Legislature(2017 - 2018)HOUSE FINANCE 519
04/26/2017 01:30 PM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB131 | |
| HB128 | |
| HB76 | |
| HB124 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 131 | TELECONFERENCED | |
| += | HB 128 | TELECONFERENCED | |
| += | HB 124 | TELECONFERENCED | |
| += | HB 76 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 26, 2017
1:33 p.m.
1:33:40 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:33 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Matt Gruening, Staff, Representative Louise Stutes; Heather
Fair, Chief Right-of-Way, Department of Transportation, In
Room; Representative Dan Ortiz, Sponsor; Forrest Bowers,
Deputy Director - Commercial Fisheries Division, Department
of Fish and Game, In Room; Representative Dan Ortiz,
Sponsor; Britteny Cioni-Haywood, Division Director,
Division of Economic Development, Department of Commerce,
Community and Economic Development; Elizabeth Bolling,
Staff, Representative Dan Ortiz; Representative Sam Kito,
Sponsor; Bianca Carpeneti, Staff, Representative Sam Kito.
PRESENT VIA TELECONFERENCE
Peter Pinnow, Senior Council, Wells Fargo, Minneapolis, MN.
SUMMARY
HB 76 MARICULTURE REVOLVING LOAN FUND
CSHB 76 (FSH) was REPORTED OUT of Committee with
a "do pass" recommendation and with two
previously published zero fiscal notes: FN1 (CED)
and FN2 (DFG).
HB 124 BENEFIT CORPORATIONS
HB 124 was HEARD and HELD in committee for
further consideration.
HB 128 SHELLFISH ENHANCE. PROJECTS; HATCHERIES
HB 128 was REPORTED OUT of Committee with a "do
pass" recommendation and with two previously
published fiscal notes, one with zero fiscal
impact: FN1 (DFG); and one with an indeterminate
fiscal impact: FN2 (DFG).
HB 131 RELOCATION ASSISTANCE FOR FED. PROJ/PROG
HB 131 was REPORTED OUT of Committee with a "do
pass" recommendation and with a previously
published zero fiscal note: FN1 (DOT).
Co-Chair Foster reviewed the agenda for the meeting. He
indicated he intended to move all bills from committee.
HOUSE BILL NO. 131
"An Act relating to relocation assistance for
federally assisted public construction and improvement
projects and programs; and providing for an effective
date."
1:34:55 PM
MATT GRUENING, STAFF, REPRESENTATIVE LOUISE STUTES,
introduced himself and read a prepared statement:
Good afternoon, Mister Chair and members of the House
Finance Committee, for the record, Matt Gruening,
staff to the House Transportation Committee.
It has been about a month since the committee has
heard this bill and my intention is to provide a brief
refresher.
I would be remiss, if did not mention that Laura
Stidolph, who previously presented this bill has a
very good reason for not being here today. I am
pleased to announce that at 3:58 this morning, Laura
gave birth to an 8 lb. 15 oz. baby boy. Both mother
and baby are in perfect health.
In front of you is House Bill 131 "Federal Relocation
Assistance Programs/Projects" which will bring Alaska
into compliance with Federal law concerning
reimbursement for relocation expenses incurred by
individuals or businesses that were displaced due to a
federally funded highway, bridge, or facilities
project. Alaskans deserve to be fairly compensated in
these circumstances. HB 131 will also protect Alaska's
approximately $700 million annual allocation of
Federal Highway Administration (FHWA) and Federal
Aviation Administration (FAA) funding by bringing the
state into compliance. $500 million is allocated
annually from the FHWA and on average $200 million is
allocated from the FAA. Having an equivalent state
statute is one of the requirements for a state to
receive a delegated authority to independently
administer the federal program. Additionally, being
out of compliance, even for a short period of time,
jeopardizes our relationship with our funding
partners, putting our entire program at risk. These
projects currently amount to approximately $700
million annually in federal participation, as well as
countless jobs.
