Legislature(1995 - 1996)
04/23/1996 08:45 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE April 23, 1996 8:45 a.m. TAPES SFC-96, #90-B, Sides 1 and 2 SFC-96, #91, Side 1 (000-462) CALL TO ORDER Senator Steve Frank, Co-chairman, convened the meeting at approximately 8:45 a.m. PRESENT In addition to Co-chairman Frank, Senators Donley, Sharp, and Zharoff were present. Senators Phillips and Rieger arrived soon after the meeting began. Co-chairman Halford arrived and assumed the chair as the meeting was in progress. ALSO ATTENDING: Representative Carl Moses; Keith Laufer, assistant Attorney General, Governmental Affairs Section, Dept. of Law; Lamar Cotten, Deputy Commissioner, Dept. of Community and Regional Affairs; Dave Wilder, Vice-chairman, Alaska Seafood Marketing Institute; Chris Gates, representing The Aleut Company; Randy Simmons, Alaska Energy Authority, Alaska Industrial Development and Export Authority, Dept. of Commerce and Economic Development; Nico Bus, Acting Director, Division of Support Services, Dept. of Natural Resources; Sharon Young, State Recorder, Division of Support Services, Dept. of Natural Resources; Tim Benintendi, aide to Representative Moses; and aides to committee members and other members of the legislature. SUMMARY INFORMATION SB 51 - DISPOSITION OF PERMANENT FUND INCOME Senator Rieger moved to report the bill from committee. The motion failed on a vote of 3 to 4. SB 275 - STATE PROCUREMENT PRACTICES & PROCEDURES Discussion was had with Dave Wilder. Senator Donley distributed an Amendment for review by members. The bill was held in committee for further discussion. SB 283 - DOCUMENT FILING, INDEXING, & RECORDING Discussion was had with Sharon Young and Nico Bus. The bill was subsequently REPORTED OUT of committee with a zero fiscal note from the Dept. of Natural Resources. SB 284 - FOUR DAM POOL: RELATED FUNDS & BONDS Discussion was had with Randy Simmons. CSSB 284 (Res) was subsequently REPORTED OUT of committee with zero fiscal notes from the Dept. of Community and Regional Affairs and Dept. of Commerce and Economic Development. SB 303 - MANAGEMENT OF CONSTIT BUDGET RESERVE FUND Co-chairman Frank spoke to permissive rather than mandatory provisions of a new draft. CSSB 303 (Fin) was then REPORTED OUT of committee with a zero fiscal note from the Dept. of Revenue. HB 466 - ADAK REUSE AUTHORITY Discussion was had with Representative Moses, Lamar Cotten, Chris Gates, and Tim Benintendi. An Amendment by Senator Rieger was adopted. SCS CSHB 466 (Fin) was then REPORTED OUT of committee with a $281.0 fiscal note from the Dept. of Commerce and Economic Development and a zero note from the Dept. of Community and Regional Affairs. SENATE BILL NO. 283 An Act relating to filing, recording, and indexing of documents with or by the Department of Natural Resources; repealing certain filing requirements concerning property involving nonresident aliens; and providing for an effective date. Co-chairman Frank directed that SB 283 be brought on for discussion. NICO BUS, Acting Director, Division of Support Services, Dept. of Natural Resources, came before committee accompanied by SHARON YOUNG, State Recorder, Division of Support Services, Dept. of Natural Resources. Mr. Bus explained that the bill represents an effort to streamline department operations. Due to budget reductions, the department has explored means by which it might improve processes. While much may be done internally to re-engineer the work flow, certain statutes must be modified to gain efficiencies. The department worked with title companies and banks to produce the proposed legislation which will: 1. Streamline the recording process. 2. Reduce requirements documents must meet to be recorded. 3. Allow a broader number of documents to be recorded. 4. Reduce the likelihood that documents will be rejected. 5. Make basic recording requirements specific and easy to understand. With the foregoing changes, the division believes it can process more work and make recording easier for the public. Sharon Young advised that Section 1 relates to mining documents. It streamlines the process and changes the date by which mining records are recorded. The principal thrust of AS 40.170.030 is contained within Section 3, which sets forth basic recording criteria. The proposed bill adds a few sections to existing criteria, but its major function is to resolve some of the ambiguities in current statutes. A further provision of the bill eliminates the classification statute. That statute identifies specific documents eligible for recording. It has been difficult to administer because while 59 documents are identified, "hundreds and perhaps thousands of different types of documents" reach recording offices each year. Provisions within SB 283 would do away with the classification