Legislature(1993 - 1994)
02/17/1993 01:30 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
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HOUSE FINANCE COMMITTEE
February 17, 1993
1:30 P.M.
TAPE HFC 93 - 24, Side 2, #000 - end.
TAPE HFC 93 - 25, Side 1, #000 - end.
TAPE HFC 93 - 25, Side 2, #000 - end.
CALL TO ORDER
Co-Chair Ron Larson called the meeting of the House Finance
Committee to order at 1:30 P.M.
PRESENT
Co-Chair Larson Representative Brown
Co-Chair MacLean Representative Foster
Vice-Chair Hanley Representative
Grussendorf
Representative Hoffman Representative Martin
Representative Parnell Representative Therriault
Representative Navarre was not present for the meeting.
ALSO PRESENT
Edgar Blatchford, Commissioner, Department of Community and
Regional Affairs; John Walsh, Deputy Director/Juneau, Rural
Development Division, Department of Community and Regional
Affairs; Paul Fuhs, Commissioner, Department of Commerce and
Economic Development; Guy Bell, Director, Division of
Administrative Services, Department of Commerce and Economic
Development; Ron Garzini, Executive Director, Alaska Energy
Authority, Department of Commerce and Economic Development;
David Denig-Chakroff, Director, Rural Programs, Alaska
Energy Authority, Department of Commerce and Economic
Development; John Jemewduk, Norton Sound Economic
Development Corporation (NSEDC), Elim, Alaska; Norman
Anderson, Bristol Bay Economic Development Corporation
(BBEDC), Naknek, Alaska; Robin Samuelsen, Bristol Bay
Economic Development Corporation, Alaska; Mark Snigaroff,
APICDA, Alaska; Fred Phillip, CVFC, Kwigillingok, Alaska;
Mark Springer, Yukon Delta Fisheries Development Association
(YDFDA), Hooper Bay, Alaska; Perfenia Pletnikoff, Central
Bering Sea Fishermen's Association (CBSFA), St. Paul,
Alaska; Laurentia Mike, Yukon Delta Fishermen Development
Association, Kotlich, Alaska.
SUMMARY INFORMATION
OVERVIEW ON COMMUNITY DEVELOPMENT QUOTAS (CDQ)
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HB 60 An Act making appropriations for capital projects;
and providing for an effective date.
OVERVIEW: Commerce and Economic Development
HB 60 was held in Committee for further
discussion.
HB 45 An Act making appropriations to the Department of
Education for support of kindergarten, primary,
and secondary education and community schools
programs and for school construction debt
retirement; and providing for an effective date.
CS HB 45 (FIN) was reported out of Committee with
a "do pass" recommendation.
HOUSE BILL 45
"An Act making appropriations to the Department of
Education for support of kindergarten, primary, and
secondary education and community schools programs and
for school construction debt retirement; and providing
for an effective date."
Co-Chair MacLean MOVED to report CS HB 45 (FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CS HB 45 (FIN) was reported out of Committee with a "do
pass" recommendation.
OVERVIEW ON COMMUNITY DEVELOPMENT QUOTAS (CDS)
EDGAR BLATCHFORD, COMMISSIONER, DEPARTMENT OF COMMUNITY AND
REGIONAL AFFAIRS, explained that the CDQ program was
initiated by the Governor to assist communities in Southwest
Alaska to achieve an economic stability and to provide a
stronger social and economic base. The program concept was
initiated many years ago.
Last year, the North Fisheries Management Council (NFMC)
allocated 7.5% of the pollock catch to the fifty-five
communities in Southwestern Alaska. Various commissioners
made recommendations on how to divide the allocation so that
the more economically depressed areas were given a
proportionate share. The long range goal would be to
provide jobs for local residents. The communities divided
themselves into six applicant groups.
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Commissioner Blatchford said the State of Alaska invested
$300 thousand dollars into the CDQ effort, which resulted in
a return the six applicant groups of $20 million dollars in
free enterprise money. Each group created a development and
financing plan.
