Legislature(1999 - 2000)
04/19/1999 09:04 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 19, 1999
9:04 AM
TAPES
SFC-99 # 96, Side A and Side B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 9:04 AM.
PRESENT
Senator John Torgerson, Senator Sean Parnell, Senator Loren
Leman, Senator Gary Wilken, Senator Al Adams and Senator
Pete Kelly were present when the meeting convened. Senator
Lyda Green arrived shortly thereafter. Senator Dave Donley
arrived later.
Also Attending:
ANNALEE MCCONNELL, Director, Office of Management and
Budget, Office of the Governor; JOHN BARNETT, Executive
Director, Storage Tank Assistance Board, Division of Spill
Prevention and Response, Department of Environmental
Conservation; STEVEN DAUGHERETY, Assistant Attorney
General, Natural Resources Section, Civil Division,
Department of Law; ROBERT DOLL, General Manager, Ferry
Operations, Department of Transportation and Public
Facilities
SUMMARY INFORMATION
SB 93-NAMES OF ORGANIZATIONS & BUSINESSES
The bill was moved from committee with no debate.
SB 113-FINANCES OF ALASKA HOUSING FINANCE CORP
The committee adopted an amendment. The bill was held in
committee.
SB 128-STORAGE TANK ASSISTANCE FUND
The committee adopted CS Version "I" and heard from the
Department of Environmental Conservation and the Department
of Law. The bill was held in committee.
SB 129-M/V MALASPINA ACCOUNT
The committee heard from the Department of Transportation
and Public Utilities. An amendment was adopted and the bill
was moved from committee.
CS FOR SENATE BILL NO. 93(L&C)
"An Act relating to the names of businesses and
organizations and to the registration under the Alaska
Trademark Act of marks that resemble the name of
another business or organization; and providing for an
effective date."
This was the second hearing for this bill. Co-Chair John
Torgerson reviewed the committee's intent at the last
meeting to review the changes and possibly suggest more.
There was no debate.
Senator Sean Parnell offered a motion to move from
committee CS SB 93 (FIN). Without objection, it was so
ordered.
SENATE BILL NO. 113
"An Act making activities of the Alaska Housing
Finance Corporation subject to the Executive Budget
Act, relating to appropriations to the Alaska Housing
Finance Corporation; relating to bonds and bond
anticipation notes issued by the Alaska Housing
Finance Corporation; and providing for an effective
date."
This was the second hearing for this bill.
Co-Chair John Torgerson spoke to a proposed amendment that
would insert language to eliminate concerns about selling
or refinancing bonds and appropriations. He stated it was
his intention that the committee adopt the amendment,
prepare and adopt a committee substitute for distribution
and then bring the bill back for a hearing at a later date.
Senator Sean Parnell moved for adoption of Amendment #1.
Senator Al Adams objected. Co-Chair John Torgerson spoke to
the amendment. This would exempt the practice of refunding
of bonds and payment of principle or interest on bonds from
the Executive Budget Act and state that payments or
interest on bonds would not be subject to appropriation.
This would leave the integrity of the corporation to sell
bonds and make payments and refinance their bonds.
Senator Al Adams maintained his objection as he did not
know why the bill was even before the committee. There was
nothing broken with AHFC and he had received many letters
of support for the corporation.
Amendment #1 was adopted by a vote of 6-1-2. Senator Al
Adams cast the nay vote. Senator Dave Donley and Senator
Randy Phillips were absent.
The bill was held in committee.
[NOTE: A committee substitute, 1-LS0640/G 4/19/99, was
ordered after this meeting to reflect the changes made to
the bill by Amendment #1. Although the Committee has not
formally adopted this committee substitute as a Working
Draft, is it still considered the Workdraft before the
Committee because it incorporates action previously taken
by the Committee.]
CS FOR SENATE BILL NO. 128(RES)
"An Act moving the termination date of the Board of
Storage Tank Assistance to June 30, 1999; relating to
the storage tank assistance fund; relating to
financial assistance for owners and operators of
underground petroleum storage tank systems; relating
to discharges from underground petroleum storage tank
systems; and providing for an effective date."
