03/22/2004 03:30 PM House L&C
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 22, 2004
3:30 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Carl Gatto, Vice Chair
Representative Nancy Dahlstrom
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 379
"An Act establishing an office of citizenship assistance in the
Department of Labor and Workforce Development."
- MOVED HB 379 OUT OF COMMITTEE
SENATE BILL NO. 291
"An Act extending the transition period for activities involving
unstamped cigarettes; and providing for an effective date."
- MOVED SB 291 OUT OF COMMITTEE
HOUSE BILL NO. 449
"An Act relating to the contracting and financing authority of
the Alaska Industrial Development and Export Authority;
authorizing the authority to issue bonds in a principal amount
not to exceed $76,000,000 to finance the acquisition, design,
construction, inventory, and operation of natural gas, propane
air, or manufactured gas public utility facilities; and
providing for an effective date."
- MOVED CSHB 449(EDT) OUT OF COMMITTEE
HOUSE BILL NO. 453
"An Act exempting from regulation under the Alaska Public
Utilities Regulatory Act wholesale agreements for the sale of
power by joint action agencies and contracts related to those
agreements, and joint action agencies composed of public
utilities of political subdivisions and utilities organized
under the Electric and Telephone Cooperative Act."
- MOVED CSHB 453(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 490
"An Act relating to the release of employment security records,
to the admissibility of determinations and decisions regarding
unemployment compensation benefits, and to contributions,
interest, penalties, and payments under the Alaska Employment
Security Act; providing that property under the Alaska
Employment Security Act is not subject to the Uniform Unclaimed
Property Act; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 379
SHORT TITLE: OFFICE OF CITIZENSHIP ASSISTANCE
SPONSOR(S): REPRESENTATIVE(S) WEYHRAUCH
01/20/04 (H) READ THE FIRST TIME - REFERRALS
01/20/04 (H) L&C, FIN
03/05/04 (H) L&C AT 3:15 PM CAPITOL 17
03/05/04 (H) -- Meeting Canceled --
03/19/04 (H) L&C AT 3:15 PM CAPITOL 17
03/19/04 (H) Scheduled But Not Heard
03/22/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: SB 291
SHORT TITLE: UNSTAMPED CIGARETTES
SPONSOR(S): LABOR & COMMERCE
02/04/04 (S) READ THE FIRST TIME - REFERRALS
02/04/04 (S) L&C, FIN
02/10/04 (S) L&C AT 1:30 PM BELTZ 211
02/10/04 (S) Moved SB 291 Out of Committee
02/10/04 (S) MINUTE(L&C)
02/11/04 (S) L&C RPT 3DP
02/11/04 (S) DP: BUNDE, FRENCH, STEVENS G
02/23/04 (S) FIN RPT 4DP
02/23/04 (S) DP: GREEN, WILKEN, BUNDE, STEVENS B
02/23/04 (S) FIN AT 10:00 AM SENATE FINANCE 532
02/23/04 (S) Moved SB 291 Out of Committee
02/23/04 (S) MINUTE(FIN)
03/03/04 (S) TRANSMITTED TO (H)
03/03/04 (S) VERSION: SB 291
03/04/04 (H) READ THE FIRST TIME - REFERRALS
03/04/04 (H) L&C, FIN
03/22/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 449
SHORT TITLE: AIDEA BONDS FOR GAS PUBLIC UTILITIES
SPONSOR(S): REPRESENTATIVE(S) HARRIS BY REQUEST
02/09/04 (H) READ THE FIRST TIME - REFERRALS
02/09/04 (H) EDT, L&C, FIN
02/26/04 (H) EDT AT 5:15 PM CAPITOL 120
02/26/04 (H) -- Meeting Canceled --
03/02/04 (H) EDT AT 10:00 AM CAPITOL 120
03/02/04 (H) <Bill Hearing Canceled>
03/09/04 (H) EDT AT 10:00 AM CAPITOL 120
03/09/04 (H) -- Meeting Canceled --
03/16/04 (H) EDT AT 5:15 PM CAPITOL 120
03/16/04 (H) Moved CSHB 449(EDT) Out of Committee
03/16/04 (H) MINUTE(EDT)
03/18/04 (H) EDT RPT CS(EDT) 5DP 1NR
03/18/04 (H) DP: KOHRING, MCGUIRE, KOTT, CISSNA,
03/18/04 (H) HEINZE; NR: DAHLSTROM
03/22/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 453
SHORT TITLE: JOINT ACTION AGENCIES
SPONSOR(S): REPRESENTATIVE(S) HEINZE
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) L&C, FIN
02/27/04 (H) L&C AT 3:15 PM CAPITOL 17
02/27/04 (H) Heard & Held
02/27/04 (H) MINUTE(L&C)
03/05/04 (H) L&C AT 3:15 PM CAPITOL 17
03/05/04 (H) -- Meeting Canceled --
03/19/04 (H) L&C AT 3:15 PM CAPITOL 17
03/19/04 (H) Heard & Held
03/19/04 (H) MINUTE(L&C)
03/22/04 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE BRUCE WEYHRAUCH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HB 379.
RAFAEL CASTANOS, Advisor
Filipino Community of Alaska
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 379.
