Legislature(1999 - 2000)
02/25/1999 01:39 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
GENERAL SUBJECT(S): OVERVIEWS:
Alaska Aerospace Development Corporation
Alaska Science and Technology Foundation
The following overview was taken in log note format. Tapes and
handouts will be on file with the House Finance Committee through the
21st Legislative Session, contact 465-2156. After the 21st Legislative
Session they will be available through the Legislative Library at 465-
3808.
Time Meeting Convened at 1:39 p.m.
Tape HFC 99-29, Side 1 and 2
Tape HFC 99-30, Side 1
X Representative G. Davis
PRESENT:
X Co-Chair Therriault X Representative Foster
X Co-Chair Mulder Absent Representative Grussendorf
X Representative Austerman X Representative Kohring
X Representative Bunde Absent Representative Moses
X Representative J. Davies Absent Representative Williams
ALSO PRESENT:
PAT LADNER, EXECUTIVE DIRECTOR, ALASKA AEROSPACE DEVELOPMENT
CORPORATION, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT; JAMES
KENWORTH, PHD, EXECUTIVE DIRECTOR, ALASKA SCIENCE AND TECHNOLOGY
FOUNDATION; LEIF SELKREGG, RISE ALASKA; GEORGE KING, HUDSON IAPF,
PROJECT MANAGER, RISE ALASKA; LAURA GOULD, DIRECTOR OF OPERATIONS,
ALASKA AEROSPACE DEVELOPMENT CORPORATION; LARRY PRICE, LOCKHEED
MARTIN; MICHAEL MACHULSKY, CHAIRMAN, BOARD OF DIRECTORS, ALASKA
AEROSPACE DEVELOPMENT CORPORATION; LARRY PRICE, DIRECTOR, SMALL
LAUNCH PROGRAMS, LOCKHEED MARTIN CORPORATION.
LOG SPEAKER DISCUSSION
OOO HFC 99-29, SIDE 1 ALASKA AEROSPACE DEVELOPMENT CORPORATION
Co-Chair Mulder Convened the Committee at 1:39 p.m.
MICHAEL MACHULSKY, Provided members with backup material.
CHAIRMAN, BOARD OF Attachment 1, Athena System Launch,
DIRECTORS, ALASKA Lockheed Martin (copy on file).
AEROSPACE Attachment 2, Economic Effect of the
DEVELOPMENT November 1998 Launch on the Kodiak Island
CORPORATION Borough and on the state of Alaska (copy
on file). Attachment 3, 1999 Business
Plan, Alaska Aerospace Development
Corporation (copy on file).
183 Mr. Machulsky Gave a brief overview of the history of
the Alaska Aerospace Development
Corporation (AADC). Noted that recent
legislation increased the Board of
Directors by four members. Listed Board
members (contained on page 3 of Attachment
3.)
332 Mr. Machulsky Funding for the Kodiak Launch Complex was
received last year. First launch facility
on private property in U.S.
393 Mr. Machulsky Pointed out that the Kodiak Launch Complex
is about creating the infrastructure in
the state for a new industry. Road and
communications improvements are the result
of the project. Additional federal funding
is coming into the state as the result.
There has been a positive affect on
education in the state.
546 Mr. Machulsky Discussed Alaska Aerospace Development
Corporation's (AADC) business plan.
Observed that projections are
conservative.
590 PAT LADNER, Noted that AADC is statewide. Emphasized
EXECUTIVE that there are several ground stations in
DIRECTOR, ALASKA addition to the launch facilities.
AEROSPACE Stressed the use of data collected by
DEVELOPMENT remote sensing. The Department of Natural
CORPORATION, Resources can use the data to track
DEPARTMENT OF erosion and beetle infestations.
COMMERCE AND Municipalities can use the data to assess
ECONOMIC growth. Data can also be used for GSI
DEVELOPMENT mapping.
780 Mr. Ladner Discussed the Challenge and Learning
Center in Kenai.