and broaden law so that any document is recordable if specific recording criteria are met. It is estimated that 30 percent of all documents that are now rejected would be recordable. Other provisions of the bill are housekeeping and involve minor word changes that will clarify the recording process in terms of recording criteria and Uniform Commercial Code filings. Brief discussion followed regarding signature requirements for documents. Ms. Young advised that the proposed bill identifies documents that require acknowledgements and would limit acknowledgements to those documents. Senator Sharp MOVED that SB 283 pass from committee with individual recommendations and accompanying fiscal notes. No objection having been raised, SB 283 was REPORTED OUT of committee with a zero fiscal note from the Dept. of Natural Resources. Co-chairman Frank signed the committee report with a "do pass" recommendation. All other committee members signed "no recommendation." SENATE BILL NO. 284 An Act relating to the four dam pool transfer fund and the power development fund. Co-chairman Frank directed that SB 284 be brought on for discussion. RANDY SIMMONS came before committee on behalf of the Alaska Industrial Development and Export Authority and was accompanied by KEITH LAUFER, Assistant Attorney General, Governmental Affairs Section, Dept. of Law. Mr. Simmons explained that the proposed bill would allow AIDEA or AEA to issue bonds to make repairs to two of the four projects which comprise the four dam pool. Repairs would be made to the Tyee Lake project (which serves Wrangell and Petersburg) and the Terror Lake project (which serves Kodiak). Five utilities presently operate the four projects (owned by AEA) through a long-term power sales agreement with AEA. Under that power sales agreement, the state has certain obligations which include making major repairs per the proposed bill. The utilities have an obligation to: 1. Make payments that cover debt services on the projects. (Payments range between $8 and $11 million per year.) 2. Cover day-to-day operational costs of the projects. Under 1993 legislation (AS 42.45.050), amounts paid by utilities on debt service are pre-appropriated: 40% to PCE 40% to the Southeast Intertie 20% to the power development fund within the Dept. of Community and Regional Affairs for small projects and grants. The proposed bill addresses approximately $17 million of repairs to the Tyee Lake Intertie. Over the last several years, that intertie has been out of service on three different occasions, cutting off power from the dam to communities. The $3.5 million relates to the Terror Lake tunnel. To meet contractual obligations, AEA can make the repairs in one of three ways: 1. A capital appropriation 2. Through the issue of bonds 3. Allow utilities to use "self-help" rights under the power sales agreement. The third option allows utilities to withhold debt service payments if the state does not meet its obligations. Last year, the state started repairs. Utilities withheld $4 million "to get the engineering done." A limited "self- help" arrangement was thus in effect last year. Two things must occur before AEA may issue the needed bonds: 1. Utilities must agree to limit their "self-help" rights for the amount of bond payments. Mr. Simmons cited an example of how the agreement would work. He said that if bond repayment costs total $5 million of the debt service now paid by utilities, the utilities have agreed not to exercise "self-help" withholdings against that $ 5 million. It is necessary to guarantee a stream of repayment on the bonds in order to sell them in the market. 2. A guaranteed revenue stream must be available. Since present debt service payments are pre- appropriated by statute, AEA must ensure that it receives a portion of that for bond payments. The propose bill changes the 40/40/20 allocation to allow AEA first priority on debt service payments. Remaining amounts will then be allocated per the 40/40/20 arrangement. The bill also says that AEA cannot issue the bonds for longer than eight years. That ensures a rough estimate of bond payments of $4.3 to $4.6 million a year. The total cost of the bond issue is approximately $35 million. Under the foregoing change, PCE and the Southeast Intertie will not receive $1.8 million a year, each, and the power development fund will not receive $900.0, annually, for the term of the eight-year bonds. Per current allocations, if $11 million in debt service is paid, PCE and the Southeast Interties receive $4.4 million and the power development fund receives $2.2 million. Mr. Simmons reiterated that annual debt service payments range from $8 million to $11 million, depending upon the amount of power purchased. Last year payments totaled $10.5 million. If the proposed bill does not pass, utilities