CHRISTINA SUMINGUIT
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 379 and agreed
with the testimony of Mr. Castanos.
CONSESA CABRIGAS
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 379.
ANDREE McLEOD
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 379.
SENATOR CON BUNDE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 291 on behalf of the Senate
Labor and Commerce Committee, which he chairs.
MIKE ELERDING, Owner
Northern Sales Company of Alaska
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of SB 291.
JOHANNA BALES, Excise Audit Manager
Tax Division
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Stated that her division had received
approximately 100 phone calls in support of SB 291.
PETER FELLMAN, Staff
to Representative John Harris
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the sponsor of
HB 449, Representative Harris.
PAUL RUSANOWSKI, Vice President
Alaska Intrastate Gas Company (AIGC)
Anchorage, Alaska
POSITION STATEMENT: Presented HB 449, which was sponsored by
Representative Harris at AIGC's request.
DON ETHERIDGE, Lobbyist
for Alaska State AFL-CIO [American Federation of Labor and
Congress of Industrial Organizations]
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 449.
BOB LOESCHER, Member
Tlingit & Haida Community Council
Juneau, Alaska
POSITION STATEMENT: During hearing on HB 449, spoke to the need
for the AIGC gas project in several coastal communities.
JAMES A. McMILLAN, Deputy Director of Credit
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Testified that he believed HB 449 was
unnecessary and clarified financing options for AIGC's project.
PHILIP SHEALY, City Manager
City of Seward
Seward, Alaska
POSITION STATEMENT: Testified in support of HB 449.
REPRESENTATIVE CHERYLL HEINZE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of HB 453.
ACTION NARRATIVE
TAPE 04-31, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:30 p.m. Representatives
Anderson, Gatto, Dahlstrom, Lynn, Rokeberg, Crawford, and
Guttenberg were present at the call to order.
HB 379-OFFICE OF CITIZENSHIP ASSISTANCE
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 379, "An Act establishing an office of
citizenship assistance in the Department of Labor and Workforce
Development."
Number 0091
REPRESENTATIVE BRUCE WEYHRAUCH, Alaska State Legislature,
sponsor, explained that HB 379 would establish an office of
citizenship assistance in the Department of Labor & Workforce
Development. He noted that this bill was introduced in another
session by then-Senator Pete Kelly from Fairbanks. There are
over 3,000 legal aliens in Juneau, many from the Philippines and
Tonga, who have a great impact on the economy. Representative
Weyhrauch said these immigrants work hard and come to this
country to fulfill the American dream of working in freedom,
without government intervention, to put food on the table.
REPRESENTATIVE WEYHRAUCH related that as he got to know many of
his immigrant constituents, he was profoundly impressed by their
desire to work. He noted the unfortunate burdens of government
paperwork and bureaucracy, however, and how it is especially
difficult for people who were oppressed in their country of
origin to turn to government here, since they fear getting in
trouble, tend not to be adversarial, or are unfamiliar with the
process. By establishing an office of citizenship assistance,
he said, he hopes to expand the productivity of legal aliens.
REPRESENTATIVE WEYHRAUCH asked the committee to address the
policy issues, saying it is his intent to fund a position within
the Department of Labor & Workforce Development so that
assistance and direction in job-related matters would be
available to legal aliens. This position would also provide
policy assistance and direction to the commissioner, or his or
her designee, to point out policy impediments for workers and
make suggestions to streamline the system. He predicted this
would increase employment and business opportunities for legal
aliens.
Number 0398
REPRESENTATIVE GATTO asked how this bill affects illegal aliens
who are currently working here, noting that the sponsor
statement referred to naturalized citizens and citizen
candidates.
REPRESENTATIVE WEYHRAUCH surmised that until an alien is
declared illegal, he/she is legal. This proposed office would
not aid anyone to skirt the system; it would serve those
requesting help.
REPRESENTATIVE GATTO expanded his question, saying that it came
from knowing that many aliens come to Juneau by way of the
cruise ships, aliens who aren't interested in becoming citizens.
He wondered what would happen if one of them asked for
assistance in getting a job at this proposed office.
REPRESENTATIVE WEYHRAUCH explained that the office is intended
to help people who have some legal status within the system. It
is not an office of advocacy to get individuals their legal
status. It would exist to assist with employment and filling
out forms, and to make referrals to other agencies.
Number 0562
REPRESENTATIVE LYNN remarked that the only thing wrong with this
bill is that he didn't think of it. He strongly favors the
concept of helping legal aliens, he said, and pointed out that
most Alaskans or their families were aliens at one time. He
stated his opposition to illegal immigration, but said he
supports helping to create productive citizens of the United
States. He asked if Representative Weyhrauch had considered
faith-based help for legal aliens.
REPRESENTATIVE WEYHRAUCH replied no, but he'd thought the idea
could be presented to the lieutenant governor's office, which is
championing that initiative. He added that he sees this as an
executive branch policy area "coming down," rather than a
legislative policy "going up."
REPRESENTATIVE ROKEBERG asked if the State of Alaska should be
spending money to provide assistance to nonresidents.