In 2012, Congress relaxed the eligibility criteria and
increased the maximum reimbursement limits for State's
relocation assistance payment programs when they
passed their transportation authorization and funding
bill, the Moving Ahead for Progress in the 21st
Century Act, aka MAP-21. Prior to MAP-21, the payment
rates had not been changed for 30 years.
These changes went into effect October 1, 2014.
Unfortunately, Alaska Statute continues to reflect the
more stringent eligibility criteria and the smaller
maximum reimbursement limits.
During the second half of the 29th Alaska Legislature,
this inconsistency between state and federal law was
nearly fixed. Language similar to HB 131 was proposed
and passed the House unanimously. It passed through
the Senate State Affairs and Senate Finance. However,
the bill was held in Senate Rules and never calendared
for a Senate floor vote.
HB 131 assures Alaskans that their Legislature wants
them to be compensated the same as a resident of any
other state.
Thank you for the opportunity to present this bill on
behalf of the House Transportation Committee. Heather
Fair, the Department of Transportation & Public
Facilities' Statewide Right-of-Way Chief, is here to
answer any questions you may have.
Representative Wilson conveyed that last time the committee
heard the bill there would be approximately $12 thousand or
9 percent in state funding, although the fiscal note was
zero. She wanted to make sure the fiscal note was accurate.
Mr. Gruening responded that the zero fiscal note was
correct. He added that federal funding was approximately 91
percent with a 9 percent state match.
Representative Wilson asked why the fiscal note would be
zero if there was a 9 percent state note. She was fine with
the bill.
1:39:19 PM
HEATHER FAIR, CHIEF RIGHT-OF-WAY, DEPARTMENT OF
TRANSPORTATION, answered that the state would design
projects based on available state funding and absorb the
additional costs when the department allocated projects.
Representative Wilson noted that the fiscal note was
retroactive to 2014. She wondered if the department was
confirming that even though there might be funding, the
department had enough in its budget to absorb the costs.
Ms. Fair responded affirmatively. She indicated that the
department estimated about $12 thousand liability to the
state, a small enough amount that the department could
absorb the cost back to 2014.
Representative Wilson suggested that in the future the
committee might want to take a closer look at the
department's budget.
1:40:24 PM
Representative Guttenberg spoke about the railroad recently
acquiring a significant amount of right-of-way. The
railroad's authority to make that acquisition was in
question. He asked if the bill would cover what the
railroad was doing. Right-of-way was required but not for
capital projects. The bill encompassed compensating people
for property right of ways. He asked if the railroad's
actions were covered in the legislation. Ms. Fair responded
that the railroad was a separate corporation.
Vice-Chair Gara understood the explanation about the zero
fiscal note. He thought it was due to the projects being
dependent on there being a federal project in the future
and the legislature having to pay to relocate a family. He
suggested that the department would not know when or how
frequently it would happen and when it would be in the
capital budget. He remarked it was an ongoing operating
budget expense normally seen in a fiscal note. He queried
the reason for the zero fiscal note. Ms. Fair responded
that it was very difficult to estimate how the department
would impact businesses, farms, and families with future
projects. The department took it into consideration when it
had the Statewide Transportation Improvement Program
(STIP). The department prioritized projects based on
available funding and need.
Vice-Chair Gara asked if there would be a capital expense
request of 9 percent. Ms. Fair responded, "That's correct,
and again we expect it to be a de minimis impact to the
state."
Representative Wilson suggested that in the future
relocation funds would be part of federal funding which
would be matched with 10 percent state funding. She thought
that what had been discussed applied to retroactive funds
and which accounts they would come out of. She reiterated
that going forward the relocation of funds would be part of
the grants from the transportation program and would be
seen in the capital budget. She asked if she was correct.
Ms. Fair responded affirmatively. She added that roughly
$12 thousand of the state liability was retroactive to-date
as well as what the department could foresee in the
following 1 to 2 years on known projects.