are expected to utilize their "self-help" rights. Discussions with utilities are ongoing regarding how repairs would be made if they proceed per "self-help" rights. AEA believes it could make the repairs within two years. If the utilities use "self help" for two years, no moneys would flow to PCE, the Southeast Intertie, or power development. Mr. Simmons further advised that at the time the bonding approach was undertaken, the state was in negotiations with utilities to buy the dams. AEA hoped to return to the legislature next year with a long-term solution, divesting the projects to utilities or other parties. While bonding would cost the state an additional $13 million for financing, no payments would be made for a year or two, and it would allow AEA to come back to the legislature with a long-term solution. Negotiations broke down soon after SB 284 was introduced. AEA no longer has high hopes a long-term solution will be forthcoming next year, but it will continue to pursue divesting to the utilities or other parties. The intent was to maintain the revenue stream for a two-year period until another solution could be found. Senator Rieger suggested that the proper thing to do is allow the utilities to invoke their "self-help" rights. A transfer of all projects to the utilities is in process. The capital budget contains a request for funding to facilitate the transfer. An additional bond issue will only complicate the situation. In response to additional comments by Senator Rieger, Mr. Simmons advised that AEA will make the repairs under either the "self-help" or bond scenario. Utilities will withhold the payments and transfer the moneys to AEA. The state owns the projects, and it is the state's responsibility to oversee repairs. As further support for bonding over "self-help," Mr. Simmons expressed a reluctance to "tie up these other entities such as PCE, the Southeast Intertie, and all the small projects that are being done by DCRA." Mr. Simmons referenced recent correspondence from utilities inquiring about the possibility of resuming negotiations. AEA replied that it would be "happy to go back to the table but both sides are going to have to move somewhat because we're so far apart on the purchase price . . . ." AEA is, at the present time, "getting ready for full self-help." In response to a question from Senator Sharp, Mr. Simmons explained that the proposed bill would not exclude any option. It does set AEA on a course where it would most likely "do the bonding." It would be better to make a decision at this time whether to utilize bonding or full "self-help." Senator Sharp voiced his belief that it appears cheaper to utilize the "self-help" approach. He acknowledged that PCE, the Southeast Intertie, and power development would be severely impacted the first two years, but that approach might be preferable to eight-year bonds. Responding to a further question from Senator Sharp, Mr. Simmons advised that while in negations with utilities, it was anticipated that divesture could be worked out so that utilities could assume the bonds if they chose to do so, or, in the alternative, not take on the bonds. Further discussion of divesture negotiations followed. Mr. Simmons advised that PCE and Southeast Intertie funding were not part of the negotiations. Additional discussion followed concerning existing statutory authority for repairs and yearly maintenance. Senator Zharoff inquired concerning potential litigation from four dam pool members. Mr. Simmons attested to a past agreement with utilities to limit "self-help" to $2 million to commence the engineering process. That agreement fell through, and the utilities filed suit and employed full "self-help" rights, withholding all moneys last year. AEA achieved an agreement with the utilities for a withholding of $4 million from last year's payment to start engineering, with the understanding that the state would work with them toward divesture and accomplishment of repairs. That is how the proposed bill developed. If the bill does not pass, full "self help" will be implemented. Senator Sharp inquired regarding the remaining balance owed on the projects. Mr. Simmons said that, depending upon the discount value used, the present value of debt service today is "roughly $165 to $170 million." The actual principal is $180 million. That amount was part of the negotiations on the sale price. Liabilities associated with the projects are subtracted from the present value of the debt service payment. In the course of further discussions, Mr. Simmons said that the problem with the agreement signed by the state is that the amount of money set aside yearly to provide repairs is wholly inadequate. Utilities put aside approximately $500.0 a year. That does not come close to meeting repair costs. [Co-chairman