This was the second hearing for this bill.
Senator Sean Parnell moved for adoption of CS Version "I"
as a Workdraft. Senator Al Adams objected. He wanted to
know what the bill would do and how this would affect the
state.
Co-Chair John Torgerson spoke to the motion. The bill that
came to the committee from the Senate Resources Committee
converted the grant program to a straight loan program. In
discussion in this committee, there was concern that some
of the "mom and pop" businesses would suffer. This CS would
establish an income limit on the tank closure and upgrade.
Current statute granted up to $60,000. This version would
continue that but add a ratio of four-to-one of assets. He
detailed the formula. In order to qualify for the tank
upgrade grant, an owner's assets would have to be less than
$240,000. For the tank clean-up grant, the current grant of
$1 million would be lowered to $250,000 and the same
formula applied. Assets for this grant would therefore have
to be under $1 million.
Senator Al Adams maintained his objection. He realized the
goal to change from a grant to a loan program. However, he
was unable to determine who would and who would not
benefit. He also wondered how the enabling regulations
could be adopted by the time the legislation went into
effect. Co-Chair John Torgerson noted there would be more
testimony from the department.
Senator Gary Wilken referred to the sheet in the packet
that showed the upgrades. He questioned which companies
would qualify for the grants. Co-Chair John Torgerson noted
that SeaLand assets were presumably higher than the four-
to-one formula for the project they requested and they
would not qualify. Senator Gary Wilken asked if there
would be another column on the spreadsheet to show the
assets of the business. Co-Chair John Torgerson affirmed
and reminded there were two different categories, the tank
upgrade and closure and the tank cleanup.
Senator Pete Kelly asked if the assets were corporate or
individual assets. Co-Chair John Torgerson said it would
depend if the company was corporate or individually owned.
He qualified that should be clarified.
Senator Gary Wilken asked if the assets would be net. Co-
Chair John Torgerson said that should also be discussed. He
noted that it was not his intention to do detailed audits
to determine eligibility. He spoke to the value of
contaminated lands.
The CS was adopted as a workdraft by a vote of 6-1-2.
Senator Al Adams cast the nay vote. Senator Dave Donley and
Senator Randy Phillips were absent.
JOHN BARNETT, Executive Director, Storage Tank Assistance
Board, Division of Spill Prevention and Response,
Department of Environmental Conservation, testified. He
commended the co-chair on the progress this CS made. He
did have concerns about the assets figuring that the
amounts listed in the bill could be too low. He spoke of a
lodge-owner's total assets of over $1 million.
He proposed rewording the language to consider the net
assets or raise the gross assets allowed. He offered to
work with the committee to prepare new language.
He then commented on the effective date saying this would
take effect in the height of the construction season and
would cause work stoppages. He suggested changing the
effective date to July 1, 2000.
Co-Chair John Torgerson pointed out that the board would
have one year after the effective date before it sunset. He
asked if the board needed to operate into 2001. John
Barnett explained that the board would sunset in the middle
of the construction season. He offered that the board
could implement the program in phases.
Co-Chair John Torgerson wanted to know if the multi-million
dollar corporations would still be eligible for grants
while the effective date was delayed. Barnett admitted
that would be the case. He suggested implementing the
insurance clause immediately, which would eliminate the
large companies from the closure list.
Co-Chair John Torgerson did not think it would eliminate
all the large corporations. He did say that the committee
should look at the effective date of the grant portion.
The loan program would be delayed until the department
adopted regulations.
Senator Al Adams asked the percentage of income allowed
under the current program. John Barnett answered that the
original program had no income limits. He listed the
maximum amounts available. The department was in support
of the committee's efforts.
Senator Gary Wilken had a question about the branding
agents. He noted that some stations were owned and
operated by the corporations. Others were independently
owned and had a brand name agreement to sell the
corporation's product. John Barnett spoke to the
contractual relationships.