REPRESENTATIVE WEYHRAUCH said he thought it depended on what
stage the person was at in the process of becoming a resident
and whether the person was trying to be a wage-earning member in
the state's workforce.
Number 0664
REPRESENTATIVE ROKEBERG remarked that the legislature in the
past spent considerable time ensuring that Alaskans received
employment opportunities. He asked if the bill could be
modified to say services would only be provided to legal
resident aliens of Alaska.
REPRESENTATIVE WEYHRAUCH replied that he thought it only took 30
days to become a legal resident of the state. He surmised that
this change to the bill could be made, but said he didn't think
it would have much impact due to the short amount of time
involved in becoming a resident.
REPRESENTATIVE CRAWFORD remarked that he thought HB 379 was a
fine idea and that he appreciated the reference in the bill to
labor unions. He read from the bill, which stated in part:
1) provide employment information and
referrals to services for legal aliens, including
employment services, such as job placement services,
and information about how labor unions, administrative
agencies, and court actions may be
used to deal with claims or charges of job
discrimination, illegal termination of employment,
sexual harassment, and unsafe working conditions
REPRESENTATIVE CRAWFORD pointed out that this could mean only
going to the union after a problem has occurred, when people
should also be directed to unions for employment.
REPRESENTATIVE WEYHRAUCH agreed and added that when English is
someone's second language or there is no cultural knowledge of
unions, he hopes word of mouth will direct people to the
proposed office, which will list employment opportunities
including unions, job service offices, and want ads. He added
that often workers require an interpreter to navigate the
system, and they could likely get this help in the office of
citizenship assistance if the commissioner crafted the position
description with this provision.
Number 0939
REPRESENTATIVE CRAWFORD recounted his own experience with
becoming an ironworker, "a real step up in my life."
REPRESENTATIVE WEYHRAUCH shared his experience of joining a
union but never being hired.
REPRESENTATIVE DAHLSTROM asked if the commissioner of the
Department of Labor & Workforce Development would determine the
[pay] range and step for this position.
REPRESENTATIVE WEYHRAUCH replied that this hadn't been decided,
and that the range and step were not defined in the bill.
CHAIR ANDERSON noted that the fiscal note, page 2, requested the
position as an Employment Security Analyst II, Range 17.
REPRESENTATIVE WEYHRAUCH replied, "That was the department's
analysis. I kept it undefined in the bill."
Number 1034
REPRESENTATIVE GUTTENBERG asked what happens to legal aliens who
are discharged from employment. Do they automatically become
illegal, he asked.
REPRESENTATIVE WEYHRAUCH replied that it depends on their status
with [the Immigration and Naturalization Service (INS)], often
determined on a case-by-case basis.
REPRESENTATIVE GUTTENBERG mentioned giving these people
opportunities, saying they want to be "mainstreamed," to have
jobs, and to participate in the community and be a constructive
part of society. He expressed the desire to give them a place
and opportunity to feel comfortable dealing with the government
and knowing that this place exists to redress [problems].
REPRESENTATIVE ROKEBERG asked if legal aliens could be residents
of Alaska.
REPRESENTATIVE WEYHRAUCH said he thought so.
REPRESENTATIVE ROKEBERG asked if permanent fund dividends are
paid to resident legal aliens of Alaska.
[There was no definitive answer.]
Number 1140
RAFAEL CASTANOS, Advisor, Filipino Community of Alaska,
testified in support of HB 379. He said he had discussed this
bill with then-Senator Kelly in 2001; unfortunately, it got
"bogged down" because of funding. Mr. Castanos spoke of the
immigration issues facing the Filipino community, since there is
no immigration office in Juneau, even though it's the capital.
For example, he'd been approached by immigrants when the
government had directed that they be fingerprinted in Ketchikan
or Anchorage. New immigrants earn $7 or $8 an hour and cannot
afford to travel to Ketchikan or Anchorage. Although he'd tried
to advocate for them, some flew to Ketchikan or Anchorage to
comply with the requirement. However, after two months they
again received letters from immigration saying, "We cannot see
your fingerprints." He pointed out that the travel money paid
out to comply was nonrefundable.
MR. CASTANOS said Filipinos are shy by nature and wouldn't
contact their legislators about these problems. Immigration
forms are complicated; if an immigrant approaches an immigration
official to get assistance in filling out a form to petition for
entry of a relative into this country, he said, the official
will not help but directs the immigrant to contact an
immigration lawyer, which costs a prohibitive $5,000 to $6,000.
MR. CASTANOS reported that he'd done research looking for a
comparable organization but, surprisingly, found none. He sees
Alaska serving as a model for a citizenship-assistance office
that would help immigrants navigate the legal system and solve
problems on their way to becoming citizens. He noted that the
idea for the original bill was supported by Catholic Social
Services of Anchorage, which advocates for illegal aliens. He
explained that he wanted the bill to focus on the larger
immigrant population of legal aliens. He felt the Filipino
community would be doing the state a favor by helping the
government solve immigration problems.
Number 1437
CHRISTINA SUMINGUIT testified that she supported HB 379 and
agreed with the testimony of Mr. Castanos.
Number 1477
CONSESA CABRIGAS testified in support of HB 379 and related that
she is a recent immigrant, having arrived in Juneau last
December, and is very happy to be here.
