Legislature(2019 - 2020)BELTZ 105 (TSBldg)

02/06/2020 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

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03:30:00 PM Start
03:30:42 PM Overview: Alaska Development Team by the Department of Commerce, Community and Economic Development (dcced)
04:40:10 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Alaska Development Team by Deputy Commissioner
John Springsteen, Department of Commerce,
Community & Economic Development
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                        February 6, 2020                                                                                        
                           3:30 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Click Bishop, Chair                                                                                                     
Senator Peter Micciche, Vice Chair                                                                                              
Senator Mike Shower                                                                                                             
Senator Elvi Gray-Jackson                                                                                                       
MEMBERS ABSENT                                                                                                                
Senator Lyman Hoffman                                                                                                           
COMMITTEE CALENDAR                                                                                                            
OVERVIEW: ALASKA DEVELOPMENT TEAM BY THE DEPARTMENT OF COMMERCE~                                                                
COMMUNITY AND ECONOMIC DEVELOPMENT (DCCED)                                                                                      
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
JOHN SPRINGSTEEN, Deputy Commissioner                                                                                           
Department of Commerce, Community and Economic Development                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Delivered a PowerPoint on the Alaska                                                                      
Development Team.                                                                                                               
ACTION NARRATIVE                                                                                                              
3:30:00 PM                                                                                                                    
CHAIR  CLICK  BISHOP called  the  Senate  Community and  Regional                                                             
Affairs Standing Committee meeting to  order at 3:30 p.m. Present                                                               
at the  call to order  were Senators Micciche,  Gray-Jackson, and                                                               
Chair  Bishop.  Senator Shower  arrived  as  the meeting  was  in                                                               
^Overview:  Alaska   Development  Team   by  the   Department  of                                                               
Commerce, Community and Economic Development (DCCED)                                                                            
 Overview: Alaska Development Team by the Department of Commerce,                                                           
           Community and Economic Development (DCCED)                                                                       
3:30:42 PM                                                                                                                    
CHAIR  BISHOP announced  the only  business before  the committee                                                               
would  be an  overview  of  the Alaska  Development  Team by  the                                                               
Department of  Commerce, Community, and Economic  Development. He                                                               
noted that the committee requested this presentation.                                                                           
3:31:52 PM                                                                                                                    
JOHN  SPRINGSTEEN, Deputy  Commissioner, Department  of Commerce,                                                               
Community  and  Economic  Development,  Juneau,  Alaska,  briefly                                                               
touched   on  his   prior  work   history  related   to  economic                                                               
development,  noting   that  he  previously  served   in  several                                                               
positions  at  the  Alaska   Industrial  Development  and  Export                                                               
Authority  (AIDEA),  including  several years  as  the  executive                                                               
director.  He  has  traveled  throughout  Alaska  to  speak  with                                                               
communities  to  talk  about  their  challenges.  He  brings  his                                                               
experience to  this development team's  effort to  drive economic                                                               
engines in the state.                                                                                                           
3:33:16 PM                                                                                                                    
MR. SPRINGSTEEN  began a PowerPoint,  by discussing slide  2, Why                                                               
establish   an   "Alaska   Development  Team?"   He   said   this                                                               
administration  has recognized  the need  to be  forward thinking                                                               
about how  to approach business, so  the goal is to  find ways to                                                               
make advancements  in all areas  to support the things  that need                                                               
to be  supported, and  allow the  things that  are doing  well to                                                               
progress.  The   team  would  like   to  grow   existing  Alaskan                                                               
businesses,  find opportunities  for  new growth,  and provide  a                                                               
good environment to improve Alaska's economy.                                                                                   
3:34:16 PM                                                                                                                    
MR.  SPRINGSTEEN turned  to slide  3 that  lists the  Alaska CEDS                                                               
Committee  (2016/2017)  composed  of   a  crosscut  of  business,                                                               
industry, and government leaders.                                                                                               
3:34:58 PM                                                                                                                    
MR.  SPRINGSTEEN  reviewed  slide  4 that  describes  the  Alaska                                                               
Development Team (AKDT). It read as follows:                                                                                    
       To promote growth of existing Alaskan businesses,                                                                        
     encourage new businesses to invest in Alaska, and help                                                                     
      create an economic environment that is favorable for                                                                      
     business development.                                                                                                      
      To enable a flourishing private sector economy that                                                                       
      brings job opportunities to the state and increases                                                                       
     prosperity and self-sufficiency for Alaskan families.                                                                      
     Fundamental Question                                                                                                     
       What can Alaska do today, with what we have in our                                                                       
     regions and communities, to grow and attract commerce,                                                                     
     industry, and investment?                                                                                                  
3:35:53 PM                                                                                                                    
CHAIR BISHOP asked if the  department had identified key drivers,                                                               
such as a matrix or guiding principles for Alaska.                                                                              
MR.  SPRINGSTEEN replied  the presentation  will  touch on  those                                                               
issues and he can elaborate later, if necessary.                                                                                
3:36:26 PM                                                                                                                    
SENATOR   GRAY-JACKSON    asked   about   new    businesses   and                                                               
entrepreneurs in Alaska.                                                                                                        