840 Mr. Ladner Discussed the Kodiak Launch Complex. Noted
that money was brought into the state from
the launch. Emphasized that value added
industry will result from the presence of
the Lockheed Martin Corporation.
907 Mr. Ladner Stressed that it is time to transition
from construction to marketing. Discussed
launches that will occur in the next few
years.
979 LAURA GOULD, Discussed the Kodiak Launch Complex's
DIRECTOR OF budget. She emphasized that it is critical
OPERATIONS, ALASKA to finish the complex to solidify their
AEROSPACE contracts. Alaska Aerospace Development
DEVELOPMENT Corporation has a 40 million-dollar
CORPORATION budget. They were successful in using $5
million dollars from an Alaska Science
and Technology Foundation (ASTF) grant to
get $30 million dollars in federal funds.
They still need a $5 million dollar, non-
general fund, and capital appropriation.
Discussed other funding possibilities.
They are working with the Alaska Science
and Technology Foundation. The Alaska
Industrial Development and Export
Authority (AIDEA) reviewed their finance
plan and concluded that their assumptions
were correct.
1119 Ms. Gould Noted that ASTF indicated that they would
accept a grant application for the last $5
million dollars.
1157 Ms. Gould The economic impact from the first launch
at the Kodiak Launch Complex was $1.3
million dollars in sales. They expect that
there will be a greater impact from future
launches. The first launch was small and
did not have a satellite.
1210 LARRY PRICE, Talked about the launch vehicle and where
DIRECTOR, SMALL Alaska stands as a launch site.
LAUNCH PROGRAMS,
LOCKHEED MARTIN
CORPORATION
1240 Mr. Price Reviewed Attachment 1. One third to two-
thirds of the missions are at high
inclination site. Plans to fly a mission
for NASA in August. The Kodiak Launch
Complex is a high inclination launch site.
1327 Mr. Price Reviewed page 3, Attachment 1. Noted that
there is a significant amount of money
invested in the Athena program. Kodiak is
a natural site to follow Florida
1361 Mr. Price Discussed page 4. Their program is in
Space and Strategic missiles, Electronics
area of the Lockheed Martin Corporation.
1394 Mr. Price Discussed page 5, Athena Overview. The
Athena Launch Program was designed to fly
up to 12 vehicles. There are 4 launches on
the current manifest. There are plans to
construct an Athena III. Pointed out that
there is growth potential at Kodiak Launch
Complex.
1481 Mr. Price Discussed page 6, Athena Flight Successes.
Discussed success of Athena flights. 80
meters per second velocity, highly
successful. Only used two of three burns.
They had propellant to spare. Discussed
the Lunar Prospector. Noted that it was
highly successful.
1537 Mr. Price Discussed ROCSAT-1. It was built for the
Taiwanese government. It was also highly
successful. Anticipate other missions that
would fly from the Kodiak Launch Complex.
1661 Mr. Ladner Discussed page 7, Launch Sites. Reviewed
other launch sites. Noted benefits of
Kodiak. There is a commercial facility and
commercial pad in Kodiak. Stressed that
they are comfortable with schedule of
construction and costs.
1744 Mr. Price Stated that there have been a number of
studies as to the size of the market.
Observed that it is hard to assess because
it is an emerging market. Market surveys
indicate that there will be as many as 800
missions over next 10 years. They estimate
that there will be 200 in the next year.
Their business plan estimates that they
will have 80 missions over the next 10
years. Anticipates 2-8 high inclination
missions. Launch vehicle is ready and
launch site supports the schedule. They
are working with NASA.
1892 Mr. Price The market is changing to smaller
companies, not all government missions.
Last year was the first year where there
were more commercial then government
launches. Observed that government
launches are fully funded. Commercial
launches can be fully or partially funded.
The are working on capability to enhance
desirability of Kodiak Launch Complex.
1955 Representative G. Asked the extent of competition.
Davis
1978 Mr. Price There are other facilities. Discussed
competition. There are two pads in Russia.