Number 1515
ANDREE McLEOD, Anchorage, testified against HB 379. She
explained that part of the American dream is interfacing with
government, and it is problematic. There are already agencies
in existence that deal with problems, such as the Human Rights
Commission, the INS, and the Office of the Ombudsman. She
opined that the policy embodied in HB 379 was discriminatory,
based on national origin. She applauded the intent of
recognizing the rich history of immigration in Alaska, but did
not feel that this should be done at public expense.
MS. McLEOD further stated that it is the responsibility of the
sponsor to bridge the transition for individual immigrants. She
said immigrants must not and should not be treated as victims of
circumstance. She remarked, "They've already shown a strong
sense of responsibility by taking the steps necessary to leave
their homeland. And it's that responsibility that needs to be
encouraged, instead of enabling a system allowing people to make
excuses." Ms. McLeod suggested that this is a federal problem
and that scarce state resources shouldn't be spent on this
issue. She concluded by sharing that her family immigrated to
this country, had a sponsor who was an uncle, and never felt
like victims.
Number 1655
CHAIR ANDERSON, upon determining that no one else wished to
testify, closed public testimony.
Number 1620
REPRESENTATIVE LYNN moved to report HB 379 out of committee with
individual recommendations and the accompanying fiscal notes.
REPRESENTATIVE ROKEBERG objected. He said if the state can find
$112,000 for employment opportunities, it might be better spent
in rural Alaska, where there are hard-core unemployment
problems. He commented that there was merit to the bill, but he
was unsure whether the state could afford it.
REPRESENTATIVE ROKEBERG removed his objection.
CHAIR ANDERSON expressed support and noted his plan to cosponsor
HB 379, since he knows of immigrant constituents in his East
Anchorage district.
Number 1665
CHAIR ANDERSON, hearing no other objection, announced that
HB 379 was reported from the House Labor and Commerce Standing
Committee.
SB 291-UNSTAMPED CIGARETTES
CHAIR ANDERSON announced that the next order of business would
be SENATE BILL NO. 291, "An Act extending the transition period
for activities involving unstamped cigarettes; and providing for
an effective date."
Number 1698
SENATOR CON BUNDE, Alaska State Legislature, presented SB 291 on
behalf of the Senate Labor and Commerce Committee, sponsor,
which he chairs. He testified:
This is probably a good illustration why we have a
legislature and we don't put all our laws in the
constitution, because things change that are
unforeseen. ... Way back when we passed the cigarette
tax, ... it turned out there was a bit of a gray
market that was established and, in order to help us
enforce our Alaska law on cigarette taxes, we needed
to establish a stamping procedure so that cigarettes
sold in Alaska were stamped.
We passed this bill last year with your help, and then
unforeseen circumstances arose. And that is, the
tobacco manufacturers, cigarette manufacturers, used
to have a very liberal return policy. Apparently, any
unsold stock could have been returned for a full
credit. For whatever reason, they chose not to do
that any longer.
We had ... a reasonable deadline in the bill, which
was by March 31 all unstamped cigarettes should have
been sold. It turns out that [retailers] are not able
to sell their ... arrearage, if you will, or their
stock, and they won't be able to return them to the
manufacturer. And it certainly wasn't the intent of
this legislation to cause a loss for those retailers.
So what we've done in this bill is extend to June 30th
the deadline for selling unstamped cigarettes in
Alaska. This certainly should be ample time for
retailers to dispose of all their previously purchased
cigarettes that were unstamped. And then, after that,
we can move forward with the new law that requires
stamps ... and enforcement of Alaska's tax laws.
Number 1850
MIKE ELERDING, Owner, Northern Sales Company of Alaska, a
wholesale distributor operating in Southeast Alaska that
primarily sells tobacco products, testified as follows:
We support the passage of Senate Bill 291. ... Last
year the passage of Senate Bill 168 required all
cigarettes imported into the state to possess a
tobacco stamp on each carton of cigarettes. The
effective date of ... Senate Bill 168 was January 1st
[2004], and there was a 90-day transition period, as
Senator Bunde pointed out, through March 31, to phase
in the conversion from stamped to unstamped inventory.
... Effective March 31st, it's going to be illegal for
retailers ... or anyone to possess unstamped
cigarettes. But, unfortunately, there are still a lot
of unstamped inventory ... at retail, which ...
creates a problem.
As Senator Bunde said, the primary reason the initial
90 days didn't go through was because of a change that
the manufacturers implemented after we'd already
passed Senate Bill 168. So, without ... the
legislature's action, we're going to have a number of
retailers in the state who ... find themselves in
possession of illegal cigarettes that would be subject
to seizure ... and, as a result, they could suffer a
severe financial loss from this. The easy and correct
way to fix this would be to extend the date from March
31 to June 30, as Senator Bunde has done ... in Senate
Bill 291.
Number 1933
JOHANNA BALES, Excise Audit Manager, Tax Division, Department of
Revenue, noted that she is the program manager for the cigarette
and tobacco products tax. Ms. Bales reported that her division
had received approximately 100 phone calls from retail
businesses due to their concerns over the change in the
[cigarette] manufacturers' policy and the resulting possible
loss of revenue to their businesses. She said, "In a way, I'm
testifying for those 100 retailers across the state who called
us ... and are hoping for the passage of this legislation."