JOHN WALSH, DEPUTY DIRECTOR/JUNEAU, RURAL DEVELOPMENT
DIVISION, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS,
introduced members of each of the six applicant groups. He
expressed appreciation for Legislative support of the
program adding that the CDQ program is a tremendous resource
for the State of Alaska.
Representative Grussendorf asked if the IFQ's would be taken
from smaller communities in Southeast Alaska. Commissioner
Blatchford replied, a burden was created when only six
applicant groups were accepted. Those groups must succeed.
If they are not successful, there is a strong possibility
that the opportunities for access to the Bering Sea fishery
will be closed. DCRA efforts have been concentrated on the
Bering Sea. He added, that there has been discussion of
expanding the program although the impact to Southeastern
communities is uncertain.
Mr. Walsh commented that the IFQ program is tied to an
individual's fishing history. The quota would go to that
individual and they would then be eligible to sell as
private property their interest in the quota. Regulations
for the IFQ program are available for comment at this time.
The final rule has not been settled. There is no
restriction of a transfer for an IFQ permit.
Mr. Walsh stated that each applicant group had to address
various aspects of the CDQ plan. The Department provided a
chart for the Committee members to view. The chart listed
vessels allowed to fish, quota amounts, the length of time
the quota was received, employment goals, infrastructure
development and the revenue capital received.
ROBIN SAMUELSEN, PRESIDENT, BRISTOL BAY ECONOMIC DEVELOPMENT
CORPORATION (BBEDC), DILLINGHAM, ALASKA, expressed his
appreciation of funding for the CDQ program. He provided a
brief history of the CDQ program in the Bristol Bay area and
buy-pass issues affecting those fishermen. The plan of that
region is to train and employ the younger generation. BBEDC
hopes to employee one hundred twenty people this year.
Representative Hoffman asked how the State could help to
insure the success of the CDQ program.
Mr. Samuelsen stated that it is important that the NFMC
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votes reflect Alaskan interests. He felt if the vote
switched to Seattle, Alaska would lose the resource.
Representative Hoffman requested the Legislature be kept
informed as to the progress of the program.
NORMAN ANDERSON, BRISTOL BAY ECONOMIC DEVELOPMENT
CORPORATION (BBEDC), DILLINGHAM, ALASKA, reiterated his
appreciation for funding received for the CDQ program.
MARK SNIGAROFF, ALEUTIAN PRIBILOF ISLAND ECONOMIC
DEVELOPMENT ASSOCIATION (APIEDA), ST. GEORGE, ALASKA, noted
his appreciation for the speed in which the State of Alaska
opened the 1992 CDQ fisheries. This enabled communities and
regions in Southwest Alaska to generate income. He stated
APIEDA has created an education endowment and a training
program. Funds currently generated will go into the
infrastructure on-shore to those communities which the
APIEDA serves. He asked for further assistance in
developing the St. George Harbor, and noted that APIEDA has
funds set aside to match State funds.
Co-Chair Larson inquired about the dock facilities at
Pribilof. Mr. Snigaroff stated that the harbor at St. George
was not completed. It needs to be dredged which will cost
$4 million dollars.
FRED PHILLIP, COSTAL VILLAGE FISHING CORPORATION (CVFC),
KWIGILLLINGOK, ALASKA, stated that CVFC is creating a
training facility in Bethel and an employment center for the
local residents. He asked that the Legislature support
funding of this facility.
PERFENIA PLETNIKOFF, CENTRAL BERING SEA FISHERMEN'S
ASSOCIATION (CBSFA), ST. PAUL, ALASKA, stated that the
partner of CBSFA is American Seafood and added that the
operation in December was successful. He added that further
assistance is needed in order to complete the dredge and
back up work in the Pribilof harbors. St. Paul has been
declared an unsafe harbor.