MR. SPRINGSTEEN  replied it is  important to let  businesses know                                                               
what  resources  currently  exist.   The  Alaska  Small  Business                                                               
Development  Center   has  a  good   footprint.  He   said  joint                                                               
discussions with  the USDA Rural  Development, the  federal Small                                                               
Business Administration,  along with the Department  of Commerce,                                                               
Community and  Economic Development  (DCCED) and the  Division of                                                               
Community  and Regional  Affairs  all recognize  that Alaska  has                                                               
great resources that need to be better utilized.                                                                                
3:37:03 PM                                                                                                                    
SENATOR SHOWER joined the meeting.                                                                                              
3:37:13 PM                                                                                                                    
MR. SPRINGSTEEN  said the administration  is fully  supportive of                                                               
entrepreneurs and  small businesses  and seeks  to help  them use                                                               
the available tools.                                                                                                            
3:37:29 PM                                                                                                                    
SENATOR  GRAY-JACKSON   asked  if   he  was  familiar   with  the                                                               
Municipality of Anchorage's Angel [Investment] Fund.                                                                            
MR.  SPRINGSTEEN   answered  yes.   In  addition  to   the  Angel                                                               
Investment  Fund,  he  knows  several  of  the  individual  angel                                                               
capital providers, which are the firms  that do work on behalf of                                                               
the fund.                                                                                                                       
3:38:14 PM                                                                                                                    
MR. SPRINGSTEEN turned  to slides 5-7, and explained  that the FY                                                               
2020  budget  included  three  positions:  a  division  director,                                                               
partially funded by the Division  of Economic Development and the                                                               
Division of  Investments, a development  manager, and  a business                                                               
development  officer. The  latter two  positions were  created in                                                               
the Division of Economic Development.                                                                                           
CHAIR BISHOP asked if the positions were filled.                                                                                
MR. SPRINGSTEEN  said yes. He  turned to  slide 6 that  depicts a                                                               
staff organization chart. He said  the prior administration did a                                                               
lot of  grants administration work and  compliance with statutory                                                               
and regulatory reporting. This Alaska  Development Team (AKDT) is                                                               
composed   of  people   with  private   sector  backgrounds.   He                                                               
identified the  team: Matthew Fagnani  serves as Director  of the                                                               
Division  of  Economic  Development,  Keith  Comstock  serves  as                                                               
Development  Manager, and  Anne Marie  Russell and  a development                                                               
associate will provide  research for the team.  He said positions                                                               
for  a business  development officer  or development  manager and                                                               
one development associate are vacant.                                                                                           
CHAIR  BISHOP asked  whether any  lateral position  transfers had                                                               
MR. SPRINGSTEEN  answered yes; Mr. Fagnani  transitioned from the                                                               
Director of  the Division of  Economic Development to  the senior                                                               
development executive position. The  new hires are Jeffrey Hunter                                                               
and Anne Marie Russell.                                                                                                         
3:41:40 PM                                                                                                                    
MR.  SPRINGSTEEN   turned  to  slide   7,  AKDT   Governance  and                                                               
Participation.  He said  it is  the governor-led  initiative that                                                               
Alaska  is  open for  business.  In  addition to  the  previously                                                               
mentioned  positions, the  development  team  includes the  DCCED                                                               
Commissioner,  Department  of  Revenue Deputy  Commissioner  Greg                                                               
Samorajski who  is under  contract to  AIDEA, and  the governor's                                                               
CHAIR  BISHOP asked  if  Clark Penney  serves  as the  contractor                                                               
[shown on the organization chart] under AIDEA.                                                                                  
MR. SPRINGSTEEN answered yes.                                                                                                   
3:42:36 PM                                                                                                                    
MR.  SPRINGSTEEN paraphrased  the following  description of  what                                                               
AKDT does:                                                                                                                      
     We   work   with   Alaskan   businesses,   governmental                                                                    
     entities, economic  development organizations, industry                                                                    
     groups,  and  chambers  of  commerce  to  identify  and                                                                    
     facilitate  ways  to  make  doing  business  in  Alaska                                                                    
     How are we doing this?                                                                                                   
        • Promoting the advantages of doing business in                                                                         
          Alaska to prospective investors                                                                                       
        • Serving as a facilitator to connect interested                                                                        
          parties and move investment ready commercial and                                                                      
          industrial projects forward                                                                                           
        • Interacting   with      economic     development                                                                      
          organizations,   industry  groups,   and  business                                                                    
          owners and participating in  trade events to share                                                                    
          information  and  ideas   for  promoting  business                                                                    
        • Identifying barriers to business development in                                                                       
          Alaska and developing approaches to resolve                                                                           
MR. SPRINGSTEEN  provided an example of  promoting the advantages                                                               
of doing business in Alaska  to prospective investors. He related                                                               
that Mr.  Samorajski has introduced global  providers of capital,                                                               
investment banks, and private equity  funds that have come to the                                                               
state to some large promising  infrastructure projects for public                                                               
and private investment with the  Alaska Railroad and ports within                                                               
He  said the  contractor, Mr.  Penney,  has worked  with the  Ted                                                               