Halford assumed the chair at this point in the meeting.] Senator Sharp MOVED that CSSB 284 (Res) pass from committee with individual recommendations. Senator Rieger said he did not believe that bill was moving in the right directions. He advised that he would not object to movement from committee, but he would sign "do not pass" on the committee report. Co-chairman Halford called for a show of hands. The motion CARRIED on a vote of 5 to 2, and CSSB 284 (Res) was REPORTED OUT of committee with zero fiscal notes from the Dept. of Community and Regional Affairs and Dept. of Commerce and Economic Development. Senator Zharoff signed the committee report with a "do pass" recommendation. Co- chairmen Halford and Frank and Senators Donley, Phillips, and Sharp signed "no recommendation." Senator Rieger signed "do not pass." SENATE BILL NO. 303 An Act relating to management of the budget reserve fund; and providing for an effective date. Co-chairman Frank directed attention to a draft CSSB 303 (Fin) (9-LS1697\F, Cook, 4/19/96) which he explained allows the Dept. of Revenue to transfer management responsibility over all or part of the budget reserve fund to the permanent fund corporation. It is left to the administration to determine the amount and the appropriateness of the transfers. The Co-chairman voiced his belief that the state could substantially increase its yield by making such transfers without incurring any risk to the state or permanent fund. It is not necessary for the legislature to outline details of the transfer in law. The new draft merely contains permissive language. Co-chairman Frank MOVED for adoption of CSSB 303 (Fin) as a working document. No objection having been raised, CSSB 303 (Fin) was ADOPTED. Co-chairman Halford voiced his understanding that the legislation is permissive rather than a mandate. Senator Donley inquired concerning the administration's position on the bill. Co-chairman Frank acknowledged that representatives of the administration had earlier raised questions about how the transfer would be made and what the impact might be. He further acknowledged that nothing would happen if the department chose not to implement the bill. The Co-chairman expressed his belief that transfer and management by the permanent fund corporation could add $40 million to the state treasury. He then MOVED for passage of CSSB 303 (Fin). No objection having been raised, CSSB 303 (Fin) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Revenue. Co-chairman Frank and Senators Donley, Phillips, Rieger, and Sharp signed the committee report with a "do pass" recommendation. Co-chairman Halford and Senator Zharoff signed "no recommendation." SENATE BILL NO. 51 An Act relating to income of the permanent fund; and providing for an effective date. Senator Rieger referenced additional legislation involving the Alaska Permanent Fund and MOVED for passage of SB 51, relating to inflation proofing for the fund. Senator Sharp OBJECTED and Co-chairman Halford joined in the objection. The Co-chairman then called for a show of hands. The motion failed on a vote of 3 to 4 with Senators Rieger, Donley, and Phillips voting in support of passage. [Senator Rieger subsequently withdrew the bill on May 4, 1996.] CS FOR HOUSE BILL NO. 466(FIN) am An Act establishing the Adak Reuse Authority. Co-chairman Halford directed that CSHB 446(Fin)am be brought on for discussion. REPRESENTATIVE CARL MOSES came before committee accompanied by his aide, TIM BENINTENDI. The Representative advised that Adak could become a showpiece for the nation, demonstrating what could be done with a base closure. He suggested that the magnitude would be comparable to closure of Elmendorf or Eielson Air Force Base. While some question the opportunity at Adak, future economic opportunity is limited only by imagination. Fresh fish to the Orient presents great opportunity because of the adequate airport. Representative Moses specifically noted that tuna could be flown from the site since, in the summertime, the tuna industry is "considerably closer to the Aleutians" than to Midway where the product is normally sold. Representative Moses referenced information from representatives of the Aleut Corporation suggesting that the state would become a "deep pocket" for U.S. Department of Defense involvement at Adak. He countered that statement, saying that the opposite is true. HB 466 would enable an unbiased public authority to work toward the future of Adak. The Navy will be much more lenient in dealing with a public authority, in terms of what the military will leave behind. It will not be a black hole for the state. The authority would be in a position to dispose of property to commercial interests to support management expenses of the authority until adequate municipal entities develop. Representative