LAURENTIA MIKE, YUKON DELTA FISHERIES DEVELOPMENT
ASSOCIATION (YKFDA), KOTLIK, ALASKA, noted her appreciation
for the CDQ program in the Yukon Delta region.
MARK SPRINGER, YUKON DELTA FISHERIES DEVELOPMENT ASSOCIATION
(YDFDA), HOOPER BAY, ALASKA, explained that the idea of the
CDQ program originated from Western Alaska fishermen and
felt that this is a credit to those local fishermen. The
YDFDA program is unique with such a small quota. The funds
are being used for a wide variety of purposes such as a
project construction allocation of $600 thousand dollars for
an on-ground processing plant.
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Mr. Springer pointed out that the Department of Community
and Regional Affairs (DCRA) is requesting an additional $150
thousand dollars in order to staff a full time employee for
the CDQ program in order to enforce these regulations. He
added that all the associations involved with the CDQ
program support filling that position.
(Change Tape, HFC 93-25, Side 1).
JOHN LEMEWKUK, NORTON SOUND ECONOMIC DEVELOPMENT
CORPORATION, ELIM, ALASKA, provided the Committee with
Attachment #1. Norton Sound Economic Development
Corporation (NSEDC) is a regional economic development
nonprofit corporation made up of fifteen villages in the
Bering Strait region of Northwestern Alaska. NSEDC was
originally incorporated in 1989 with the general purpose of
promoting economic development opportunities primarily for
Norton Sound. In June 1992, the organization was
restructured to expand membership within the region, to
focus its activities on fisheries related activities and to
qualify as a Community Development Quota (CDQ) applicant and
managing organization.
HOUSE BILL 60
"An Act making appropriations for capital projects; and
providing for an effective date."
OVERVIEW - DEPARTMENT OF COMMERCE AND ECONOMIC
DEVELOPMENT
PAUL FUHS, COMMISSIONER, DEPARTMENT OF COMMERCE AND ECONOMIC
DEVELOPMENT (DCED), provided the Committee with a synopsis
of the DECD Capital Improvement Project (CIP) requests.
[Attachment #2 & #3].
* Data Processing System Enhancement request for
$750 million dollars.
Wang Laboratories has filed for bankruptcy in
August 1992. DCED data bases are used extensively
for occupational, business and insurance
licensing, for corporate filings and for servicing
$230 million in outstanding loans, along with
several smaller systems. All data bases currently
use proprietary Wang equipment and software.
Requested money will be used to acquire the
equipment and software necessary for DECD to make
a 3-5 year transition from proprietary Wang
systems products in line with industry trends and
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standards.
* Economic Development Matching Grants request for
FY 93 Appropriation for $700 million dollars and
FY 94 Request for $750 million dollars.
Provides matching funds to communities and
nonprofits for economic development projects.
This program has been in place for the past 12
years. Leverages between $2.5 and $3.5 million in
federal and other funds each year.
* Small Business Assistance and Development - FY 94
Request for $550.0
Primarily matches federal funds for:
Small Business Development Centers $263.
Procurement Technical Assistance 150.
University Center for Economic Devl. 37.
Buy Alaska 50.
Small Business Forum 50.
* Alaska-Japan Fisheries Cooperation
FY 94 Request: $45.0
Based on 1985 Memorandum of Agreement between the
State of Alaska and the Japan Overseas Fisheries
Cooperation Committee. Funding used for meetings
and exchanges for the mutual benefit of Alaska and
Japan fisheries, particularly in the interest of
new product development. Past successes include
roe on kelp and surimi.
* Gold Rush Centennial Celebrations FY 94 Request:
$100.
First year of a five year program to organize
celebrations of the Gold Rush Centennial in the
Klondike, Nome, Fairbanks, and interior Alaska.
Money to be used for planning activities and
grants to local communities for events development
and promotion.