Stevens  Anchorage   International  Airport  and   the  Fairbanks                                                               
International  Airport  on   enhancing  air  cargo  capabilities,                                                               
securing  cold  storage,  and attracting  investments  for  these                                                               
types  of opportunities.  Some of  the team  has worked  with the                                                               
regional development  organizations and the Denali  Commission to                                                               
determine growth of  new sectors and growth  of existing economic                                                               
engines  for the  state. He  stated that  Mr. Fagnani  has worked                                                               
with the  mariculture sector to  try to remove  impediments, such                                                               
as providing agency  staff to process leases and  renewals at the                                                               
Department of Natural Resources (DNR).                                                                                          
3:45:39 PM                                                                                                                    
CHAIR  BISHOP asked  whether DNR  has adequate  resources in  its                                                               
permitting  section. He  recalled the  legislature passed  a bill                                                               
last  year  to  help  induce  and grow  the  shellfish  and  kelp                                                               
industries.  He said  DNR returns  $28  for every  $1 of  general                                                               
funds invested  so he  wants to  be sure  the department  has the                                                               
MR. SPRINGSTEEN said  yes; DNR was able to  dedicate resources to                                                               
facilitate   this  activity.   Another  example   of  identifying                                                               
barriers to Alaska  was having someone in the right  place at the                                                               
right time  when the state  worked with the Denali  Commission to                                                               
update its  broadband study.  Having Keith  Comstock in  place to                                                               
provide comments allowed the next  wave of satellite standards to                                                               
be  included  and  eligible  for federal  funding.  It  does  not                                                               
provide  the entire  solution, but  it helps  the parts  of rural                                                               
Alaska that lack fiber and microwave or feeder system access.                                                                   
3:47:28 PM                                                                                                                    
MR.  SPRINGSTEEN  said slide  9  illustrates  that a  2008  Scott                                                               
Goldsmith  article  outlining  what drives  Alaska's  economy  is                                                               
still  relevant  today.  Petroleum,   federal  tax  dollars,  and                                                               
everything  else  represent  the three-legged-stool  of  Alaska's                                                               
economy. The  focus of this  article was bringing new  money into                                                               
Alaska to provide the economic engine to drive the economy.                                                                     
3:48:25 PM                                                                                                                    
MR.  SPRINGSTEEN explained  that slide  10 depicts  a chart  that                                                               
describes ways to help the  Alaska Economy by growing the state's                                                               
existing economic  engines, encouraging  new growth  sectors, and                                                               
creating  a favorable  environment for  the induced  sectors. The                                                               
first column  identifies the existing  economic engines as  oil &                                                               
gas,   mining,  seafood,   tourism,  Alaska   Native  Corporation                                                               
businesses,  international air  cargo, manufacturing  and export,                                                               
investment management, and federal tax dollars.                                                                                 
He  highlighted a  business in  Palmer  that Alaska  manufactures                                                               
naval deck cleaners in Palmer  for aircraft carriers globally and                                                               
the  vibrant export  market  for peonies,  which  command a  high                                                               
price point. He said the idea  is to find more opportunities like                                                               
3:49:29 PM                                                                                                                    
SENATOR SHOWER  stated that the  market for peonies  is expanding                                                               
and  his district  has  most of  the peony  flower  farms in  the                                                               
state. It is an economic driver  that fits a niche nicely because                                                               
Alaskan peonies bloom  when they are not blooming  in other parts                                                               
of the  world. He  also noted that  hemp production  is expanding                                                               
rapidly  and flour  is produced  in the  Delta Junction  area and                                                               
becoming available for export.                                                                                                  
3:50:41 PM                                                                                                                    
CHAIR BISHOP  said there was a  question last year as  to whether                                                               
the flowers  could even be  exported so  it is important  to fund                                                               
the  Division  of  Agriculture  and  ensure  the  inspectors  are                                                               
SENATOR  SHOWER replied  the flowers  cannot be  exported without                                                               
the agriculture  program in place  to do the inspections,  but he                                                               
has  assurances  from  the  Division   of  Agriculture  that  the                                                               
inspections  will happen.  He said  the division  is looking  for                                                               
ways  to become  self-funding, but  the state  must have  a glide                                                               
path  so  that businesses  do  not  suffer  in the  meantime.  He                                                               
estimated the  value of the industry  in the tens of  millions of                                                               
3:52:17 PM                                                                                                                    
MR. SPRINGSTEEN said  one of the roles  of the team is  to act as                                                               
an  additional  voice  to the  administration  for  business  and                                                               
industry  that  have  an  express  need.  Turning  to  investment                                                               
management,  he explained  that aside  from the  Alaska Permanent                                                               
Fund  and its  goal to  maximize  returns for  all Alaskans,  the                                                               
state has  investment managers who  manage global  portfolios and                                                               
bring some new money into the economy.                                                                                          
He said federal  tax dollars is an existing  economic engine that                                                               
benefits  all   Alaskans.  These  include   infrastructure  funds                                                               
provided  through  the  U.S.  Department  of  Transportation  and                                                               
health care funding. He said  the Alaska Native Claims Settlement                                                               
Act,  Section 8(a)  government  contracting  work, also  benefits                                                               
Alaskans. Also, the U.S. Department  of Defense (DoD) is bringing                                                               
the F-35 Squadrons  to Eielson Air Force  Base. Alaska's military                                                               
bases are  economic engines in  Alaska, including the  U.S. Coast                                                               
Guard  that  is  securing  the  Arctic  which  includes  Alaska's                                                               
