting to order at 1:05 p.m. He noted the members present at the call to order were Representatives Ivan, Austerman, Kott, Vezey and Elton. The first bill for consideration was HB 294 -- Village Safe Water Bidding. This was a continuation of the last meeting. Teleconferenced sites were Fairbanks, Anchorage, Homer, Kodiak, Mat-Su, Seward, Kenai/Soldotna and Bethel. He invited Representative Vezey to make opening comments. HB 294 - BIDDING FOR VILLAGE WATER/SEWER FACILITIES Number 028 REPRESENTATIVE VEZEY stated he understood previous testimony to indicate there would be a conflict of the statutes regarding contracting out the projects and force accounting. He was not aware of any conflict. Another area of conflicting testimony was regarding local hire. He pointed out that one of the incentives to local hire was that communities did not have to pay Little Davis Bacon wages. If that option was extended to contractors, he felt it would be a great incentive for them to hire locally. He felt that the issue of prevailing or legally mandated wages might be an issue the committee would want to investigate. He indicated the wages should apply equally. He felt that going to a competitive wage system would in no way restrict a local community from participating in the construction projects. CO-CHAIR IVAN opened the testimony to teleconference participants. The first site was Bethel. Number 120 WALTON SMITH, City Manager of St. Mary's, stated that he supported the intent of the legislation; however, he felt that force accounting had provided quality work and excellent prices on their projects. He disagreed with the sponsor's statement that "only by competitive bidding can we be assured that the funds spent for these construction projects will result in the greatest value to the state and the communities involved." He did not believe that competitive bid process did that. The bidding process would require more engineering work, time to develop bid documents, etc., and delay the projects considerably. He was also concerned that contractor profit would increase the cost of the projects. With the city managing the project, profit was not a concern and local hire was maximized. This also facilitated training locals to care for and operate the systems once completed. He wondered what kind of ethical standards were going to be implemented that weren't already in place. He expressed concern that contractors would subcontract parts of the jobs with little oversight. It was his opinion that currently both options, force accounting and competitive bidding, existed and changing the system would not be cost effective or efficient. Number 262 REPRESENTATIVE VEZEY stated that he felt the procurement procedures allowed for greater flexibility and didn't anticipate that the competitive bid process would be more costly or time consuming. Number 293 MR. SMITH indicated that he felt the flexibility was already in the statutes. He thought the proposed legislation restricted that flexibility. He was concerned that this method would require considerable more documentation and procedures which would be more costly and inefficient. Number 348 REPRESENTATIVE VEZEY responded that standard specifications were commonly utilized on all similar projects. He was concerned that a system was lacking to judge the efficiency of the programs. Contractors routinely bid on unit prices and did not require change orders just because work was added or deleted. Number 390 MR. SMITH reiterated his fear that this would not allow for the necessary flexibility to accomplish the project efficiently and cited examples of situations he had been involved in where there had been problems. He reinforced his support of force accounting and local hire. Number 464 BOB CHARLES, Vice President of Operations, Alaska Council of Village Presidents, and Chairman of the Rural Alaska Sanitation Coalition, expressed his opposition to the legislation. He supported the force accounting concept and believed it promoted and stimulated the local economy. It gave the communities the ability to determine how the sanitation project would be implemented. He felt it was important for the community to establish a feeling of ownership of the project. He questioned whether the lowest bidder was always the best. He felt it was essential that an understanding of village life and the problems involved be a strong consideration in developing the projects. Most often contractors did not have this insight or personal investment in the community. He thought the state should be promoting flexibility instead of limiting them. He stated that the people he represented were opposed to the bill. Number 525 GREG CAPITO, Village Safe Water Program (VSWP), Department of Community and Regional Affairs, stated that it was his responsibility to assist with the planning, design, and building of safe sanitation facilities in the bush. The facilities, once completed, became owned and operated by the community and are not owned by the state. He indicated the department