Senator Gary Wilken wanted to know if there was a better
way to determine the net assets. He wondered if setting a
formula on the amount of gas pumped or by some other
method. John Barnett said something similar had been
considered.
John Barnett suggested the best way to determine assets
would be to require the owner to submit a certified
statement of their assets.
Senator Gary Wilken said the reason he asked those
questions was due to a friend of his who had about $20
million in airplanes but only one fuel tank. He felt this
operator should be given the grant. Co-Chair John
Torgerson said it was his intent that a person who could
afford it should pay for it.
Co-Chair John Torgerson then asked again for explanations
of the three programs. John Barnett explained there were
really only two programs.
Co-Chair John Torgerson broke down the amounts available
for grants and the intent of the income limitations. He
asked if the four to one assets formula was adequate. John
Barnett said he felt it was too low. Co-Chair John
Torgerson asked what was the average grant. John Barnett
said the closure and cleanup programs were usually tied
together and gave the figures.
Co-Chair John Torgerson asked John Barnett for his
definition of net assets. He asked the witness to focus on
the $60,000 grant portion requirement. The other program
could then be addressed under the same method later.
Barnett had conferred with Steven Daugherety of the
Department of Law. They used the proposed four-to-one
formula and drafted language to read, "the owner/operator
does not have tangible net assets that exceed the product
of multiplying the estimated cost of cleanup by four."
John Barnett defined the $60,000 program qualifications as
tangible net assets after deducting liability not over $1
million at any time.
STEVEN DAUGHERETY, Assistant Attorney General, Natural
Resources Section, Civil Division, Department of Law came
to the table at the request of the co-chair. Co-Chair John
Torgerson asked if it was his recommendation to use
tangible net worth in place of assets. Steven Daugherety
described how this was taken from federal language.
Co-Chair John Torgerson asked if it was his recommendation
to raise the four-to-one ratio. Steven Daugherety
responded that the ratio would probably work using the net
asset definition. The liabilities would be removed. He
detailed the liabilities involved in operating a business.
John Barnett referred to earlier discussions about net
worth and liability. He and Steven Daugherety had worked to
draft language to remove that liability.
Co-Chair John Torgerson then worked to define tangible net
assets. There was discussion on corporate and personal
assets. He stressed that the committee did not want to
grant funds to the tank owners who could afford the
cleanup. The legislation needed to be clear about that.
Co-Chair John Torgerson asked how many of the pending
closures or upgrades were corporations. John Barnett did
not know specifically because that information was not
required in the application process. He made estimates
based on other information he had. He guessed that about
half of the owners were incorporated.
Co-Chair John Torgerson felt the tangible net assets
provision was too broad. He admitted the four to one ratio
he proposed might be too narrow.
Co-Chair John Torgerson turned to the tank cleanup program
and asked if the department wanted to use the same tangible
net asset provision. John Barnett responded he did.
Co-Chair John Torgerson then wanted to know if the four-to-
one ratio was acceptable as well. John Barnett noted that
the current ranking system worked well. The department
placed most of the larger companies at the end of the list
and most of the corporate projects would then drop off and
not be funded by the state.
Co-Chair John Torgerson clarified that the assets limit and
the effective date were the only problems the department
had with the bill.
Steven Daugherety pointed out that with corporate entities,
it might not be possible to require them to cover the cost
of the cleanup.
Co-Chair John Torgerson noted that the tangible net assets
provision could be a giant loophole.
Senator Al Adams suggested using the federal language along
with a cap of $1 million. Another option would be to use
the capacity of the tank as a guideline. Co-Chair John
Torgerson did not have information to use as guidelines for
any of the suggestions since the department did not require
income as a requirement for the grants.
Senator Al Adams had a question about the effective dates.
Co-Chair John Torgerson did not want to leave a loophole
for large corporations to receive the grants while waiting
for the effective date. It was also not his intention to
bankrupt "mom and pop" operations.
Co-Chair John Torgerson ordered the bill held in committee.
SENATE BILL NO. 129
"An Act relating to the Alaska marine highway system
vessel, M/V Malaspina; and providing for an effective
date."