coastal waters.                                                                                                                 
MR.  SPRINGSTEEN  turned to  the  second  column that  lists  new                                                               
growth sectors  to encourage, starting  with product  exports. He                                                               
said there  is an ongoing  discussion about mariculture  since it                                                               
has a large and competitive  global market. With agriculture, the                                                               
focus is  on looking for  products with  a high price  point that                                                               
help  solve  logistical  costs.  He  noted  that  Alaska  exports                                                               
glacier water  that has  been marketed with  the aurora  from the                                                               
Northern Lights. The  state is looking for  new opportunities for                                                               
timber. He said  there is a lot of interest  at the federal level                                                               
for  critical minerals.  An executive  order relates  to critical                                                               
minerals  and  the  need for  self-reliance  to  support  defense                                                               
needs.  He  related  that  high  power  magnets  in  iPhones  and                                                               
androids  contain  rare   earth  elements,  including  neodymium,                                                               
praseodymium,  and dysprosium.  Graphite  prospects in  Northwest                                                               
Alaska  have  markets   since  the  mineral  is   used  in  Tesla                                                               
automobiles and most modes of transportation.                                                                                   
3:55:46 PM                                                                                                                    
SENATOR SHOWER  remarked that the Joint  Armed Services Committee                                                               
(JASC)  recently discussed  that  96 percent  of  the rare  earth                                                               
metals  are owned  and controlled  by China.  He emphasized  that                                                               
Alaska has an opportunity to explore for rare-earth metals.                                                                     
CHAIR BISHOP  commented that  Alaska is  50 years  behind knowing                                                               
what it has in terms of resources in mineral exploration.                                                                       
3:57:08 PM                                                                                                                    
SENATOR SHOWER  recalled the JASC  testimony was that  the Wilson                                                               
Institute  said  that just  five  percent  of Alaska's  Northwest                                                               
coast is mapped and explored. He described that as shocking.                                                                    
3:57:42 PM                                                                                                                    
CHAIR BISHOP asked what outreach has been done in mariculture.                                                                  
MR. SPRINGSTEEN replied senior  development executive Mr. Fagnani                                                               
has  been  working with  the  Mariculture  Task Force  to  remove                                                               
barriers and silos; it is a driving point of the administration.                                                                
CHAIR  BISHOP described  the development  team  as DCCED's  brain                                                               
trust on steroids that will take things to the next step.                                                                       
MR.  SPRINGSTEEN related  that  the development  team comes  with                                                               
decades  of   private  sector  experience.  Their   focus  is  on                                                               
understanding how to accomplish  deals, not spending time looking                                                               
backward  or being  theoretical. One  of the  goals is  to create                                                               
recognizable value that  citizens can see, such  as investment of                                                               
new capital in new sectors or to grow existing sectors.                                                                         
MR.  SPRINGSTEEN  continued  to  discuss ways  to  Encourage  New                                                               
Growth  Sectors,  turning   to  Service  Enhancement,  Additional                                                               
Tourism  Destinations.  He  said  Iceland  has  built  a  budding                                                               
tourism  industry,  providing  itineraries for  people  to  spend                                                               
three days in Iceland before  moving on to other destinations. He                                                               
suggested that  Alaska might be  able to develop a  similar model                                                               
in  addition  to   building  on  the  success   of  Hoonah  Totem                                                               
Corporation in Hoonah. The community  has embraced tourism as its                                                               
economic engine,  working with the cruise  lines. Also, enhancing                                                               
airport  capabilities  will  have   a  higher  value  for  global                                                               
logistics    service    providers.    In    terms    of    Export                                                               
Services/Knowledge,  Alaska  is close  to  the  point of  hosting                                                               
secure data centers,  dropping the fiber line  that was Matanuska                                                               
Telecom Association, a  land line that goes  through Canada helps                                                               
with redundancy issues  that prevented Alaska from  being part of                                                               
the market  to have secure  back up  storage data centers  in the                                                               
state.  The  team  is  working  with  the  university  system  to                                                               
determine what can be commercialized,  such as Artic research and                                                               
development  or  attracting   additional  research  dollars.  The                                                               
department  encourages  people  to  offer  ideas  to  the  Alaska                                                               
Development Team.                                                                                                               
4:02:43 PM                                                                                                                    
MR.  SPRINGSTEEN turned  to the  third  column, Create  Favorable                                                               
Environment for  Induced Sectors.  He reviewed the  logistics and                                                               
supply  chain, construction,  and professional  services, all  of                                                               
which  happen  in  conjunction   with  other  purposes,  such  as                                                               
construction of  a hospital or  dock. The development  team would                                                               
like to  separate the economic  engines that Mr.  Goldsmith talks                                                               
about  from those  things the  state  takes and  supports in  the                                                               
Alaska economy to get the work done.                                                                                            
4:03:27 PM                                                                                                                    
SENATOR SHOWER  remarked that  when people  discuss manufacturing                                                               
in  Alaska, it  is usually  in the  context of  obstacles due  to                                                               
Alaska's remote location. However,  manufacturing happens in Asia                                                               
and is  shipped to  the Lower  48 and  Alaska is  halfway between                                                               
Asia and  destinations in  the Lower  48 so  he would  argue that                                                               
Alaska is poised  to manufacture goods. What is needed  is a base                                                               
of qualified  people building factories for  manufacturing. Also,                                                               
some  people  would  like  to   manufacture  firearms  or  refine                                                               