Others do not have missiles of the same
class.
2006 Representative G. Questioned the importance of the Kodiak
Davis Launch Complex.
2017 Mr. Price Noted that there is good coverage at high
latitudes. Launches from Florida do not
get as far north or only reach northern
latitudes after many cycles. Kodiak Launch
Discussed advantages of the Kodiak Launch
nd
Complex. It has a clear ocean to drop 2
rd
and 3 stage segments.
2076 Co-Chair Mulder Pointed out that high inclination launches
can service the entire United States.
2105 Mr. Price Discussed high inclination north to south
launches.
2128 Mr. Price In response to a question by
Representative Bunde, explained that they
need a 50-mile down range to drop stages.
Aircraft need to keep clear.
2157 Mr. Price Noted that there is a lot of marine
traffic in Florida. They usually launch at
night.
2175 GEORGE KING, (Rise Alaska provides project management
HUDSON IAPF, RISE at the Kodiak Launch Complex. Their
ALASKA contract extends to December 1999.)
Discussed status of work in progress to
take maximum advantage of market. Pointed
out that financing has become an issue as
the market has split from noncommercial
(government) to commercial launches.
Discussed how they are trying to position
AADC to be competitive in the market.
2260 Mr. King Discussed efforts to secure bonding
through AADC bond authorization revenue
bonds. They are creating letter of credit
revenue bonds to allow financing for
commercial launches. This would eliminate
risk to the state of Alaska. Pointed out
that there is no general fund money
involved. Bonds are not related to
infrastructure, but to launches.
2322 Mr. King Noted that they are working with the
Lockheed Martin Corporation to use the
Kodiak Launch Complex as their launch
site. Alternative financing will make the
Kodiak Launch Complex more attractive.
2348 Mr. King The have identified a portion of the
federal tax code that prevents tax exempt
financing. He noted that this section
could be changed.
000
HFC 99-29, SIDE 2 TAPE CHANGE
078 Co-Chair Mulder Asked the number of firms that might be
interested in taking advantage of a
financing package.
0136 Mr. Price Stated that there are about five a year
that are high inclination candidates. He
estimated that a revenue package could
enhance their competitive position on 14
of launches over the next three years.
160 Co-Chair Mulder Pointed out that the state is not at
financial risk.
180 Mr. King Emphasized that the state is insulated
from risk because it is a letter of
credit.
212 Co-Chair Clarified that financing is an inducement
Therriault to business in Alaska
248 Mr. Price Noted that high inclinations launches and
financing separates Kodiak from Russia
303 Mr. King Satellite companies are coming out with
short timeframes when they put out bid
requests. Satellite companies are
customers of AADC and the Kodiak Launch
Complex. Foreign launch sites are their
greatest competition because of subsidizes
by foreign governments.
426 Co-Chair Noted that a vehicle is necessary to
Therriault deliver the product to space. Pointed out
that the Lockheed Martin Corporation has
made an investment in the Kodiak Launch
Complex.
496 Representative J. Asked how stiff is the competition and how
Davies important is the change in the tax code?
520 Mr. King Stressed that the tax code change is very
important. Tax exempt financing rates are
the lowest available. Would have the
lowest cost of funds that is not
subsidized.
573 Co-Chair Mulder Asked how realistic is it that the change
could occur.
598 Mr. King Emphasized that the tax change is
realistic overtime, but he could not
anticipate when it would occur.
643 Ms. Gould Stressed that they have been effective at
working with the Congressional delegation.
Stressed that the Legislature can send a
message to the Congressional delegation.
656 Co-Chair Mulder He asked who would be against allowing the
extension of tax exemption.
Mr. King Observed that the IRS is cautious about
requests for tax exemption. Stated that
they need to make case that spaceports
constitute a compelling state interest.
724 Co-Chair Mulder Pointed out that there is a strong
argument that it would allow an
opportunity to retain business in the
United States. Stressed that they are
competing internationally.