Moses expressed resentment regarding false information indicating that Senator Stevens had suggested creation of a profit or non-profit entity. The Senator merely suggested that that approach should be considered. Technically, the proposed authority is a non-profit which would operate for the benefit of the future of Adak. The Congressional delegation and the U.S. Navy are waiting for HB 466 to pass. Time is of the essence. Representative Moses next referenced concern raised by the Aleut Corporation that stripping of facilities might occur. He said he did not believe an authority delegated with economic development of Adak would do anything to disadvantage that goal. Much equipment left behind by the U.S. Navy will be sold to commercial interests moving into Adak. The Representative termed "ridiculous" a caveat that equipment could not leave the island. Much equipment will be surplus to needs on Adak. He said he was a stockholder of the Aleut Corporation, and he suggested that a majority of the members were in favor of the proposed bill. He urged passage as soon as possible. Senator Zharoff asked if the authority would receive ownership of the land. Representative Moses said that would have to be decided by Congressional legislation. END: SFC-96, #90-B, Side 1 BEGIN: SFC-96, #90-B, Side 2 Senator Zharoff attested to problems associated with a similar transfer at Kodiak. He then voiced his understanding that if the Aleut Corporation has "top filed" on the land, and it is vacated by the present owner, the corporation would have first option on the land. Representative Moses acknowledged that possibility but reiterated that the final decision would be made by Congress. He then described past discussion of land selections with the corporation. He attested to difficulties that would arise should one entity own the land while another owns the improvements. Further discussion followed regarding the impact of "top filing," using both Ft. Richardson, Adak, and Kodiak as examples. Senator Zharoff suggested that the proposed reuse authority would merely add an additional layer of bureaucracy. LAMAR COTTEN, Deputy Commissioner, Dept. of Community and Regional Affairs, came before committee. He explained that discussions relate to an exchange rather than "top filing." The exchange involves land that would revert from withdrawal status from the refuge back into the refuge. It then becomes the property of the U.S. Department of the Interior. Interior has expressed interest in undertaking exchanges with the Aleut Corporation for over-selection. In light of that, the state initiated discussions involving itself, the U.S. Navy, and the Aleut Corporation. Discussion focused on the proper configuration of land status, in the future, for Adak. The state recognizes that consensus on status must be reached. Senator Stevens would then introduce legislation to make appropriate exchanges and/or transfers. Mr. Cotten said the state is not interested in becoming a participant in a situation where the base is to be transferred to the Aleut Corporation and an authority is in place. If there is an economic value to parts of the base, and two-years of revenue stream can be demonstrated to cover operating costs, the authority would want to choose those lands. The problem between the Aleut Corporation and the authority (or the state) rests in the fact that the corporation would prefer that "We take over things that are traditional municipal or state responsibility." Those things (breakwaters, roads, etc.) do not make money. The department believes the authority should acquire properties that can produce a revenue stream to cover responsibilities that do not produce income. The proposed bill reflects a conservative approach for state review of pros and cons and to ensure a cash flow from properties it acquires through the authority. Under a likely scenario, the authority would not take over the entire base. Mr. Cotten referenced over 500 housing units and many buildings for which no use is envisioned. The premise is private sector interest in renting, leasing, or buying certain facilities: the fuel station, water front property, warehousing, the school, buildings near the airport, machine shops, etc. Mr. Cotten directed attention to page 13, lines 9 through 16, and noted that if a municipality other than a second class city is created or the area is annexed by a municipality to the east, the authority would be integrated into that municipal government within a year. The assets and liabilities assumed by the authority would be transferred to the municipality. Senator Rieger asked if establishment of the authority could evolve into a situation similar to the Alaska Railroad. Mr. Cotten said he was unfamiliar with operations of the railroad. He advised that any bonded