Alaska's oil in the state  instead of shipping it to out-of-state                                                               
refineries.  Alaska should  be employing  Alaskans to  refine its                                                               
oil. He said  these things represent opportunities  and Alaska is                                                               
missing out.                                                                                                                    
4:05:13 PM                                                                                                                    
CHAIR BISHOP asked if the  Alaska Development team has identified                                                               
the  top  three  barriers  that  keep  Alaska  from  growing  its                                                               
MR. SPRINGSTEEN  said he  appreciated Senator  Shower's comments,                                                               
but it is context dependent as  to whether the challenges are due                                                               
to  workforce, transportation,  or  cost of  energy.  He said  he                                                               
tends to start  with the market and purchase price  and look back                                                               
at the  impediments, which makes  sense for the peony  market. He                                                               
pointed out that refineries in  Fairbanks were shut down, and the                                                               
state began  to import refined fuels  from the Lower 48.  He said                                                               
he  would be  happy to  continue the  conversation on  that issue                                                               
4:06:35 PM                                                                                                                    
CHAIR BISHOP  said he learned  last spring that Iceland  not only                                                               
has tourism, but  it also refines and smelts  aluminum from South                                                               
America. He  said the only  way that can  happen is if  energy is                                                               
cheap.  "That's  the number  one  starter.  If you've  got  cheap                                                               
energy, the business will come."                                                                                                
SENATOR SHOWER  commented that if  Alaska had its  own refineries                                                               
it would have cheap energy.                                                                                                     
CHAIR BISHOP replied he advocates for hydroelectric.                                                                            
MR.  SPRINGSTEEN  said he  was  jealous  of Iceland's  geothermal                                                               
CHAIR BISHOP added, "And hydro."                                                                                                
4:07:50 PM                                                                                                                    
MR. SPRINGSTEEN  said he  was grateful  for the  arrangement that                                                               
allows large-scale hydro projects in Alaska.                                                                                    
MR.  SPRINGSYTEEN reviewed  slide 11,  Who is  Focused Where?  He                                                               
restated  the  assignments  for team  members  Mr.  Fagnani,  Mr.                                                               
Comstock, and Mr. Samorajski.                                                                                                   
4:08:55 PM                                                                                                                    
MR.  SPRINGSTEEN reviewed  slide  12, Highlights  of Recent  AKDT                                                               
Activities, which read as follows:                                                                                              
     AKDT and Mining                                                                                                            
     •  Making it easier to do business                                                                                         
        •  Alaska mining, U.S. Critical Minerals, and                                                                           
     eligibility for "high priority infrastructure project"                                                                     
      designation to streamline permitting.                                                                                     
     AKDT and Mariculture                                                                                                       
       •  Interacting with industry to promote business                                                                         
       •  Alaska Mariculture Task Force, Alaskan grown                                                                          
         shellfish & seaweed, overcoming statutory and                                                                          
     regulatory hurdles, and consultation with the seafood                                                                      
     AKDT and Broadband                                                                                                         
     •  Identifying barriers and resolving impediments                                                                          
    •  Alaska    broadband,   sensible    standards   for                                                                       
      satellite performance, and OneWeb collaboration with                                                                      
      Pacific Dataport to improve rural connectivity                                                                            
MR. SPRINGSTEEN stated  that he and Mr. Penney  have been working                                                               
together  to  make  it easier  to  do  business mining  for  U.S.                                                               
critical  minerals  in Alaska.  He pointed  out  that the  mining                                                               
industry  was added to  eligibility for  the Fix  America Surface                                                               
Transportation Act.                                                                                                             
4:10:31 PM                                                                                                                    
SENATOR MICCICHE  said the administration favors  cutting funding                                                               
for experts in  some of these fields, so that  generalists may be                                                               
successful in  some of these  areas, but  that does not  work. He                                                               
asked  how to  work together  with some  of the  people who  have                                                               
experience in  these fields.  He said  he is  an advocate  of the                                                               
private   sector   operating   without  a   lot   of   government                                                               
intervention.  He reviewed  DCCED's  budget  submission for  this                                                               
year and  wondered how much  is redundant and how  much expertise                                                               
is being  set aside  that knows  the markets.  He asked  what the                                                               
development  team thinks  will be  successful when  Alaskans have                                                               
been "banging their  heads against the wall" for  decades in some                                                               
of  these   markets.  He  acknowledged   the  difficulty   to  be                                                               
competitive  due  to  labor, natural  resources,  and  permitting                                                               
issues. He  asked why  the other departments  are not  doing this                                                               
with their funding and how does  he see that the development team                                                               
will improve those processes.                                                                                                   
MR.  SPRINGSTEEN  answered  that  the development  team  did  not                                                               
necessarily have expertise  in each of these sectors  and was not                                                               
trying to replace that expertise. He  said the big drivers of the                                                               
development  team  will be  to  bring  experienced operators  and                                                               
smart  money  to  the  issue.  He  said  these  people  have  the                                                               
knowledge to vet and evaluate a  deal and if something is brought                                                               
to  the table  that  does  not make  sense,  the department  will                                                               
repurpose its efforts to move forward with other initiatives.                                                                   
4:12:56 PM                                                                                                                    