Representative Guttenberg commented that in a capital
appropriation for a project it included engineering costs
and costs associated with property acquisitions including
right-of-way properties. He thought the legislation would
authorize DOT to add 10 percent or absorb the cost.
However, it was enclosed inside a capital project bid
document going forward. He did not believe the legislature
would see the amount in a budget item. He asked if his
assessment was accurate. Ms. Fair responded that the
legislature would not see the detailed line items in the
request. She added that the legislature was currently not
seeing a line item, as it was already something the
department paid. There would be new limits.
1:45:44 PM
Vice-Chair Gara reviewed one zero fiscal note:
Department: Department of Transportation and Public
Facilities
Appropriation: Design, Engineering, and Construction
OMB Component: 2357
Vice-Chair Gara MOVED to report HB 131 out of Committee
with individual recommendations and the accompanying fiscal
note.
There being NO OBJECTION, it was so ordered.
HB 131 was REPORTED OUT of Committee with a "do pass"
recommendation and with a previously published zero fiscal
note: FN1 (DOT).
1:46:46 PM
AT EASE
1:50:01 PM
RECONVENED
HOUSE BILL NO. 128
"An Act relating to management of enhanced stocks of
shellfish; authorizing certain nonprofit organizations
to engage in shellfish enhancement projects; relating
to application fees for salmon hatchery permits; and
providing for an effective date."
1:50:10 PM
Co-Chair Seaton relayed that the last time the committee
heard the bill on April 14, 2018 at which time there were
no amendments offered. He invited the bill sponsor to
refresh the committee about the bill.
REPRESENTATIVE DAN ORTIZ, SPONSOR, reviewed the legislation
dealing with shellfish enhancement projects. He explained
that the purpose of the bill was to advance mariculture
opportunities in Alaska through shellfish enhancement
projects. It allowed non-profits to apply for and pursue
enhancement or restoration projects involving shellfish.
They might include red and blue king crab, sea cucumber,
abalone, geoduck, razor clams, plus other shellfish species
not yet on the radar.
Representative Ortiz continued to explain the purpose of
the bill. He reported that HB 128 held the Department of
Fish and Game (DFG) to a high standard in the process of
issuing permits specifically requiring the commissioner to
make a finding of substantial public benefit and a
determination that the project would not jeopardize natural
stocks. It was important to note that when shellfish were
released back into the wild by a permit holder, the
shellfish became a common property resource available for
common use.
Representative Ortiz summarized that the project held the
promise of diversifying and strengthening Alaska's fishery
portfolio by establishing a sound, sustainable approach to
growing the state's fledgling mariculture industry. The
bill had 2 zero fiscal notes.
Representative Wilson appreciated the bill. She quarried
about enhancement for hatcheries. She referred to the title
on page 1, line 3 and salmon hatchery permits.
Representative Ortiz responded that the bill was
specifically designed to enhance Alaska's mariculture
industry. There were several salmon hatcheries in Alaska
that came into existence many years ago. There was nothing
preventing the state from putting other hatcheries forward
in the future. The bill being discussed addressed the issue
of the mariculture industry.
Representative Wilson asked if someone from DFG was
available.
1:53:54 PM
FORREST BOWERS, DEPUTY DIRECTOR, COMMERCIAL FISHERIES
DIVISION, DEPARTMENT OF FISH AND GAME, introduced himself
and asked Representative Wilson to restate her question.
Representative Wilson suggested that in the bill the state
was enhancing shellfish, which she favored. She brought up
the Interior hatchery. It had a plentiful stock, but the
fish could not be placed into the river. Since the bill
provided a vehicle, she thought there might be some
enhancement the state could provide for its hatcheries
creating more opportunities. She asked for his feedback.
Mr. Bowers responded that currently there were laws in
place that allowed for enhancement or rehabilitation for
fish including salmon, trout, and char. Those laws had been
in place for many years. Currently, there was no law that
allowed for shellfish enhancement, the intent of the bill.