indebtedness to be issued by the authority would require legislative approval. Tim Benintendi added that referenced language at page 13 was tightened to accommodate the concern raised by Senator Rieger. The authority would not linger in the wake of a viable municipality. Discussion of annexation followed. Two entities have expressed interest: Unalaska and the Aleutians East Borough. Co-chairman Halford suggested that the ultimate means of bringing the issue back before the legislature would be a four-year sunset provision. Representative Moses said he was so optimistic about the future of Adak he did not feel sunset would be necessary. The Aleutians East Borough has already prepared annexation paperwork, and the City of Unalaska is having a study conducted. Mr. Cotten advised that he had written to the Aleutians East Borough registering concern over annexation. Concern has less to do with Adak than state policy regarding "leapfrogging" over an existing municipality (Unalaska). The department is leery about setting that precedent. Senator Zharoff referenced ability of the authority to bond. He further referenced succession on dissolution of the authority providing for the municipality to succeed to authority assets, liabilities, rights and powers. He then pointed to exemptions from taxation and asked how all aspects of the foregoing would fit together. Mr. Cotten explained that issuance of debt would require state approval. The authority would be exempt from taxation, but those who lease or buy could be taxed. Assets would consist of properties and revenue streams; liabilities would be contracts or bonded indebtedness. Mr. Cotten stressed the unknown nature of the undertaking. At the present time, there is an idea of what the authority would acquire and what it would not, but that is the extend of what is known. The state, the U.S. Navy, the Aleut Corporation, and the Department of Interior are attempting to "look at what's realistic." The Aleut Corporation has some "chips" to deal with Interior. Mr. Cotten stressed that the state is not going to be a "cash cow" to pay for the operating expenses of somebody to become a capitalist. He further advised that frustration with the Aleut Corporation approach stems from the fact that while the corporation anticipates taking over a portion of the facilities, it expects the state to operate the airport through state general funds. The state would need to balance that general fund expenditure with a revenue stream from the area. Co-chairman Halford suggested that once the area is incorporated within a municipality, it is eligible for revenue sharing, community grants, equal treatment in terms of airports and roads. It appears that the U.S. Navy is giving the state a multi-billion dollar asset which could become a multi-million dollar annual drain on the treasury. As the Navy moves out, the department will not allow creation of a city of twenty-five people. A minimum of 400 people is needed for a first class city capable of incorporating and taking over the assets of the base. Mr. Cotten acknowledged that, in theory, the state might be obligated to take on certain operations such as the airport. He voiced a reluctance to do so unless an offsetting revenue stream could be developed. Representative Moses stressed that need for state participation would triple under the Aleut Corporation proposal. He voice need for a state authority to lease the fuel facilities for which four different concessions are bidding. The authority would be delegated with development of Adak for the benefit of the future. Representative Moses noted that it would be difficult for Alaska's Congressional delegation to obtain federal transitional moneys if take over is by a private entity. That is the reason for the proposed bill. Discussion followed between Senator Zharoff and Representative Moses regarding responsibility for hazardous cleanup. Representative Moses advised that the $90 to $100 million in federal cleanup over the next two years would jump start the economy of Adak. Mr. Cotten added that cleanup is to be coordinated with state selection of what has the highest reuse. As an example, he noted that the existing waterline goes through the landfill and would not meet EPA standards. Representative Moses cited factory trawler interest in renting warehouses for base operations. The 1,000 units of housing are worth $50 million at "rock bottom prices." Co-chairman Frank asked what would happen to properties that are not acquired. Mr. Cotten said that the property would be transferred to the Department of Interior. The Navy and Interior will then determine whether facilities remain or are demolished. Since the area is within a wildlife refuge, the Department of Interior would probably prefer removal. The U.S. Fish and Wildlife Services