SENATOR MICCICHE noted that some  of the funding has been shifted                                                               
from  subject management  experts in  tourism and  Alaska Seafood                                                               
Marketing  Institute (ASMI)  to a  generalist group.  He said  he                                                               
knows  some of  the team  and they  are very  bright generalists.                                                               
However, he  wonders why  the department  does not  continue with                                                               
the  subject  matter  experts since  they  have  been  remarkably                                                               
effective  for decades.  He  suggested  the administration  could                                                               
supplement   these  subject   matter  experts   with  a   smaller                                                               
development team, which could market  the talents of both sets of                                                               
MR. SPRINGSTEEN said if the  expertise has not resulted in growth                                                               
or  advancement in  the industry,  it points  to another  factor,                                                               
such as experienced operators and  smart money to invest in these                                                               
types of  businesses. He said  the budget request would  take the                                                               
sunsetting avionics  fund and  direct it to  a pilot  project for                                                               
the next  three years for  this development team effort.  It will                                                               
move  it from  a government  only activity  to something  that is                                                               
integral but independent of the political process.                                                                              
4:14:54 PM                                                                                                                    
SENATOR MICCICHE suggested that the  reason it is difficult to be                                                               
competitive  in Alaska  is  the same  reason  everything is  more                                                               
expensive.  The cost  of everything,  the distance,  the weather,                                                               
and the  cost of  labor make  it hard to  compete but  Alaska has                                                               
succeeded in some areas. While  he is supportive of this concept,                                                               
he predicted that it would  take very detailed and out-of-the-box                                                               
thinking to crack some of these codes.                                                                                          
4:16:26 PM                                                                                                                    
SENATOR  SHOWER  asked  if   the  administration  had  identified                                                               
anything in particular  or if it was  bureaucracy and regulations                                                               
that make it difficult for Alaska  to be responsive and nimble in                                                               
the business environment.                                                                                                       
MR. SPRINGSTEEN said part of  the feedback from the Conference of                                                               
Economic   Development  Strategy   was  a   need  for   statewide                                                               
coordination.    The   Alaska    Development    Team   is    this                                                               
administration's effort to  do so, but to do  it differently than                                                               
in  the past.  He  reiterated  that past  effort  was focused  on                                                               
grants administration  and not growing Alaska's  economic engines                                                               
and creating new ones.                                                                                                          
4:18:44 PM                                                                                                                    
MR.  SPRINGSTEEN continued  reading the  highlights on  slide 12,                                                               
related to AKDT and Broadband:                                                                                                  
   AKDT and Broadband                                                                                                           
   • Identifying barriers and resolving impediments                                                                             
   • Alaska broadband,   sensible   standards   for   satellite                                                                 
     performance, and OneWeb collaboration with Pacific Dataport                                                                
     to improve rural connectivity.                                                                                             
He  said that  AKDT has  helped put  those groups  in touch  with                                                               
private  equity and  global  investment banks  to  help move  the                                                               
project forward.                                                                                                                
4:19:36 PM                                                                                                                    
MR. SPRINGSTEEN  said the next  few slides show  some recognition                                                               
that the  team has  received for its  work. He  highlighted their                                                               
successes. The  team helped  get mining  included as  an eligible                                                               
sector under  the federal Fix America  Surface Transportation Act                                                               
(Fast-41).  This   effort  was  prompted  by   the  governor  who                                                               
nominated Graphite  One Inc.'s Graphite Creek  deposit in Western                                                               
Alaska  as a  high-priority  infrastructure  project. The  AKDT's                                                               
support  facilitated meetings  with Graphite  One and  UCorp, the                                                               
rare earth development prospect  in Southeast Alaska, and getting                                                               
mining  included as  an eligible  sector. He  said he  personally                                                               
found it to be a huge win.                                                                                                      
4:20:15 PM                                                                                                                    
MR.  SPRINGSTEEN  reviewed slide  14,  AKDT  and Mariculture.  He                                                               
explained that the  Anchorage Daily News article  by Julie Decker                                                               
acknowledged  AKDT's involvement  in providing  state support  to                                                               
grow a $100 million mariculture industry.                                                                                       
4:20:40 PM                                                                                                                    
MR.   SPRINGSTEEN  reviewed   slides  15-16,   AKDT  and   Alaska                                                               
Broadband,  consisting of  a table  of performance  measures that                                                               
will define success by 2024.                                                                                                    
     A Blueprint for Alaska's Broadband Future                                                                                  
       Advice prompts inclusion of satellite standard for                                                                       
        Alaska Broadband (critical for rural access and                                                                         
     federal funding eligibility)                                                                                               
One line emphasized the satellite standard on the chart:                                                                        
         Latency (satellite, covering Alaska) NGSO: 100                                                                         
     milliseconds, GEO: 670 milliseconds.                                                                                       
CHAIR BISHOP  asked him to  describe AKDT's  working relationship                                                               
with the Denali Commission.                                                                                                     
MR. SPRINGSTEEN answered that the relationship is great.                                                                        
4:21:32 PM                                                                                                                    
MR.  SPRINGSTEEN briefly  touched on  slide 16,  AKDT and  Alaska                                                               