* Coal Initiatives FY 94 Request: $290.0
Money to be used for test shipments of Alaska coal
-- to confirm the suitability of the coal in a
number of combustion systems -- and for efforts at
opening new markets. The coal market is growing
at up to 80 million tons annually. Major
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prospects include Japan, Korea, Taiwain, the
Philippines, Mexico and Hawaii.
Representative Martin asked the criteria used to determine
the small business loans. Commissioner Fuhs stated that all
applicants are screened. The Economic Development Matching
Grants Program is not required to be paid back and
applicants can only receive this grant one time. None of
the programs listed are loan programs. He noted that there
are problems in the Business & Industry Development
Corporation (BIDCO) program. Representative Martin
disagreed with the University applying for small business
assistance and development grants. Commissioner Fuhs stated
that DCED's work is to promote the private sector business
in Alaska. DCED is trying to make businesses self
sufficient. He added that the University's budget has shown
double funding and this was incorrect accounting.
Currently, those funds have been separated and will be shown
only in the DCED budget request for the University Center.
Representative Martin questioned the value of the coal
initiative. Commissioner Fuhs stated that for a few years,
Alaska has been shipping eight hundred thousand tons of coal
to Korea. He expressed his enthusiasm with the current
efforts to create a fuel mixture which is not toxic and is
environmentally safe for shipping.
Representative Brown referenced Attachment #3, the small
business development request for $550 million dollars and
asked for further discussion on the budget interfacing.
Commissioner Fuhs replied the only area of duplication was a
Development Specialist position.
GUY BELL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, stated in
the past there has been duplication with two separate
business center development programs operating. One
operates through the University system, and is funded
through the Small Business Assistance Development Program.
There are two other business assistance programs which are
operated through private nonprofit organizations, one in
Anchorage and one in Fairbanks. Two years ago, the funding
for those organizations was deleted from the operating
budget.
Representative Brown asked how many new employees would be
added with the proposed budget. Mr. Bell said none. All
additions are grants. Commissioner Fuhs added that the
grants are matched by equal amounts of federal money. Mr.
Bell reiterated that no staff is paid for out of the capital
request. He offered to provide the Committee a response in
writing in order to avoid confusion.
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Commissioner Fuhs interjected that Alaskan producers must be
certified in order to qualify for the product preference
program. The program has been very effective.
Representative Brown questioned the establishment of the
Economic Center at the University of Alaska. Commissioner
Fuhs commented that the center is in Anchorage and resulted
from a federal grant to help provide assistance to nonprofit
corporations. He admitted that he too had questioned the
component.
Representative Parnell inquired if full funding for the data
processing component was expected this year. Mr. Bell
responded that a new system was necessary by next year,
although the anticipated conversion time is three to five
years. The pace software is a difficult system to change.
Representative Parnell asked if the entire component was
being requested this year. Mr. Bell stated it was.
ALASKA ENERGY AUTHORITY
RON GARZINI, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY,
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, provided
the Committee with Attachment #4 and #5 which summarizes the
CIP requests for the Alaska Energy Authority (AEA).
DAVID DENIG-CHAKROFF, DIRECTOR, RURAL PROGRAMS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE AND ECONOMIC
DEVELOPMENT, explained the Operation, Technical and
Emergency Assistance component, CIP request of $1.3 million
dollars. This request addresses continuation of specific
programs designed to provide a wide range of energy systems
operations, technical and emergency assistance to rural
communities and utilities in evaluating deficiencies and
needs with respect to the collective energy systems and
facilities within a community. This may be accomplished by
conducting surveys and evaluating electrical generation,
distribution systems and waste heat systems serving the
community. Additionally, as assessments of the demand-side
alternatives such as insulation, heating and lighting
retrofits of local public buildings, energy control systems
and rate design could be made.
Mr. Denig-Chakroff continued with the second component:
Rural Utility Regionalization, Consolidation and Business
Management Training, CIP request for $270 million dollars.