This was the first hearing for this bill, which was
sponsored by the Senate Finance Committee.
Co-Chair John Torgerson said he reviewed the legislation
with Captain Doll of the Marine Highway System over the
weekend and had concerns with the capital improvements fund
provisions. He detailed the language deletions he felt
should be made. He wanted a correction made to ensure that
capital improvements were made through the regular capital
budget process.
Tape: SFC - 99 #96, Side B 9:51 AM
Senator Sean Parnell asked for an explanation of the
purpose of the bill. Co-Chair John Torgerson said it was
to set up a separate accounting for the M/V Malaspina. It
would direct the department to maintain the gross revenues
generated by that ferry separately. An underlying reason
was the intent of the Legislature to continue to subsidize
the M/V Malaspina in its dayboat operation. That was clear
in the original legislation that established the route and
this bill would lay the groundwork. He noted language that
allowed the Legislature to continue to appropriate funds if
it desired.
There was front section language in the FY00 Operating
Budget bill that would relate to this.
Senator Sean Parnell moved to amend page 1 line 12 and page
2 line 7 to delete the language relating to capital
improvements. The amendment would direct the bill drafters
to reword the language in an appropriate manner. There was
no objection and it was ordered.
ROBERT DOLL, General Manager, Ferry Operations, Department
of Transportation and Public Facilities, testified to the
bill. He spoke of the intensive discussion with the sponsor
to clarify the language.
The bill would segregate the revenue generated by the M/V
Malaspina and direct the department to use those funds to
operate the vessel. The department estimated expenditures
of $3,900,000 for the upcoming summer season. Revenues were
estimated at $3,057,000. The $33,000 difference was close
enough that the department could manage the ship and ensure
its operation.
The amendment continued the current practice of allowing
the department to make annual maintenance repairs on the
vessel using capital funds. He explained that the extent
of repairs was never known until the ship was dry-docked
and examined. That annual process had always been
addressed using a single capital appropriation.
Senator Loren Leman noted that under this the ferry would
not be operating in the black. Robert Doll agreed that the
$33,000 difference would be a separate allocation. This was
due in part to the expected higher maintenance costs this
year. He speculated that the route would generate surplus
revenue once it reached its full schedule of operation.
Senator Loren Leman wanted to know if it would become
closest ferry in the system to breaking even. Robert Doll
said the M/V Columbia was the first, the M/V Malaspina was
second. Both ferries operated in high revenue segments.
Senator Gary Wilken asked how Captain Doll felt about the
sponsor statement. He read, "we are sending a strong
message that the Legislature does not intend to subsidize
the operation of dayboats." Robert Doll commented that it
was an ambitious statement that the department would be
working towards in the long term. He discussed the
different routes and the expected revenue they could
generate in relation to the cost of operation.
Senator Sean Parnell offered a motion to moved SB 129 as
amended from committee. Senator Al Adams objected. He felt
this legislation would set poor precedent in the
establishment of separate accounting systems for certain
services. He felt this was micro-management. He stressed
that the Marine Highway System was Southeast Alaska's
highway. He wondered if the intent was to someday micro-
manage other highways in rural areas of the state.
Co-Chair John Torgerson noted the M/V Malaspina was
supposed to have been surplused with the launch of the M/V
Kennicott. This expanded the service. It was his intent
for the marine transportation system to break even. The
system of separate accounting would help ensure that.
Senator Loren Leman wanted to know about overhead costs
such as administration and the reservation system and if
those costs would be broken out of the program. Co-Chair
John Torgerson said that if those costs were charged to the
M/V Malaspina, the department could not afford to operate
the ferry. Therefore, those costs would not be accounted
for under the bill.
The bill was reported from committee by a vote of 7-1-1.
Senator Al Adams cast the nay vote and Senator Randy
Phillips was absent.
ADJOURNED
Senator Torgerson recessed the meeting at 10:04 AM.
The committee returned and addressed the FY00 Operating
Budget. Minutes for that portion of the meeting are
separate.
SFC-99 (1) 4/19/99
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