Broadband.  He  said  AKDT  has   been  making  introductions  to                                                               
different capital groups.                                                                                                       
4:21:58 PM                                                                                                                    
MR. SPRINGSTEEN reviewed slide 17,  Other AKDT Initiatives, which                                                               
read as follows:                                                                                                                
        • Expanding gaming opportunities in Alaska                                                                              
        • Attracting investors for cold storage and secure                                                                      
         storage facilities for international air cargo                                                                         
        • Capitalizing on University of Alaska research and                                                                     
          development capabilities                                                                                              
        • Providing long-term supplies of timber to global                                                                      
        • Exploring potential for multi-user infrastructure                                                                     
          funded primarily by and for industry (similar to                                                                      
          Delong Mountain Transportation System)                                                                                
        • Pursing public-private partnerships for tourism                                                                       
        • Ongoing work with Alaska Regional Development                                                                         
          Organizations  (ARDORs),  Alaska Municipal  League                                                                    
          members,   industry   groups,  and   chambers   of                                                                    
          commerce  on driving  local and  regional economic                                                                    
MR. SPRINGSTEEN  provided more detail on  AKDT's efforts, stating                                                               
that Deputy  Commissioner of Revenue Samorajski  has been working                                                               
on the governor-announced state  lottery. Clark Penney has worked                                                               
with the airport  manager, and Jim Szczesniak worked  to bring in                                                               
investors  for cold  storage and  secure  storage facilities  for                                                               
international  air cargo.  Development  Executive Keith  Comstock                                                               
and senior development executive  Matthew Fagnani were working on                                                               
capitalizing the  University of  Alaska research  and development                                                               
capabilities.  Mr. Penney  and  Mr. Clark  are  working with  the                                                               
forest industry to revitalize the timber industry for Alaska.                                                                   
MR. SPRINGSTEEN said the road and  port model that serves the Red                                                               
Dog Mine  illustrate the  importance of  access to  resources. He                                                               
stated that AIDEA  has custody of the Ambler  Access Project that                                                               
seeks  permits to  access the  project from  the Dalton  Highway.                                                               
AKDT would  like to  create access  for resource  development and                                                               
have long-term  assessment arrangements  in order to  raise funds                                                               
for  construction  costs.  Mr. Comstock  is  working  on  public-                                                               
private  partnerships   for  tourism  opportunities   similar  to                                                               
Iceland's  approach and  adding  new  tourism destinations.  AKDT                                                               
will work  with the  ARDORS and AML  to discuss  economic engines                                                               
and potential projects.                                                                                                         
CHAIR  BISHOP  asked  him  to identify  the  biggest  barrier  to                                                               
MR. SPRINGSTEEN  replied it  varies depending  on the  region. In                                                               
certain areas  it is the  lack of reliable infrastructure  to get                                                               
to the destination. He said  the National Park Service's plan has                                                               
been  to ensure  access going  forward. Part  of this  discussion                                                               
relates  to public-private  partnership (PPP),  working with  the                                                               
different  companies that  are active  and identifying  areas for                                                               
investment to  grow their tourism experiences.  Alyeska Resort is                                                               
moving   forward  with   a   plan  for   a   Nordic  spa   [using                                                               
hydrotheraphy]  to  help  expand  their  experiences  for  cruise                                                               
lines, but also to attract locals.                                                                                              
4:26:41 PM                                                                                                                    
SENATOR  MICCICHE wondered  if expanded  focus groups  could find                                                               
out  the reasons  that  organizations  in the  Lower  48 are  not                                                               
coming to Alaska. He related  his own experience coming to Alaska                                                               
and loving  it. On the  flip side, he  said he has  hired workers                                                               
who brought their  families here but soon left  because Alaska is                                                               
not for everyone.                                                                                                               
He said  Mr. Springsteen  pointed out  that businesses  choose to                                                               
base  their companies  in Delaware.  He  said 60  percent of  the                                                               
Fortune  500 companies  are incorporated  in Delaware  because of                                                               
their tax  laws and stability,  and Alaska  does not have  any of                                                               
those things going for it.                                                                                                      
SENATOR  MICCICHE  expressed  frustration   that  the  state  has                                                               
perhaps undermined people who have  been remarkably successful in                                                               
growing tourism.  It is the  one industry  that has fired  on all                                                               
cylinders during  the recession, and  the same thing  with Alaska                                                               
Seafood Marketing  Institute (ASMI). He pointed  out that Iceland                                                               
is  in the  middle  of  two heavily  populated  coasts.  It is  a                                                               
country that  is not in  the middle  of nowhere, while  Alaska is                                                               
only  a strategic  location  for air  cargo. He  said  he is  not                                                               
discouraged by  new ideas,  but he  is trying  to figure  out how                                                               
AKDT can  be the  most valuable in  determining the  reasons that                                                               
some are not doing business in Alaska.                                                                                          
MR. SPRINGSTEEN responded that he  hoped to have the conversation                                                               
on how Alaska can play to its strengths and move forward.                                                                       
4:29:36 PM                                                                                                                    
SENATOR SHOWER said  London used to be the center  of banking but                                                               
now it is  Hong Kong. He surmised that even  though Hong Kong has                                                               
nothing  over London,  it enticed  people with  tax breaks,  free                                                               
buildings and whatever it took.                                                                                                 