740 Representative J. Are there other companies looking at the
Davies Kodiak Launch Complex.
756 Ms. Gould Stated that there are opportunities to
work with the military and other foreign
vehicles. They are working on a long term
marketing plan
812 Representative Stated that he needed more information on
Bunde bonding. Questioned if there would be a
risk to the state.
848 Mr. King Pointed out that a letter of credit is not
at risk for the state. The borrower has a
relationship with the bank. They negotiate
allocation of risk between them. The bank
makes payments on behalf of the borrower.
The bonds are issued by the state.
Discussed the importance of alternative
financing to capturing the market.
991 Mr. King Acknowledged that there are risks to the
state. The risk would be if the borrower
and the bank both failed. Stressed that
they will work with the Department of
Revenue and the legislature to look at
banks.
1001 Representative Noted that the risk to state is minimal.
Bunde
1026 Mr. King Agreed that the risk is not zero.
1047 Co-Chair Asked if the Legislature should create a
Therriault resolution supporting the change in the
tax code.
1071 Ms. Gould Noted that a resolution by the Legislature
would be very beneficial.
1120 Representative Noted that the first Kodiak launch was not
Austerman a problem with local fishermen. What is
the normal pay back on bonds?
1165 Mr. King Clarified that bonds are rarely extended
beyond useful life of the satellite. The
payoff would be within the life of the
satellites.
1199 Mr. Price Normal payoff would be between 3 and 10
years. Most would be between 5 and 7
years. May be as short as a year or six
months.
1227 Representative G. Noted that IRS code changes are mechanisms
Davis to reduce cost.
1253 Mr. Price Discussed competition with foreign
markets.
1301 Co-Chair Mulder Asked what the state charges.
1311 Ms. Gould Stated that the information is
confidential. Observed that AIDEA thinks
that AADC over estimated their costs.
1360 Mr. Price Pointed out that the lower the cost the
lower the total package.
1404 Representative Maintained that if they build it and the
Bunde market will come.
1428 Mr. Price Stressed that there is still a risk.
Emphasized that there are challenges in
capturing the market.
1614 Mr. Price Noted that the Kodiak Launch Complex is
tailored to the needs of the vehicles that
will be launching there
ALASKA SCIENCE AND TECHNOLOGY FOUNDATION
1643 JAMES KENWORTH, Provided members with Attachment 4
PHD, EXECUTIVE (Attachment 4). Pointed out that need to
DIRECTOR, ALASKA expand or replace exports. Only agency
SCIENCE AND with science and technology focus to grow
TECHNOLOGY economy uses incentives to get industry to
FOUNDATION take a longer-term view and take more
risk.
1723 Mr. Kenworth Discussed the challenges facing the state
and the Alaska Science and Technology
Foundation. Need to enlarge and diversify
goods.
Mr. Kenworth Discussed I, Attachment 4. Salmon based
final products accounted for $7.3 million
dollars in sales. Discussed grants for
surimi process and salmon pin bone
removal. There is a $70 thousand dollars
dollar grant for a Katchemak Bay oyster
seed project.
1809 Mr. Kenworth Discussed II of Attachment 4, Replace
Imports.
1869 Mr. Kenworth Discussed the Petro Star Desulfurization
Project.
1901 Mr. Kenworth Discussed III of Attachment 4, Science for
Alaska Benefit. Noted that there is a
project to test for total dissolved solids
(TDS). Working on two-year project to
determine TDS levels.
1940 Mr. Kenworth Discussed remote sensing to integrate
radar data. Stressed that it could provide
better information to the mining industry.
1966 Mr. Kenworth Discussed the seismology project to
produce micro zone maps in Anchorage. The
maps can be used to determine if areas are
over or under built.
1997 Mr. Kenworth Discussed IV, Technology Infrastructure
for Growth. Noted the importance of early
risk capital for infrastructure growth.
Added $1.4 million in equity in 1998. The
Alaska Science and Technology Foundation
is now capitalized at $7 million dollars.