wishes to continue its presence on the island. Representative Moses cited difficulty in determining what might be useful in the future. Discussion followed regarding approval of a majority of the membership of the authority prior to disposal of property or facilities. Senator Zharoff asked if more than a simple majority should be required. Representative Moses expressed reluctance to tie the hands of the unbiased authority delegated to what is best for the future of Adak. CHIS GATES, representing the Aleut Corporation, next came before committee. Senator Zharoff again posed the question of the majority needed to approve a disposal. Tim Benintendi clarified that it would not be possible to move on an action on a tie vote or less than a majority of the board. Mr. Gates voiced his understanding that Senator Stevens believes consideration of a non-profit corporation instead of an authority might have merit. He then read from correspondence from the Senator indicating that the Aleut Corporation proposal "offers a mechanism to jump start the process of attracting commercial enterprises to Adak." Further, while the fiscal note is for $600.0, real state expenditures for operation of the airport and seaport will total millions. The Aleut non-profit (including the Aleutians East Borough, Dutch Harbor, state representation, and villages of the region) proposes that a corporation operate the airport. That would save millions of general fund dollars. Mr. Gates noted that reuse arrangements in Alaska generally utilize non-profits rather than authorities. He expressed his hope that the proposed bill would not allow ability to "strip out the assets" without a super majority (three-quarter) vote of the board. There will be great incentive to "sell stuff that we're going to need to make that town work." Co-chairman Halford asked if it was the intent that the state maintain the airport. Representative Moses acknowledged that someone would have to operate it since it is the mainstay of Adak. He said he anticipated a substantial amount of help from the federal government. Under a public authority, the Navy, other federal agencies, and the Congressional delegation would be better able to assist the future of Adak than if it is in the hands of a private entity. Co-chairman Halford referenced the $281.0 fiscal note and voiced his understanding that $100.0 of the total is federal. He sought assurance that only that amount would be spent. Representative Moses noted that, one way or another, the airport would be kept open since it serves as an alternate for all planes to the Orient. He stressed that the proposed bill provides a vehicle to take in moneys to support public needs until a municipality is in place. Discussion followed regarding activities leading to establishment of a new town. Representation Moses stressed that that would happen. The proposed bill would allow it to happen along an organized path. Once seed money is provided, the authority will be self-supporting. The authority must be in place for the Navy and Congressional delegation to commence transition. The Navy will be gone by January of 1998. Senator Randy Phillips inquired regarding a five or ten-year sunset. Representative Moses said while he did not think it was necessary, he would have no objection. He added that "Things are going to happen a lot faster than that." Senator Zharoff voiced concern that sunset provisions might impact ability to bond. Mr. Cotten concurred in that concern. END: SFC-96, #90-B, Side 2 BEGIN: SFC-96, #91, Side 1 Senator Rieger expressed concern that bonded indenture or lease obligations not prevent transfer of the authority to a successor. Co-chairman Halford agreed with the concern and voiced his belief that pledge of the state language at page 9 has problems. It appears that the authority could enter a covenant that supercedes state ability to change the powers and duties of the authority at a later date. Discussion followed regarding transition language to ensure that bond holders would not lose their investments, since the state would pick up the obligation, in the event of any change. Representative Moses reiterated that the legislature would have to approve any bonding. Further discussion followed regarding bond issues by AIDEA. Senator Rieger suggested that pledge of the state language might work if coupled with a restriction on bond indenture language so as not to preclude eventual transfer to a municipality or other entity. Co-chairman Halford observed that wording within the succession section at page 13 appears in conflict with pledge of the state language at page 9. If language in these sections is read so as not to include transition provisions, it may work as is. Referencing AIDEA financing, Senator Rieger voiced his understanding that the state has always