He said Alaska should look at  those types of things in an effort                                                               
to  be  nimble and  flexible.  Even  though not  everything  will                                                               
stick, Alaska  should not  limit itself. He  asked if  a railroad                                                               
system that  connects the Alaska  Railroad to the Lower  48 would                                                               
provide business opportunities.                                                                                                 
MR.  SPRINGSTEEN  said  infrastructure should  be  purpose-built,                                                               
right-sized,  and sustainable  through a  source of  revenue that                                                               
will support it.  If the revenue source is  exporting Alberta oil                                                               
sands through Alaska  to Asian markets with  a long-term contract                                                               
with a credible buyer, then there are no reasons against it.                                                                    
SENATOR MICCICHE highlighted  issues Alaska has had  as a rapidly                                                               
growing economy due to oil  and gas production. The state created                                                               
departments for  jobs, but in  the 1990s it  began overregulating                                                               
natural resource  development, so the  state has suffered  from a                                                               
downward spiral.  The state became undercapitalized,  so it began                                                               
to  overtax  companies. He  asked  if  AKDT will  evaluate  which                                                               
regulatory obstacles  need to be  eliminated. He said he  was not                                                               
talking  about the  basic safety  and environmental  protections,                                                               
but the  eight layers of  them. He suggested  that it would  be a                                                               
valuable exercise.                                                                                                              
SENATOR MICCICHE  said he  has worked in  the private  sector oil                                                               
and gas  and fishing industries  for 35  years. He has  worked in                                                               
two countries  and the Lower  48, and somehow those  regions have                                                               
avoided those problems.                                                                                                         
4:34:42 PM                                                                                                                    
MR. SPRINGSTEEN  replied Assistant Commissioner Amy  Demboski has                                                               
been  working  on  regulatory review  and  reform  to  streamline                                                               
regulations  to promote  a business-friendly  environment in  the                                                               
4:35:21 PM                                                                                                                    
MR. SPRINGSTEEN  continued the presentation  with slide  18, From                                                               
AKDT to a "Partnership Model."  He explained that many states use                                                               
some form of private or  public-private partnership (PPP). AKDT's                                                               
early effort  has been  to stand up  the organization.  Its near-                                                               
term goals are to create  recognizable value and transition to an                                                               
integral  but  independent entity.  This  concept  has been  very                                                               
successful  in  other  states  and  is  an  acknowledgement  that                                                               
facilitation  and  coordination  for economic  development  is  a                                                               
necessity  for all  states across  the country.  Many states  use                                                               
some  form  of  public-private   entity  for  statewide  economic                                                               
development, he  said. It keeps the  focus on a group  of people,                                                               
industry,  and government  leaders  driving  forward on  economic                                                               
engines for their states.                                                                                                       
MR.  SPRINGSTEEN highlighted  several  models  AKDT is  reviewing                                                               
such  as the  Delaware  prosperity partnership  and the  Missouri                                                               
partnership,  but noted  that  the  team is  still  early in  its                                                               
evaluation.  He characterized  it as  being in  a research  phase                                                               
working towards a partnership model.                                                                                            
4:36:46 PM                                                                                                                    
MR. SPRINGSTEEN reviewed slide 19, Working to a Partnership                                                                     
   • Performing research on economic engine development                                                                         
   • Participating in best practices working group e.g. the                                                                     
     State Economic Development Executives (SEDE) Network                                                                       
   • Ongoing interviews   with    other   state   economic                                                                      
     development executives                                                                                                     
4:37:22 PM                                                                                                                    
CHAIR BISHOP  referenced slide 18  and asked, if  AKDT's approach                                                               
is  not working  by the  end of  this administration,  whether he                                                               
would be the first  to say that the state needs  to shelve it and                                                               
stand the  team down. He  remarked that this approach  will speak                                                               
for itself  if there  is merit  and the  legislature can  see the                                                               
tangible results.                                                                                                               
MR. SPRINGSTEEN said part of the  idea is to have some "end caps"                                                               
on  AKDT.  The  department  is repurposing  the  state's  [Alaska                                                               
Capstone Avionics Revolving Loan Fund]  over three years for this                                                               
pilot project.  If this  effort does not  produce results,  it is                                                               
not  likely the  legislature would  be very  receptive to  future                                                               
4:38:34 PM                                                                                                                    
SENATOR MICCICHE  asked what tangible metrics  or deliverables he                                                               
could  provide the  legislature to  measure and  determine AKDT's                                                               
success. He  said he has been  in the legislature long  enough to                                                               
see people  celebrate successes while moving  backwards. He asked                                                               
if he could provide realistic goals going forward.                                                                              
MR. SPRINGSTEEN  replied others  are assessing  what the  team is                                                               
doing and would like to see results for the investment.                                                                         
4:39:44 PM                                                                                                                    
CHAIR BISHOP  opined that it  is not affordable energy  that will                                                               
bring business to the state. It is cheap energy.                                                                                
4:40:10 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Bishop adjourned the Senate  Community and Regional Affairs                                                               
Standing Committee meeting at 4:40 p.m.                                                                                         

Document Name Date/Time Subjects
Alaska Development Team Presentation.pdf SCRA 2/6/2020 3:30:00 PM
Alaska Development Team