REPRESENTATIVE CRAWFORD asked what would happen if this bill
doesn't pass by March 31, 2004.
MS. BALES replied that she would be meeting with the governor's
office [March 23, 2004] to discuss this issue, and believes it
would be possible to suspend enforcement, in this instance,
until her division is certain it is carrying out the intent of
the law.
SENATOR BUNDE commented that absent clear legislative intent,
the law would require that the unstamped tobacco products
purchased before the law went into effect would have to be
confiscated.
REPRESENTATIVE ROKEBERG reassured Senator Bunde that the House
Rules Standing Committee [which he chairs] would expedite
calendaring for SB 291.
Number 2038
REPRESENTATIVE ROKEBERG moved to report SB 291 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, SB 291 was reported from the
House Labor and Commerce Standing Committee.
HB 449-AIDEA BONDS FOR GAS PUBLIC UTILITIES
CHAIR ANDERSON announced that the next order of business would
be HOUSE BILL NO. 449, "An Act relating to the contracting and
financing authority of the Alaska Industrial Development and
Export Authority; authorizing the authority to issue bonds in a
principal amount not to exceed $76,000,000 to finance the
acquisition, design, construction, inventory, and operation of
natural gas, propane air, or manufactured gas public utility
facilities; and providing for an effective date." [Before the
committee was CSHB 449(EDT).]
Number 2074
PETER FELLMAN, Staff to Representative John Harris, Alaska State
Legislature, introduced HB 449, which was sponsored by
Representative Harris by request of the Alaska Intrastate Gas
Company (AIGC). He noted that the bill's presentation would be
made by a representative from that company.
Number 2100
PAUL RUSANOWSKI, Senior Vice President for Operations, Alaska
Intrastate Gas Company, presented HB 449 as follows:
The bill addresses a requirement under AS 44.88.095(g)
in which the legislature must approve a project over
$10 million in costs before AIDEA [Alaska Industrial
Development and Export Authority] can consider the
program under the development finance program. This
project in its entirety encompasses 17 communities and
would cost in excess of $100 million. AIDEA
considered each of the communities as part of the
total project. So whether the cost for a community is
less than $10 million or not, the project itself
dictates their ability to consider the community under
the development finance program.
What we seek with this legislation is an opportunity
to broaden the financial opportunities for communities
so that, individually, they might be able to work with
both Alaska Intrastate Gas Company and AIDEA to be
considered under the development finance program for
financing utility infrastructure in that community, if
that represents the most favorable approach to
developing utility services in that community.
At the present time, Alaska Intrastate Gas Company has
reached agreement with AIDEA to proceed with conduit
financing for initiating the project. So this is not
a program that would be considered by Alaska
Intrastate Gas Company right now. And we are
presently working with a financial institution to seek
a bond placement this summer to initiate the project.
The bill also provides a sunset date for the bonding
authority so that it would not continue in perpetuity,
but it would terminate within a few years after
passage. The project itself would result in
employment of excess of 200 people throughout
Southeast Alaska, [and] generate more than 50
permanent jobs in these communities.
Number 2202
REPRESENTATIVE ROKEBERG asked for clarification on the agreement
between AIGC and AIDEA regarding conduit revenue bonds.
MR. RUSANOWSKI replied that it is a verbal agreement; they are
working on a bond placement that would utilize conduit
financing.
REPRESENTATIVE ROKEBERG referred to a letter dated February 18,
2004, sent to Representative Harris from Ron Miller, executive
director of AIDEA, noting that the letter says legislative
authorization is not necessary in order to use the conduit
revenue bond program. He asked for clarification on the purpose
of the bill.
MR. RUSANOWSKI explained that this was correct, but said his
company wasn't seeking authorization for itself at this time for
this program. The purpose of this bill is to provide for the
availability of the conduit revenue bond program to communities
as development occurs. If communities choose to access natural
gas, they could be considered by AIDEA to secure future
financing for the project. He said the initial conduit
financing will cover Juneau, Ketchikan, and Sitka. In the
future, he thought there might be better financial opportunities
for communities to consider. He said these communities, because
they'd be part of a larger project, wouldn't be able to
participate in the development finance program for any potential
financing.
Number 2279
REPRESENTATIVE ROKEBERG asked if those communities could then
use the conduit taxable bond program through AIDEA and if HB 449
was authorizing them to do so.
MR. RUSANOWSKI replied:
What you'd be authorizing is for this project to be
considered under the development finance program if it
meets the investment criteria and feasibility, et
cetera, that AIDEA would require. However, the
project will be initiated without the use of this
program, or consideration from this program, through
conduit financing. ... If [communities] chose that
they would like to proceed this way, where the
financing mechanism through this program was more
favorable than what we could provide outside of this
program, then it might be of interest to the community
to utilize it in conjunction with ourselves.
Number 2319
CHAIR ANDERSON reversed the question, asking, "If the bill
doesn't pass, what can't these communities receive?"