Currently, a person could not apply for a permit to do a
shellfish fishery enhancement project. The bill would allow
enabling regulations and a permitting process to be put
into place where a person could apply for and receive a
permit to enhance a shellfish fishery. As Representative
Wilson pointed out, there was already a fish enhancement
hatchery program in place for fish. The legislation would
establish a parallel program for shellfish.
Representative Wilson asked if there was a non-profit means
of doing salmon enhancing products similar to what was
being proposed for shellfish. She wondered if salmon
hatcheries could release stock into the Chena River or the
Yukon River, or wherever the need existed. Mr. Bowers
responded affirmatively. There were examples in many
coastal areas of Alaska. Representative Wilson was pleased
with Mr. Bowers answer. She had been told that the state
could not. She thanked him.
Co-Chair Seaton added that releasing fish into the wild
could be different then raising fish. Permits were required
to allow an entity to release fish without competing with
natural stocks. Enhancement was done by hatcheries or non-
profit entities all along the Gulf. He noted there were
several letters of opposition to the massive amounts of
pink salmon going through non-profit hatcheries and being
released. There was some contention.
Representative Thompson was aware of the hatchery on the
Gulkana River between Summit Lake and Paxon Lake. The
hatchery was funded by the fishing industry. The fish were
fertilized and taken to a lake in the Interior, and
subsequently were put back into the river. He asked if Mr.
Bowers was speaking of such a type of set up.
Mr. Bowers affirmed that Representative Thompson's comments
reflected an example of a fish enhancement project for a
private non-profit. He added that a permitting process was
in place. However, it did not mean the department would
necessarily grant or approve every application. He noted
folks in Representative Thompson's district who had
discussed a potential project with the department and who
might have received some negative feedback. There was
statutory and regulatory language in place that allowed
them to apply for a permit.
Representative Wilson was told by the fish hatchery in
Fairbanks that they could not install the fish in the
Yukon. The co-chair had stated that the reason they were
not allowed was because of the mixture of raised and wild
fish. She wanted additional clarification. She mentioned a
large amount of money going into the project and that there
were issues about fish population. She was concerned with
having built the hatcheries and them not working. She had
heard from the hatchery that it could not insert stock.
1:59:15 PM
Vice-Chair Gara did not want to haphazardly add a fish
hatchery provision in the bill. For example, recently there
had been a significant amount of controversy about adding
hatchery king salmon to a wild king salmon stream. He
opined that considerations would have to be studied prior
to going forward. Mr. Bowers agreed. The only part of the
bill that did not relate to shellfish was the application
fee. The legislation raised the application fee for a new
salmon hatchery permit from $100 to $1000. Everything else
related to shellfish fishery enhancement. The piece related
to the salmon hatchery permit application fee was in the
bill and where the word "hatchery" was drawn into the
title.
Vice-Chair Gara was comfortable with the bill being a
"shellfish bill." He would be uncomfortable expanding it.
Co-Chair Foster directed Vice-Chair Gara to walk through
the fiscal notes.
Vice-Chair Gara reviewed two zero fiscal notes:
[Fiscal Note Number: 2]
Department: Department of Fish and Game
Appropriation: Commercial Fisheries
Allocation: Statewide Fisheries Management
OMB Component Number: 2171
[Fiscal Note Number: 1]
Department: Department of Fish and Game
Appropriation: Commercial Fisheries
Allocation: Commercial Fisheries Entry Commission
OMB Component Number: 471
Vice-Chair Gara MOVED to report HB 128 out of Committee
with individual recommendations and the accompanying fiscal
notes.
There being NO OBJECTION, it was so ordered.
HB 128 was REPORTED OUT of Committee with a "do pass"
recommendation and with two previously published fiscal
notes, one with zero fiscal impact: FN1 (DFG); and one with
an indeterminate fiscal impact: FN2 (DFG).
HOUSE BILL NO. 76
"An Act relating to the mariculture revolving loan
fund and loans from the fund; and providing for an
effective date."