The goal of the program is to create self-supporting
utilities in rural Alaska that can protect the State's
capital investments in power systems by continuously
operating and maintaining those systems in a safe, efficient
manner and providing reliable, affordable power to their
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customers without continual assistance from the State. This
will be done by developing the corporate strength of those
utilities.
(Tape Change, HFC 93-25, Side 2).
The Statewide Electric and Power Project Development program
CIP request for $1,000 million dollars would provide funding
for the engineering, environmental, and economic and
financial analysis of power projects throughout the State.
The objective is to respond in a timely manner to requests
from legislators, utilities and communities on power project
proposals and to develop a multi-year plan for
implementation through the issuance of revenue bonds and
minimal State contributions. If possible, the costs of
feasibility studies and financial packages would be recouped
from bond receipts.
Mr. Garzini noted the component - Energy Conservation and
Management Program for State-Funded Facilities - Phase One
CIP request for $550 million dollars. The State now owns
and operates more than 11.5 million square feet of
buildings. Additionally, the State pays for a portion of
the operating expense for square footage of school district
and municipally-owned facilities as well as space that is
leased from private owners. Responsible management of these
facilities requires that end-use energy consumption for each
facility be accurately estimated, so that energy costs may
be analyzed and minimized. The program is designed to
determine energy end-use in facilities for which the State
bears the operation costs, and to implement management
changes or capital projects designed to reduce energy costs
borne by the State general fund.
The next component is the Sutton-Glenallen Intertie
Feasibility Study CIP request for $500 million dollars.
Copper Valley Electric Association (CVEA) has proposed
construction of one hundred and twenty-seven miles of
transmission line between Sutton and Glennallen linking
CVEA to the Railbelt system.
The second item of the component is a CIP request for $500
million dollars for the Southeast Intertie Feasibility.
This project would fund the feasibility level evaluation of
a Tyee-Snettisham link of a Southeast Intertie transmission
system and bring it up to the same level in the project
approval process as the Tyee-Swan segment of a Southeast
Intertie. The project is justified to determine if the
transfer of surplus Tyee energy and possibly energy from
other potential hydroelectric projects along an
interconnected system. This is an acceptable alternative
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for meeting growing energy demands in Juneau.
Mr. Denig-Chakroff addressed the CIP request for $2.750
million dollars for the Rural Power Systems Upgrades. The
program would provide funding to continue Energy Authority
achievement of a variety of rural power systems upgraded
that have been identified through the Rural Technical
Assistance and Circuit Rider Maintenance programs or which
have been pointed out by community officials and
legislators. Projects realized under this program will
provide for more efficient operation of rural power systems.
The next CIP request is for $1 million dollars for the
Emergency Bulk Fuel Repairs/Spill Prevention. This project
would provide funding to make emergency repairs to bulk fuel
storage and handling systems in rural Alaska. Priority for
these funds would be communities whose systems are in such
poor repair that fuel vendors have threatened to refuse to
deliver fuel and/or where there is an imminent threat to
life, health, safety or the environment.
Mr. Garzini itemized the next CIP request of $5 million
dollars for the Component Renewal and Replacement - Alaska
Energy Authority - Owned Facilities. He pointed out that
this is not a request for State funding. It is a request to
receive monies from wholesale purchasers of power generated
by or wheeled over electrical systems owned by the Alaska
Energy Authority and to expend those monies for the renewal
and replacement of aging components of those facilities.
AEA has invested in those facilities a combined amount of $1
billion dollars.
Mr. Denig-Chakroff addressed Electrical System Life, Health
and Safety Improvements CIP request for $750 million
dollars. The program would provide follow-up funding of the
agency's program to correct problems in rural electric
systems that are or could become a threat to life, health
and safety in rural communities. Wherever possible, funds
will be used to leverage local matching funds.