MR. RUSANOWSKI responded that the adverse effect is the
elimination of one potential mechanism for financing
infrastructure within the community that might be more favorable
to the community in reducing the cost of the service.
Number 2353
DON ETHERIDGE, Lobbyist for Alaska State AFL-CIO [American
Federation of Labor and Congress of Industrial Organizations]
and local laborers, testified that the local laborers hope to be
part of this project and support HB 449, since it will help
outlying communities join the project because the bill provides
"a more expedient and cheaper way of doing things."
TAPE 04-31, SIDE B
Number 2350
MR. ETHERIDGE concluded by explaining that the AFL-CIO is in
support of the jobs this project will create, both temporary and
permanent.
Number 2333
BOB LOESCHER, Member, Tlingit & Haida Community Council, noted
that he was formerly with the AIDEA board of directors and was
former chief executive officer for Sealaska Corporation. He
said he currently represents a number of entities in coastal
communities that are interested in this project. Speaking to
the need for the project, he explained about the rising cost of
diesel fuel, which powers electrical generators in Southeast
communities at a cost of about 33 cents a kilowatt-hour. He
said although the bill is constructed with a focus on Ketchikan,
Sitka, and Juneau, a number of communities - Hoonah, in
particular - could then apply for pipelines. He stated:
We could reduce the cost of ... fuels 50 percent from
diesel fuel, and that would help our economic
development tremendously and also help the people who
reside in this community ... because they are paying
anywhere from $1.40 to $1.80 a gallon for diesel fuel
right now. ... It could go to $2 or $3 dollars this
summer just for gasoline; parallel price for diesel
fuel goes up similarly, so we could be looking at
anywhere from $2 to $3.50 per gallon in coastal
communities for diesel fuel. ...
This project for Southeast Alaska would access
Canadian propane-air right now, and as Alaska gas line
sources develop over the next 20 years, we could
access Alaska gas and bring it to our region. So ...
the people I represent strongly endorse this bill.
MR. LOESCHER said he thought there might be further amendments
on HB 449. He related that when he was on the AIDEA board, any
project that exceeded $10 million required legislative oversight
because large projects affect the amount of bonds sold and other
bond capacity in the state. He said he approved of this
legislative oversight.
Number 2191
REPRESENTATIVE GUTTENBERG asked where the number $76 million
came from on page 2 of the bill.
MR. LOESCHER replied that he wasn't familiar with current
details of the project, but in the past there was a $70-million
estimate for the Sitka, Ketchikan, and Juneau portion of the
project. He added that he thought the number could have
increased because of additional communities being added on to
the project list.
Number 2162
JAMES A. McMILLAN, Deputy Director of Credit, Alaska Industrial
Development and Export Authority, said he wasn't going to
testify for or against the AIGC project; rather, he wanted to
testify to his belief that HB 449 isn't necessary. It
authorizes AIDEA to issue bonds not to exceed $76 million for
financing this project under the authority's development finance
program, which he said is commonly referred to as its "own and
operate" program.
MR. McMILLAN cited the Red Dog project as an example of a
project that received financial assistance under the development
finance program, where the authority actually owns the road and
operates it through a third-party agreement with Teck Cominco
[Limited]. The Federal Express maintenance hangar in Anchorage
is another example where the authority owns the project and
operates it through a third-party agreement with FedEx.
MR. McMILLAN explained that normally AIDEA looks at the
development finance program for financial assistance for those
projects where ownership of the assets will bring a benefit to
the project. This most commonly occurs when government
ownership is required in order to qualify for tax-exempt bonds
that lower the cost of financing. He said AIDEA has been
acquainted with this project for about five years, and had
indicated to AIGC on many occasions - at least twice in writing
- that this project doesn't fit within the development finance
program. He said AIDEA's ownership of the assets under that
program brings no additional benefit to the project and, in
fact, may bring additional hurdles of time and costs to go
through the required approval process.
MR. McMILLAN explained that AIDEA also determined this project
doesn't qualify for tax-exempt financing; therefore, there is no
necessity for [AIDEA], a public corporation, to own the asset.
Mr. McMillan disagreed with Mr. Rusanowski's testimony, which he
interpreted to be that this authorization is needed not
necessarily because of Juneau, Sitka, and Ketchikan, but because
of the additional communities, and that the authority would look
at this as the total cost of the project and not the financing
for one of the smaller communities. Mr. McMillan said the
statute requires approval of issuance of bonds under the
development finance program if the face amount of the issuance
of the bonds issued by the authority exceeds $10 million. He
said it really has no relationship to the total project cost.
Number 2011
MR. McMILLAN responded to Mr. Rusanowski's statement that there
is an agreement with AIDEA to issue conduit bonds for the
initial portion of this project as follows:
I want to clarify that we have indicated to [AIGC]
that the conduit revenue bond program, issuance of
taxable bond, appears to be the program that fits best
for the type of financing of the project that they are
undertaking. But that requires, first of all, an
underwriter or someone to purchase the bond, and due
diligence and an underwriting analysis. We really
haven't concluded any of ... those points to move
forward and have an agreement on issuance of conduit
bond.