opposed the legislation. It was the VSWP's belief that local government should decided how a project must be built since they have to own and operate the facility. Ownership was integral to successful operation and maintenance of the facility. He stated that administrators and city managers need as many alternatives as possible to complete the projects. VSWP encourages a mix of force accounting and contract construction to accomplish the projects. He noted that approximately $8 million worth of projects were currently being bid. The communities need the authority and responsibility to make these decisions. He felt it was the contractor's responsibility to adapt to the needs of the remote communities. Number 584 REPRESENTATIVE VEZEY asked if it was accurate that local wages were 60 percent of the Little Davis Bacon wages. MR. CAPITO answered that yes, 60 percent was correct. For a force account job, the local prevailing rate varied depending on the area of the state. The wage rate is adjusted up according to the skills of the job required. He estimated that, for an entry level position, the hourly rate would be $12-12.50 and up to $17-18 per hour for a journeyman or skilled person. REPRESENTATIVE VEZEY estimated those rates to be 35-40 percent of the Davis Bacon rates. He stated that Davis Bacon rates would run from a low of about $31-32 to upwards of $41-44 per hour. He inquired as to why Mr. Capito felt that the contractor would have to pay Davis Bacon wages. MR. CAPITO indicated that if local government does the job using force accounts, the prevailing wage rate of that community is the one that is employed. If a licensed contractor does the same work under the statutes, Davis Bacon wage rates kick in. REPRESENTATIVE VEZEY felt that the law stated that Title 36 wages were not required on village safe water projects and indicated that it was not the intent of the legislation to do so. He stated the funding source was a significant factor in whether the Davis Bacon wages were used. He also felt that if a contractor hired locally there was not a need for the cost of a camp. MR. CAPITO stated that he had never seen a project where a contractor came into a village and didn't bring his own people. Housing, water and sewage are considerable problems under those circumstances. REPRESENTATIVE VEZEY felt that if a contractor could get employees for $15 instead of $35, he would hire locally. MR. CAPITO indicated that the funding source was not the issue, but that the statute clearly stated that, if the contractor paid the people, they received Davis Bacon wages; if the local government employed the workers, the local prevailing wage was used. TAPE 95-15, SIDE B Number 000 CO-CHAIR IVAN stated that the complexity of some projects automatically excludes force accounting in communities, but those that could be handled at the local level were encouraged, particularly because of the bad economy. Number 024 CO-CHAIR AUSTERMAN indicated it was his understanding that, if it was force accounting, the workers were municipal employees and not subject to the Davis Bacon; but if the municipality goes to competitive bid and contracts it out, those contract employees are subject to Davis Bacon. REPRESENTATIVE VEZEY stated that it was his understanding the village safe water project were exempt from Title 36 if the funding came through that source. Number 062 TOM QUICK, Vice Mayor of Ouzinkie, President of the Kodiak Island Village Utility Council, and representing the Kodiak Area Native Association on the Rural Alaska Sanitation Coalition, wanted to emphasize cost isn't the only factor. He was concerned about the quality and on-going serviceability and viability of the projects. Under force accounting, the local government wasn't in need of the profit factor as was a private contractor. Contractor interest tends to be very short-term. Use of local people provides a community resource and knowledge. He cited problems he had encountered with contractors working in the villages, such as abuse of the equipment, use of subcontractors, and a desire to get the job done too quickly. He expressed a strong concern for maintenance as an ongoing resource in the state of local Alaska people to work with when there are problems or needs for future planning of projects. Number 230 WILLIAM J. HUNTER, City Manager of Bethel, supported the idea of competitive bidding in general; however, he felt local governments needed options other than competitive bidding. Number 272 CHUCK EGGENER, Sanitary Engineer and Bush Contractor, explained that he had been a contractor and brought a camp in to do the projects; however, in the last ten years, he had gone to a small core group and utilizing local workers, essentially becoming a force accounting construction management company. He felt that they build contractor quality projects at 35 percent less cost. He felt they had an excellent reputation for quality and efficiency. He thought that the mechanism allowing communities to do force accounting was