2:02:05 PM
Co-Chair Foster indicated there had been no amendments
submitted to his office since the bill's last hearing. He
invited the bill sponsor, Representative Ortiz, and his
staff to the table.
REPRESENTATIVE DAN ORTIZ, SPONSOR, thanked the committee
for considering the legislation. He read the sponsor
statement:
This bill amends the existing Alaska Mariculture
Revolving Loan Fund to allow up to forty percent of
the fund to be used for loans to permitted shellfish
hatcheries for planning, construction and operation.
Alaska shellfish farms currently do not have a stable
supply of seed for the propagation of oysters, and no
regular, in-state source of seed for resident aquatic
plants and other shellfish. A stable supply of seed is
one of many hurdles the industry must overcome to grow
and become a viable Alaskan industry.
This bill will amend the program to shift its focus
and eligibility from individual mariculture farmers to
include shellfish hatcheries that would market stock
to local Alaskan mariculture farmers.
The mariculture industry in Alaska is not yet fully
developed, and is extremely high risk, from a
financial standpoint. These obstacles make private
financing difficult to obtain, but this bill will
enable Alaskans to maintain their businesses and grow
Alaska's
mariculture industry.
Representative Ortiz reported that the bill had 2 zero
fiscal notes. He was happy to answer any questions.
Co-Chair Foster reviewed the list of available testifiers.
Co-Chair Foster directed Vice-Chair Gara to review the
fiscal notes.
Vice-Chair Gara reviewed two zero fiscal notes:
[Fiscal Note Number: 2]
Department: Department of Fish and Game
Appropriation: Statewide Support Services
Allocation: Commissioner's Office
OMB Component Number: 2175
[Fiscal Note Number: 1]
Department: Department of Commerce, Community and Economic
Development
Appropriation: Investments
Allocation: Investments
OMB Component Number: 383
Representative Wilson referred to the last paragraph on the
fiscal note with OMB component number 383. She read from
the fiscal note (copy on file).
She asked if the department would be absorbing the costs.
She asked for the amount being absorbed.
2:05:32 PM
BRITTENY CIONI-HAYWOOD, DIVISION DIRECTOR, DIVISION OF
ECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, relayed that the funding would come
out of the fund. She noted that there was potentially
another regulation package that would be coming out.
Representative Wilson asked what fund the monies would be
drawn from. She thought the amount should be reflected in
the fiscal note and asked Ms. Cioni-Hawood to comment.
Co-Chair Seaton read from the remainder of the last
paragraph on page 2 of the fiscal note (copy on file). He
remarked that the regulations were already being rewritten.
He asked for further clarification.
Ms. Cioni-Haywood understood that the department was not
asking for additional money or an additional appropriation,
therefore, the fiscal note was zero.
Representative Guttenberg pointed out that the note was
from DCCED. It was part of the loan programs, which they
had a significant amount. He pointed to the top line of the
analysis which indicated that the Mariculture Revolving
Loan Fund program was already authorized to issue loans. It
appeared the program was expanding to include other
projects.
Representative Wilson asked about other planned regulation
projects that would include this project. Ms. Cioni-Haywood
explained that the department was also considering a
regulation project on HB 56 [Legislation introduced in 2017
- Short Title: COMMERCIAL FISHING LOANS] that would include
changes for the commercial fishing loan limits.
Representative Wilson assumed that HB 56 did not have a
zero fiscal note. Ms. Cioni-Haywood relayed there was a
zero fiscal note for HB 56. She was informed that since the
department was not asking for an additional appropriation,
the fiscal note would be zero.
Representative Wilson was asking because the committee had
heard about the budget and how much it had been reduced.
She appreciated that the department was absorbing the cost.