been obligated to defer to language in a contract or a bond indenture. That is governed by a breach of contract provision in the Constitution. Co-chairman Halford suggested that if general language covers the issue, perhaps pledge of the state language is not necessary. He concurred that necessary provisions could be added when bonds come before the legislature for approval. Senator Rieger MOVED for adoption of the following amendment: Page 5, line 17, after "transfer" insert: (d) The authority may not enter into a trust indenture or contract which has the effect of precluding the transfer of the assets and liabilities of the authority to a successor. No objection having been raised, the AMENDMENT was ADOPTED. Senator Rieger directed attention to page 11, lines 23 through 29, and advised that provisions set forth do not reflect a "good deal" for the authority. Risk associated with loans often occurs in the outer years. There is a large differential in risk between initial and outer years. He suggested that no state agency should enter such an arrangement. Co-chairman Frank acknowledged the concern and commented that AIDEA presently has such authority. Senator Sharp MOVED for passage of SCS CSHB 466 (Fin) with individual recommendations and accompanying fiscal notes. No objection having been raised, SCS CSHB 466, (Fin) was REPORTED OUT of committee with a $281.0 fiscal note from the Dept. of Commerce and Economic Development and a zero note from the Dept. of Community and Regional Affairs. All members present signed the committee report with a "do pass" recommendation. Senator Randy Phillips was temporarily absent and did not sign. SENATE BILL NO. 275 An Act relating to state procurement practices and procedures; and providing for an effective date. Co-chairman Halford directed that SB 275 be brought on for hearing. Senator Donley referenced his amendment relating to employment of staff outside of Alaska. DAVE WILDER, Vice-chairman, Alaska Seafood Marketing Institute, came before committee. He explained that as a fisherman in Bristol Bay for 30 years, he has great interest in legislation impacting the industry. Mr. Wilder noted that ASMI saved approximately $200.0 as a result of last year's exemption from the procurement code. That allowed for hire of an additional field representative in Southeast. In addition to ASMI staff in Juneau and Seattle, three representatives presently market Alaska seafood products domestically. ASMI manages its own promotions. Mr. Wilder remarked on industry distress and competition from farmed salmon in both domestic and export markets. The declining value of the product is having a "very stressful impact on the industry." ASMI must remain responsive to opportunities. The institute does as much contracting as possible within the state. The majority of the board are Alaska residents, and half of the members of the board are fishermen. Mr. Wilder again attested to savings derived from exemption from the procurement code. Senator Donley voiced his understanding that CSSB 275 (STA) would not return ASMI to the procurement code. It would merely place it back under the bidder preference for Alaskan products. Mr. Wilder concurred but added that inclusion would add costs to future contracts. He cited a recent advertising contract as an example and said the bidder preference would have made no difference. He again stressed need to timely and efficiently respond to the market. ASMI is becoming less dependent on the state as it improves its processes. More regulations do not improve that process. Senator Donley voiced his belief that all should comply with the bidder preference. Discussion of past practices relating to advertising contracts followed between Senator Randy Phillips and Co- chairman Halford. Senator Donley noted that the 5 percent bidder preference applies "if everything else is equal." Bidders have to meet the basic contract criteria before they are eligible for the preference. If they do not have expertise in the marketplace (in the instance of a foreign campaign), they will not meet qualifications, and the 5 percent preference would make no difference. Mr. Wilder cited an instance in which an Alaska firm was hired for a project. The Alaska firm then "went outside and got all the expertise . . . ." The state ended up paying an "extra $100.0, plus, a year to honor the bidder preference." If that $100.0 could have been put into marketing, it would have been much more responsive to the legislature and the industry. Senator Donley suggested that bid specifications could be crafted to require greater involvement. Co-chairman Halford noted need to recess for attendance at the Senate floor session and suggested that the meeting reconvene at 4:00 p.m. ADJOURNMENT The meeting was recessed at approximately 11:00 a.m.