working and there were a lot of spin-off benefits to the local community. He opposed the legislation. Number 346 REPRESENTATIVE VEZEY asked if there was an effort to establish a regional wage scale. MR. EGGENER stated that you couldn't get good performers who are skilled at their jobs to leave Anchorage for less than Davis Bacon wages. Local people are available, have a vested interest in the outcome of the construction, and view it as an opportunity. Number 375 REPRESENTATIVE VEZEY asked if Mr. Eggener was able, as a contractor, to pay local or regional prevailing wages, would it influence his decision as to the source of labor. MR. EGGENER indicated that it may to some extent, but the bidding contractor, not knowing his labor, would bid a large contingency just in case he couldn't get the quality of labor needed. REPRESENTATIVE VEZEY asked if he was testify the productivity wouldn't be any more or less, but that in a fixed price or unit price bid a contractor would have to allow for contingencies. MR. EGGENER indicated that you were paying a lower wage, but you were training the individuals. REPRESENTATIVE VEZEY asked if by hiring workers at 35 percent less, couldn't you afford to train them. MR. EGGENER said he thought a contractor would take advantage of that opportunity. Number 426 MARIE SANSONE, Assistant Attorney General, Department of Law, stated that the Department of Environmental Conservation had asked the Department of Law to review the legislation. She indicated there were three areas of concern: 1) the bill as drafted conflicted with the state procurement code in at least one and possibly several areas that would require amendments to the procurement code in order to avoid the conflict; 2) the bill was ambiguous as to whether the recipient of a grant under the village safe water program under Title 6 could continue to use force account labor, and there was some ambiguity as to the other recipients of the other types of grants that are covered by this bill; and 3) there were a number of provisions, terms and definitions in the bill that conflicted or differed from other terminology that was used in the procurement code, in Title 36, Title 37 or Title 46. She elaborated on these issues and felt that they needed to be clarified in order to carry out the true intent of the legislation. Number 566 REPRESENTATIVE VEZEY asked if she would provide her comments in writing. He asked for clarification between AS 36.30 regarding exempting grants. MS. SANSONE stated the provision of the procurement code that exempts the grants from the procurement code has the effect of allowing the grantee to elect to use force accounting. When the grantee chooses to contract, they were required to follow the procurement code which would trigger the Little Davis Bacon Act. Number 604 CO-CHAIR IVAN informed the committee that HB 294 would be held for more hearings because of the affect it had on over 200 villages in the state. HB 154 - REGULATORY TAKING OF PRIVATE PROPERTY Number 620 CO-CHAIR IVAN then indicated the committee would take up HB 154 sponsored by Representative Kohring. He asked that Co-Chair Austerman, representing the subcommittee on the bill, discuss the concerns on the bill. CO-CHAIR AUSTERMAN stated the recommendations had been distributed to committee members and Representative Kohring had provided a response. He noted that it had been suggested that the subcommittee recommendations be attached and forwarded to House Judiciary since most of the issues were under their purview. Number 640 CO-CHAIR IVAN asked for testimony from those on teleconference, starting with Tom Boedecker of Kenai. Number 649 TOM BOEDECKER, Borough Attorney for Kenai Peninsula Borough, expressed his concerns regarding this legislation. He interpreted the focus of the sponsor to be dealing with takings by regulatory action; however, the definition of governmental action was too broad to be limited to that. He also expressed concern regarding assessments of property which may be redundant in existing law. Of particular concern to him were the guidelines to be developed by the Attorney General (AG). Under the bill it was specified the guideline to be developed by the AG would not alter the law beyond what the Constitution provides. He felt the AG would be very conservative in the viewpoints and the guidelines, and would rule that things were takings much more often than not. It raised the question of immunity of local officials. TAPE 95-16, SIDE A Number 000 JON ISAACS, Anchorage, expressed concern on the current version and preferred the C version which developed guidelines for government to follow and has a much more reasonable definition of government action. It takes into account the effect of government takings on property tax. He felt the K version of the bill was too broad and would create a legal and financial nightmare for both state and local governments and private citizens. Number 048 BEN SUDDATH, testified via teleconference from Seward, outlining personal problems