REPRESENTATIVE ROKEBERG posed a situation in which AIGC found an
underwriter, did due diligence, and was prepared to provide
financing. In such a situation would it only have to apply to
AIDEA for the conduit financing, he asked.
MR. McMILLAN replied that if AIGC could find an underwriter and
someone to purchase the bonds, then AIDEA would give
consideration to financial assistance under the conduit revenue
bonds. He clarified that conduit revenue bonds, when issued by
the authority, put the authority at risk; potentially, its name
and ability are identified with these bonds. Its ability to
enter into the market again could be adversely affected if there
were a default on those bonds. While finding someone to
purchase the bonds is an important first step, AIDEA also wants
to do its own due diligence and analysis to make sure there is a
reasonable expectation of success for the payment of these
bonds.
Number 1909
REPRESENTATIVE ROKEBERG asked what kind of savings and how many
basis points AIGC could expect to save in financing because of
AIDEA's conduit revenue bond program.
MR. McMILLAN explained that this is a taxable-bond issue. The
rule of thumb is that if the project qualifies as tax-exempt and
if AIDEA issues tax-exempt bonds, then the savings could be up
to 200 basis points or 2 percent. If the project is financed
with taxable bonds, the only thing AIDEA brings to the table is
its periodic entrance into the market, which would give the
project increased exposure to potential investors. He said in
the case of taxable bonds, there is no benefit from AIDEA in
terms of savings on the coupon on the bonds.
REPRESENTATIVE ROKEBERG offered his understanding that
Mr. McMillan was saying AIDEA might take on additional risk,
with a potential default, and not be able to save any money in
terms of the marketability of the bonds themselves.
MR. McMILLAN clarified that the ability to actually market those
bonds is an enhancement that AIDEA brings to the table, since
people are familiar with AIDEA and the projects it supports and
sponsors. In terms of savings on the interest rate, he said
bondholders can only look to the revenues generated from the
project and cannot look to AIDEA.
REPRESENTATIVE ROKEBERG asked if there was a way, under the
Internal Revenue Service (IRS) taxing authority and Industrial
Development Bonds (IDB), for AIDEA to issue financing for some
of AIGC's project on a tax-exempt basis to help the project
proceed.
MR. McMILLAN responded that the rule of thumb for issuance of
utility bonds is that the borrower must be the utility in the
community, and must have been the utility in the community,
providing that specific service, as of January 1, 1997. The
conditional certificate issued by the Regulatory Commission of
Alaska (RCA) is, in fact, to AIGC and not the communities. He
said it is apparent that AIGC was not in business as of
January 1, 1997, providing the service to these communities.
REPRESENTATIVE ROKEBERG asked if Alaska still has some IDB
bonding authority that is limited by the U.S. Code.
Number 1727
MR. McMILLAN explained that Mr. Loescher had made reference to
that issue, called volume cap, which dictates the amount of tax-
exempt bonds a state may issue. He said AIDEA is one of the
issuers of tax-exempt bonds. He believes the limit for Alaska
this year is $250 million. "They" vie for this volume cap on
tax-exempt bonds along with other organizations such as Alaska
Housing [Finance Corporation], the [Alaska] Student Loan
Corporation, and others.
Number 1677
PHILIP SHEALY, City Manager, City of Seward, testified that he
is in support of HB 449, and that Representative Kohring had
added Seward as the 18th certificated community. Mr. Shealy
said Seward had previously worked with ENSTAR [Natural Gas
Company] to provide gas service to the community. However,
ENSTAR's certificate was revoked and consequently the service
ended. [Breakup occurred in audio transmission.]
CHAIR ANDERSON, upon determining no one else wished to testify,
closed public testimony.
Number 1561
REPRESENTATIVE GATTO moved to report CSHB 449(EDT) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 449(EDT) was
reported from the House Labor and Commerce Standing Committee.
HB 453-JOINT ACTION AGENCIES
Number 1528
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 453, "An Act exempting from regulation under
the Alaska Public Utilities Regulatory Act wholesale agreements
for the sale of power by joint action agencies and contracts
related to those agreements, and joint action agencies composed
of public utilities of political subdivisions and utilities
organized under the Electric and Telephone Cooperative Act."
CHAIR ANDERSON noted that there was public testimony at the
previous hearing [3/19/04], and he closed public testimony.
Number 1519
REPRESENTATIVE CHERYLL HEINZE, Alaska State Legislature, sponsor
of HB 453, offered closing comments. She began by noting that
Homer Electric Association, Inc. ("Homer Electric") had said it
wasn't included in the process. However, she pointed out a
resolution signed by the Alaska Power Association (APA) board of
directors of which Homer Electric is a member. The resolution,
which is included in the committee packet, supports the
authorization of a joint action agency (JAA). Asserting that
everyone was part of the process, she remarked, "I have been
diligent in talking to everyone to make sure we try to put
forward a good piece ... of legislation." She continued:
It seems like things have gotten just a little bit
muddled, so I want to clarify the intent of House Bill
453. It does not form a JAA. A joint action agency
was put in Alaska Statute in 2001. The JAA allows
utilities to form a partnership to build generation
and transmission facilities. House Bill 453 offers a
tool to ensure that the JAA formed by the Railbelt
utilities has access to the lowest interest rates ...
for borrowed capital to finance [the] high cost of
infrastructure projects like replacement, operation,
[and] maintenance of our aging Railbelt electrical
system, which I think all of you know, from the first
time I was here and I had the big map, ... is a
problem to the entire state of Alaska.