However, it would be nice to know the amount being
absorbed. She specified that the loan people would be
paying for the costs. She suggested that there were
inconsistencies in the absorption of costs. She asked about
the other fiscal note and the potential of more money for
the hatchery portion. She read from the second page of the
fiscal note from DFG (copy on file) regarding additional
operating funds for operators of hatcheries. She realized
that she was directing her question to DCCED and she should
be asking DFG. She asked if the money for hatcheries went
back into the hatcheries themselves. She wondered if that
was the reason it stated there might be more money for the
hatcheries as opposed to the state.
Representative Ortiz asked what she was referring to.
Representative Wilson was speaking to the fiscal note with
the OMB component number 2175. She pointed to the second
page. The language mentioned potential revenue going to
hatcheries rather than to the state.
2:11:02 PM
AT EASE
2:11:27 PM
RECONVENED
Representative Ortiz deferred to his staff, Ms. Bolling.
ELIZABETH BOLLING, STAFF, REPRESENTATIVE DAN ORTIZ,
explained that hatcheries would be able to apply for grants
through the reshaped loan fund. Although the grants were
small, it would be possible for operators to get some small
grant money through the program that they might otherwise
receive from DFG. All that the fiscal note conveyed was
that a portion of the amount they paid out to the
hatcheries to operate might be offset slightly by the grant
program.
Representative Guttenberg highlighted that the loan program
was sustainable as a revolving loan fund and was self-
sustained. The legislation was expanding who could use the
funds and how the funds would be used. The loan fund by
itself was essentially a bank.
Representative Wilson clarified that her point was that the
money would be designated general funds (DGF) and DGF was
shown in state fiscal notes. She wanted the information
provided on fiscal notes.
Co-Chair Seaton MOVED to report CSHB 76 (FSH) out of
Committee with individual recommendations and the
accompanying fiscal notes.
There being NO OBJECTION, it was so ordered.
CSHB 76 (FSH) was REPORTED OUT of Committee with a "do
pass" recommendation and with two previously published zero
fiscal notes: FN1 (CED) and FN2 (DFG).
2:14:47 PM
AT EASE
2:15:49 PM
RECONVENED
HOUSE BILL NO. 124
"An Act relating to corporations, including benefit
corporations, and other entities; and providing for an
effective date."
2:15:57 PM
Co-Chair Foster indicated there was one amendment that he
would be offering. He asked the bill sponsor to provide the
committee with a recap of the bill.
REPRESENTATIVE SAM KITO, SPONSOR, reviewed the bill. He
explained that the bill established a charter type of
corporation that would allow a company to have, within its
bi-laws, operations plan, and activities more than just a
fiduciary responsibility to its shareholders. They would be
allowed, under the "B" corporation statute, to provide a
public benefit. The public benefit would be defined in the
organizing documents of the corporation. He had covered
several questions. He would defer to his staff to present
his position on the amendment.
Co-Chair Foster reviewed the list of available testifiers
online.
Co-Chair Foster MOVED to ADOPT Amendment 1 (copy on file):
Page 15, following line 2:
Insert a new section to read:
"Sec. 10.60.725. Reliance by third parties. (a) A
person who, in good faith, centers into a
transaction with a benefit corporation may
(1) assume without inquiry that the
transaction, and each action or inaction by
any director or officer of the benefit
corporation giving effect to the
transaction, is in furtherance of the
benefit corporation's general public benefit
purpose or specific public benefit purpose;
and
(2) enforce the transaction against the
benefit corporation as if the transaction is
in furtherance of the benefit corporation's
general public benefit purpose or specific
public benefit purpose.
(b) Nothing in this section exempts a covered
financial institution from identifying and
verifying the beneficial owner of a legal entity
that is a customer as required under a federal or
state law or regulation. In this subsection,
"covered financial institution" has the meaning
given in 31 C.F.R. 1010.605."
Representative Wilson OBJECTED for discussion.