he had encountered regarding this issue. Number 131 BILL CUMMINGS, Assistant Attorney General, Department of Law, indicated he thought this legislation was quite revolutionary and felt there were some serious questions that needed to be addressed. He stated there were provisions in the legislation that were unconstitutional, ambiguous, and major departures from public policy. His main concern was the constitutional issues which were in Section 3 of the bill. He felt there was a question of what the effect was to be of the guidelines the AG was to prepare. The Constitution gave only the legislature the right to enact laws. Under the provisions of the bill, funding of the damage award was to come from the budget of the agency doing the taking. He indicated there was a constitutional problem in that appropriations are made to the agency for certain activities and can't be spent for other things. Another problem was that a person who suffers a regulatory taking was to be fully compensated. The problem was the definition does not include all the constitutional provisions already provided. The final problem he felt was with the interest provisions using the London Interbank rate. The norm in Alaska is to pay the legal interest rate which is currently set by statute at 10.5 percent and also applies in condemnation cases. Many of the takings in this bill result from physical invasions or depravation of the benefits of ownership. In the cases where the London Interbank rate would be lower than 10.5 percent, the people would have a great chance of prevailing on a constitutional argument that they were denied equal protection under the law because there is no logical difference between a person experiencing an administrative taking and one who experiences a more traditional taking. One other area of concern was the taking of access from property. The bill provides that payment be made for depravation of access and is left with two provisions; to buy out the parcel of land or provide access to it. Buying out the land is good public policy; however, providing access in addition to paying for damages is like double payment. Number 265 SARA HANNAN, Alaska Environmental Lobby, expressed strong opposition to the bill. She also expressed strong disagreement with the idea of passing this legislation on to the next committee without addressing the problems identified. Number 318 CO-CHAIR IVAN noted that the subcommittee had brought forward issues that the House Judiciary Committee would better address. Number 323 TOM BOUTIN, Director, Division of Forestry, Department of Natural Resources, stated this legislation would be devastating to the Alaska Forest and Resources Practices Act. The Act statutorily requires a great deal of protection of fish habitat and water quality that are takings under HB 154. In Southeast Alaska alone, for buffer strips, he felt that the impact could be as much as $200 million. The division's budget was only $7 million annually, which could not begin to cover the costs. He reiterated that this legislation had severe ramifications on the Forest Practices Act and would consider most of their actions as takings, which would be very expensive. Number 361 CRAIG LYON, House Researcher to Representative Kohring, stated that they appreciated the time the committee and subcommittee had taken. He hoped the memo had addressed some of the concerns of the subcommittee and supported passing the legislation on to the House Judiciary Committee. Number 371 REPRESENTATIVE KOTT stated he was concerned that the response to the subcommittee's questions had only been received just prior to the beginning of the committee meeting. Number 384 REPRESENTATIVE VEZEY moved that the committee pass CSHB 154(CRA) out of committee with individual recommendations and attach the subcommittee's letter of recommendations for the next committee of referral. Number 392 REPRESENTATIVE ELTON expressed objection. He expressed concern that the committee should be incorporating village and municipal input into the legislation. He felt the legislation had tremendous impact on local governments and should address the issues during the interim as was the recommendation of the subcommittee. He noted that the Departments of Law and Natural Resources had presented many reservations. He expressed a concern on the retroactivity clause in the bill and felt the committee was not being responsible. He maintained his objection. Number 450 CO-CHAIR IVAN asked for a roll call vote. The motion was adopted with Representatives Austerman, Ivan, Kott and Vezey voting in favor of the motion and Representative Elton voting against the motion. Co-Chair Ivan noted that the bill had moved to the next committee. Number 458 CO-CHAIR IVAN noted that the next meeting was Tuesday, April 25 which would deal with SB 16, Increased Land Grants to the University of Alaska, and SB 6, Suspended Driver Licenses/Traffic Offenses. ADJOURNMENT CO-CHAIR IVAN adjourned the House Community and Regional Affairs Committee at 3:06 p.m.