When utilities borrow money, the cost of that money is
passed to the ratepayers - all the ratepayers in the
Railbelt. Last week we heard Chris Pihl testify that
regulatory uncertainty causes higher rates on borrowed
capital. And that's very, very important. That is
basically the reason for this bill. Miss Pihl has
helped finance over $8 billion worth of public utility
projects such as this project before us. ... The
international rating agency reported that regulatory
environment creates uncertainty, thereby raising
interest rates to Railbelt borrowers. ... The higher
rate will trickle down.
All that HB 453 does is allow that certainty by
exempting wholesale agreements by the JAA from rate
regulation. With lowered interest rates, the Railbelt
utilities will be paying the lowest possible price for
their wholesale purchase of electricity, and the
savings trickle down from Fairbanks to Homer. As an
example, the Four Dam Pool JAA has a proven record of
providing low-cost, affordable power to its members.
House Bill 453 will give the same benefits to the
ratepayers in the Railbelt. I've worked diligently on
this bill.
CHAIR ANDERSON asked Representative Heinze if there were any
amendments she wished a member of the committee to propose.
REPRESENTATIVE HEINZE replied yes.
Number 1340
REPRESENTATIVE GATTO moved to adopt Amendment 1, labeled 23-
LS1601\A.1, Craver, 3/2/04, which read:
Page 1, line 2, following "agencies":
Insert "to public utilities that are parties to
the agency agreement, including certain electric
cooperatives,"
Page 2, line 8, following "utilities":
Insert "or electric cooperatives, each of whom is
a party to the agency agreement"
CHAIR ANDERSON objected for purposes of discussion.
The committee took an at-ease from 4:29 p.m. to 4:32 p.m.
REPRESENTATIVE GATTO explained that although he'd been a vocal
opponent of the bill, he and Representative Heinze had talked,
and he believes he could support it with these amendments. He
said Amendment 1 would allow any utility not a member of the JAA
to remain regulated both with regard to the amount it charges
and the amount it would pay. He further clarified that as long
as a [utility] doesn't join the JAA, it maintains its regulation
under the RCA.
CHAIR ANDERSON asked if it was Representative Gatto's
presumption that parties such as NEA [Naknek Electric
Association, Inc.] and Homer Electric in Seward, which were
initially averse to HB 453, would now support this [if
Amendment 1 were adopted].
REPRESENTATIVE GATTO replied, "I don't presume."
Number 1259
REPRESENTATIVE CRAWFORD asked if, for example, a power agreement
were sold from Chugach [Electric] to MEA [Matanuska Electric
Association], it would still be regulated; however, if Chugach
Electric were to sell power to ML&P [Municipal Light and Power],
this agreement wouldn't be regulated because [ML&P] would be
part of the JAA.
REPRESENTATIVE GATTO affirmed the foregoing.
REPRESENTATIVE ROKEBERG asked if this is an opt-out provision or
is automatic.
REPRESENTATIVE GATTO replied that it is automatic. He said,
"Until you join the JAA, you're not a member and you simply
remain subject to the RCA."
REPRESENTATIVE ROKEBERG added that the net effect is that an
entity could be receiving wholesale power from the JAA, but that
portion of the contract or the agreement between [parties] would
still be subject to the RCA oversight and regulation.
REPRESENTATIVE GATTO affirmed that.
Number 1195
CHAIR ANDERSON removed his objection. He announced that
Amendment 1 was adopted.
Number 1184
REPRESENTATIVE GATTO moved to adopt Amendment 2, which read
[original formatting and punctuation provided]:
To page #3 Line 1
After "this chapter"
Insert "as specified in AS 42.05.431"
CHAIR ANDERSON objected for purposes of discussion.
REPRESENTATIVE GATTO explained that Amendment 2 refers to the
power of the commission to fix rates, and is proposed for
reasons of clarity.
REPRESENTATIVE HEINZE remarked, "I think Representative Gatto is
making this bill even better. This way, it covers all the
parties and, I think, puts to rest any feelings that maybe they
somehow might not be an equal party or whatever."
REPRESENTATIVE ROKEBERG asked whether it makes a good bill
better or a bad bill worse.
CHAIR ANDERSON replied, "I think a good bill better."
Number 1097
CHAIR ANDERSON removed his objection. Hearing no further
objection, he announced that Amendment 2 was adopted.
Number 1080
REPRESENTATIVE GATTO referred to notes he'd made on the bill
itself, inserting "relating to" on page 1, line 1, where it says
"exempting from". He asked whether that had been considered as
a conceptual amendment.
REPRESENTATIVE ROKEBERG observed that such a change would
greatly widen the title.
CHAIR ANDERSON recommended against that change.
REPRESENTATIVE GATTO agreed.
Number 1033
CHAIR ANDERSON moved to report HB 453, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 453(L&C) was
reported from the House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:54 p.m.
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