2057 Mr. Kenworth Discussed the creation of InvestNet. It is
an investor network where entrepreneurs
and investors can come together and
investment plans created.
2071 Mr. Kenworth Observed that ASTF is funding K-12
internet projects. Uses volunteer labor.
Schools are being wired for $10 thousand
dollars per school.
2097 Mr. Kenworth ASTF is funding the placement of science
resources on the internet. Noted that
Alaskan students will have access to the
Sealife Center and other museums through
the web.
2114 Mr. Kenworth Summarized that ASTF funded 111 projects,
costing $13.6 million dollars. Projects
resulted in an additional $65 million
dollars in matching money. This included
$5 million dollars for the Kodiak Launch
Complex. Noted that there are $4 million
dollars for the University of Alaska
Fairbanks coal project.
2162 Mr. Kenworth Observed that the percentage of ASTF's
total expenditures that is put into
operations has declined from 32 percent to
8 percent.
2178 Mr. Kenworth Explained that their total earnings would
not be known until the end of year.
2243 Mr. Kenworth Discussed performance measures. Discussed
a 1999 McDowell survey on performance
measures. Observed that performance
measures were previously on a per project
bases. They are now looking at overall
performance measures such as job sales.
Observed the survey found that 130 jobs
were a direct result of ASTF programs.
Noted that 84 percent of the grantees
would not have entered into projects
without ASTF assistance. Added that 36
percent would not be in business.
2269 Mr. Kenworth Observed that they need better measures
for knowledge projects.
2280 Mr. Kenworth Spoke in support of continuing the work of
ASTF.
2298 Representative G. Observed that ASTF is making effort to
Davis improve conditions in rural Alaska.
Questioned how effective they have been in
rural Alaska.
2322 Mr. Kenworth Discussed wastewater disposal in rural
Alaska. Discussed Review Board with
Department of Environmental Conservation
and Public Health.
000
HFC 99-30, SIDE 1 TAPE CHANGE
036 Mr. Kenworth Discussed efforts to improve rural Alaska
through rural power projects.
165 Representative Complaints that ASTF is placing money in
Bunde failing projects. Asked what is being done
to assure repayment.
201 Mr. Kenworth Stressed that 5 percent of the gross goes
back to the endowment. Noted that they
send annual surveys to grantees.
302 Representative Asked if other states have similar
Bunde programs.
344 Mr. Kenworth Stated that 48 other states have similar
programs. Noted that a few are inactive.
Most were started in early 80's.
370 Co-Chair Asked if there is a mechanism for deposing
Therriault equipment.
399 Mr. Kenworth Explained that ASTF deposes equipment when
the Board receives a report from staff.
Most of the time the equipment goes back
to the grantee.
474 Representative Asked if other states finance science and
Kohring technology.
531 Mr. Kenworth Noted that some states have science and
technology commissions, some encourage
science and technology through their
universities, and some have separate
agencies that are concerned with science
and technology issues. Discussed makeup of
programs in other states. They are state
government funded programs.
671 Representative Questioned the benefits of science and
Kohring technology in terms of jobs and dollars
generate.
714 Mr. Kenworth Stated that current impact of ASTF is
documented on page 3 of Attachment 4.
Stressed that the impact is good, but
needs to keep growing.
820 Representative J. Expressed support for the Alaska Science
Davies and Technology Foundation.
843 Representative G. Observed that the Kodiak Launch Complex is
Davis requesting an additional $5 million
dollars.
889 Mr. Kenworth Noted that the Board of ASTF received the
AIDEA review in their last meeting. He
noted that the Board would be glad to
receive an application for the balance of
funds. Discussed conditions and issues
that would need to be worked out to make
sure that this is the last piece of state
money needed to for the capital program.
923 Co-Chair Discussed the creation of a letter to the
Therriault Congressional delegation supporting a
change in the tax code.
1010 Co-Chair Mulder ADJOURNMENT
The meeting adjourned at 3:29 p.m.
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