The Bulk Fuel System Upgrades CIP request for $4.5 million
dollars would fund the design and upgrade of bulk fuel
storage and handling facilities in rural Alaskan communities
which are dependent upon seasonal fuel delivery and long-
term storage. Upgrades are critically needed in order to
resolve significant hazards to life and safety as well as
code violations and to ensure continued delivery of vital
petroleum products. The work will be accomplished through
grants and contracts with administrative and project
management oversight by the AEA.
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The Alternative & Applied Energy Technology Development CIP
request is for $700 million dollars. This program would
fund the development, design, construction, demonstration
and/or operational testing of technological enhancements to
energy systems including generation, storage, transmissions
heating and chilling and end-use efficiency and load
management. The program will be used to coordinate efforts
with energy research groups.
Mr. Garzini commented on the Reimbursable Authority CIP for
$5,000.0 thousand dollars. The authority to receive and
expend funds provided by others allows the Energy Authority
to enter into agreements with non-state entities and private
parties to either incorporate change orders into State
contracts or have the Energy Authority perform tasks which
the other party cannot itself accomplish.
Mr. Denig-Chakroff introduced CIP request for $5,000.0
thousand dollars for Electrical Service Extension Grant
Program which would be a matching grant program that
provides up to 60% of the cost of eligible projects proposed
by utilities for extending electrical service to private
residences and small businesses not currently served by an
electrical utility and, as a second priority, for making
improvements to existing utilities.
The King Cove Hydroelectric Project Construction CIP request
for $500 million dollars for the proposed King Cove hydro
project is located on Delta Creek, about five miles north of
the community of King Cove. A recent update of the project
analysis concluded that the proposal is technically and
economically feasible. With back-up diesel generation to
cover demand peaks and low water flow intervals, the hydro
project would supply most of the City's existing annual
demand and supply most of the anticipated growth
requirements over the next twenty years.
Mr. Garzini introduced the CIP request for $50 million
dollars for the Snettisham Acquisition which would provide
support for Energy Authority FY 93 costs of personnel,
travel, communications, and legal and consulting fees
related to the possible sale of the Snettisham Hydroelectric
Project to the State. The sale is part of the legislative
proposal authorizing the sale of the two federal
hydroelectric projects in Alaska and subsequent close out of
the Alaska Power Administration.
Co-Chair MacLean questioned the Governor's $250 million
dollar cut to the King Cove Hydroelectric Construction. She
asked if the cut would allow them to qualify for Electrical
Service Extension Funds. Mr. Garzini replied that the rule
for that fund is a 60\40 grant program for line extensions.
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King Cove could qualify if they were providing a line
extension.
Representative Brown inquired if a processing plant
currently existed in King Cove. Mr. Denig-Chakroff stated
it did and added that King Cove has one thousand residents.
Representative Brown discussed disapproval of the project
and stated it was not an economically feasible plan for that
size community. Mr. Garzini pointed out that the community
will assist in financing the balance.
Co-Chair MacLean asked for further detail on the Alternative
& Applied Energy Technology Development component. She
asked why funds were not available from the Science and
Technology Fund for that component. Mr. Denig-Chakroff
replied when a specific small technical problem is
identified, AEA does ask the Science and Technology Fund's
support.
Co-Chair MacLean requested more information on the Bulk Fuel
System upgrades. Mr. Denig-Chakroff offered to provide that
information. Co-Chair MacLean asked how the Sutton-
Glenallen feasibility study would impact the legislation
introduced by Representative Navarre. Mr. Garzini replied,
when the legislation was heard in the House Labor & Commerce
Committee, it was suggested that Representative Navarre
include the Sutton to Glenallen Intertie in that package.
Mr. Garzini noted that the project is not currently ready to
build because a feasibility report has not been completed.
Representative Brown asked if the Southeast Feasibility
Study would continue to need funding with the closure of
Greens Creek. Mr. Garzini replied that the forecasted
energy demands in Juneau still far exceed the capacity of
energy generated in that area.
ADJOURNMENT
The meeting adjourned at 3:40 P.M.
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