2:18:24 PM
BIANCA CARPENETI, STAFF, REPRESENTATIVE SAM KITO, indicated
that the amendment was a friendly safe harbor amendment
proposed by the Alaska Bankers Association. The proposed
language was intended to function much like Alaska's
certificate of trust statute. In particular, the subsection
of the trust statute was AS 13.36.079(f)(g). The provisions
provided third parties transacting business with a trust.
They could rely on a trust statement that the transaction
was permitted by the trust, and, as such, enforceable
against the trust. The intent of the amendment was to
provide the same contractual certainty to third parties
that contracted businesses with proposed public benefit
corporations.
Ms. Carpeneti turned to Article 5, Actions and Claims,
Sections 10, 60, 300, and 320 of the proposed legislation
found on pages 9 and 10. The section provided that parties
might bring action against a public benefit corporation for
failing to pursue or create a public benefit. Since
monetary damages were not permitted under the proposed
legislation, the likely relief would be injunctive in
nature. The relief could theoretically include a court,
setting aside a contract under the theory that it did not
satisfy or further a public benefit. Absent the proposed
language, third parties might feel compelled to make an
independent assessment of whether the transaction satisfied
or furthered a public benefit. She relayed that there were
some concerns that sort of analysis might increase the
costs of completing transactions and might make some
transactions more difficult to complete.
Ms. Carpeneti reported that the bill sponsor's position on
the amendment was neutral. He consulted with William Clark,
the lawyer that testified in front of the committee at the
prior bill hearing, who understood the intent of the
amendment but thought it might go too far. Specifically, he
had concerns with subsection 2 regarding the non-benefit
corporation part of the contract. He disagreed that the
non-benefit corporation should not have a duty to inquire
about the purpose of the contract, but it might have said
too much to allow the other party to enforce a contract in
all cases. If a court declined to enforce a contract, the
other party would still be protected because it would be
entitled to any damages it could prove. She relayed Mr.
Clark's suggestion was to strike subsection 2. Although he
noted that his concerns were not extremely serious.
Representative Kito's office also contacted DCCED to see if
there were any concerns about the proposed amendment.
Responses were received from Janey Hovenden, Director,
Division of Corporations, Business and Professional
Licensing. She noted that the division did not see an issue
with the proposed changes. Representative Kito's office
also heard from Kevin Anselm from the Division of Banking.
The division requested the addition of subsection 3, as
provided in the amendment before the committee.
PETER PINNOW, SENIOR COUNCIL, WELLS FARGO, MINNEAPOLIS, MN,
referred to section 2 and indicated the intent was to track
the same rights and the same protections afforded under the
trust certificate statute that was referenced.
2:22:33 PM
Co-Chair Seaton commented that either the general public
benefit or the specific public benefit were not the sole
reason for the company's existence. He read from the
amendment (see above). He understood that in a trust there
was an obligation to only act on behalf of the
beneficiaries of the trust. The amendment encompassed an
additional benefit that was offered by a corporation but
was not its sole benefit. He thought the language would
interfere with a company's right to make a profit by not
furthering the specific or benefit purpose. He wanted
someone to address the issue of mixing trusts with an
auxiliary purpose, which could become problematic.
Mr. Pinnow understood the representative's comment. He
explained that whenever there was a public benefit
requirement imposed by a statute Wells Fargo wanted to make
sure it had contractual certainty. It did not want to run
the risk of having its contracts set aside with 20/20 hind
sight. The proposal was intended to ensure that parties
transacting business with a public benefit corporation felt
safe and secure that the contract they entered into would
not be set aside in the future under the theory that the
contract did not further the public benefit. He reiterated
that the intent was to make sure there was contractual
certainty. He explained that the reason he analogized it to
the trust certificate was because, much like parties that
transacted business with trusts, they needed contractual
certainty that the transaction was authorized and in
furtherance of the trust purpose. As a third party who
would be interacting and lending money to a benefit
corporation, Wells Fargo would want to make sure it had
certainty just as a third party relying on a trust
certificate would.
2:27:09 PM
Co-Chair Seaton remarked that general benefits and specific
benefits were additional values to the operation of the
corporation. Neither were the sole purpose of the
corporation. He thought that, the way the amendment was
written, the entirety of the contract had to accomplish the
accessory benefit, rather than the sole purpose of a
corporation. A trust had a sole purpose. He suggested that
the amendment was converting the general benefit or
specific benefit into the sole purpose of the company and
that everything in the contract would have to comply. He
asked Mr. Pinnow to comment on the potential interpretation
of the language contained in the amendment.
Mr. Pinnow did not believe the purpose of the language
would require that a public benefit corporation only engage
in transactions that would serve a public benefit. The
purpose of the language was intended to make it clear and
provide third parties with the protection against their
contract right being set aside because of the contract not
furthering a public benefit objective. He suggested that
the language should not be interpreted as fundamentally
changing the requirements of a public benefit corporation.
It was intended solely to provide protection to third
parties transacting with a public benefit corporation.
2:29:42 PM
Co-Chair Seaton highlighted line 5 and asked if Mr. Pinnow
was saying that it was assumed without inquiry that the
transaction and each action or inaction by any director or
officer was to further the public benefit.
Mr. Pinnow responded that he could see Co-Chair Seaton's
point that the contract might be for the benefit of the
corporation but that the contract might not further the
public benefit purpose. He was concerned that a contract
might be set aside because someone argued that a contract
did not serve a public benefit.
Co-Chair Seaton did not have a problem with the intent of
the bill, but argued that the amendment did not accomplish
that goal. He indicated he objected to adopting the offered
specific language. He proposed having the Legislative Legal
Services redraft the amendment. He recommended taking out
the trust language as well.
Co-Chair Foster asked the bill sponsor how he wanted to
proceed. Representative Kito was comfortable with
revisiting the bill later and changing the language to
better satisfy the chair.
Representative Guttenberg thought the amendment was, at
best, neutral and potentially cloudy. He referred to the
section of the amendment that contained the language
causing confusion. He was concerned that someone would
enter a contract with a benefit corporation and have it
overridden. He asked Mr. Pinnow to comment.
Mr. Pinnow replied that the language spoke to the public
benefit purpose or the specific public benefit purpose. The
language was intended to deal solely with whether a
transaction furthered the public benefit purpose. He
suggested that if there were concerns about a contract that
would otherwise apply under general corporate law, the
language should not be interpreted to address that. The
language was intended to deal with the specific and unique
characteristics of the public benefit corporations and that
they had a public benefit purpose requirement that could be
enforced by shareholders.
2:35:58 PM
Co-Chair Seaton asked Mr. Pinnow about the concern the
amendment was trying to address. He wondered if the intent
was to ensure that when a party entered a transaction with
a benefit corporation that the transaction did not have to
further the general public benefit or the specific benefit
purpose to be valid. Co-Chair Seaton provided an example
regarding maintaining trails around Juneau. He asked if he
was correct in his assumption about Mr. Pinnow's intent.
Mr. Pinnow responded in the affirmative. Wells Fargo wanted
certainty. He provided the example of Wells Fargo lending
money to a public benefit corporation to do an addition
such as building a parking ramp that someone later
questioned the public benefit. Wells Fargo would not want
to have a transaction or contract set aside or called into
question as being outside of the corporate authority simply
because with hind sight it did not accomplish, achieve, or
further a public benefit.
Co-Chair Seaton understood what Mr. Pinnow was hoping to
achieve. He thought that the intent could be accomplished
by having Legislative Legal Services redraft the amendment.
He thought the issue could be resolved with the use of
different language.
Representative Wilson asked if the amendment could be
provided in time for her to speak with bankers at home to
make sure it worked for them.
Co-Chair Foster WITHDREW Amendment 1.
HB 124 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the agenda for the following day.
He recessed the meeting to a call of the chair [Note: the
meeting never reconvened].
ADJOURNMENT
2:40:00 PM
The meeting was adjourned at 2:40 p.m.