Legislature(1995 - 1996)
01/17/1996 03:37 PM Senate RES
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SENATE RESOURCES COMMITTEE
January 17, 1996
3:37 P.M.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Drue Pearce, Vice Chairman
Senator Steve Frank
Senator Rick Halford
Senator Robin Taylor
Senator Georgianna Lincoln
Senator Lyman Hoffman
MEMBERS ABSENT
None
COMMITTEE CALENDAR
SENATE BILL NO. 162
"An Act relating to land used for agricultural purposes and to
state land classified for agricultural purposes or subject to the
restriction of use for agricultural purposes only; and annulling
certain program regulations of the Department of Natural Resources
that are inconsistent with the amendments made by this Act."
SRES - 1/17/96
SB 128 (NONRESIDENT HUNT, SPORT FISH, TRAP FEES) was scheduled, but
not taken up this date.
PREVIOUS SENATE COMMITTEE ACTION
SB 162 - No previous action to consider.
SB 128 - No previous action to consider.
WITNESS REGISTER
Representative Lyda Green
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SB 162
Brett Huber, Legislative Aide
c/o Senator Lyda Green
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 162.
Ron Swanson, Deputy Director
Division of Lands
3601 C St., Ste. 1122
Anchorage, AK 99503-5947
POSITION STATEMENT: Commented on SB 162.
John Cramer
P.O. Box 2636
Palmer, AK 99645
POSITION STATEMENT: Supported SB 162.
Karen Lee, Director
Farm Service Agency
1113 W. Fireweed
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 162.
Charles Forck
P.O. Box 929
Delta Junction, AK 99737
POSITION STATEMENT: Supported SB 162.
Bill Ward
P.O. Box 350
Soldotna, AK 99669
POSITION STATEMENT: Supported SB 162.
Mike Schultz
HC 62, Box 5440
Delta Junction, AK 99737
POSITION STATEMENT: Supported SB 162.
Herb Simon
Glennallen, AK
POSITION STATEMENT: Supported SB 162.
Don Kratzler
Nenana, AK
POSITION STATEMENT: Supported SB 162.
Bill Spencer
Nenana, AK
POSITION STATEMENT: Supported SB 162.
Niilo Koponen
710 Chena Ridge Rd.
Fairbanks, AK 99709
POSITION STATEMENT: Supported SB 162.
Tim Green
P.O. Box 204-405
Douglas, AK 99824
POSITION STATEMENT: Commented on SB 162.
Harvey Baskin
P.O. Box 877306
Wasilla, AK 99687
POSITION STATEMENT: Commented on SB 162.
Ed Bostrom
P.O. Box 56822
North Pole, AK 99705
POSITION STATEMENT: Supported SB 162.
Larry Devilbiss
HC04, Box 9302
Palmer, AK 99645
POSITION STATEMENT: Supported SB 162.
Mike Bronson
2229 Turnagain Pkwy.
Anchorage, AK 99517
POSITION STATEMENT: Opposed SB 162.
ACTION NARRATIVE
TAPE 96-2, SIDE A
Number 001
SRES - 1/17/95
SB 162 AGRICULTURAL LAND
CHAIRMAN LEMAN called the Senate Resources Committee meeting to
order at 3:37 p.m. and announced SB 162 to be up for consideration.
SENATOR HALFORD moved to adopt the CS, Chenoweth, January 15
version, to SB 162. There were no objections and it was so
ordered.
SENATOR LYDA GREEN, sponsor of SB 162, said she introduced this
bill after talking with numerous agriculture (ag) land owners,
industry organizations, soil and water conservation districts, and
consumers of Alaska agriculture products. The changes are designed
to facilitate the growth, stability, and economic viability of
agriculture as a renewable resource industry for Alaska, she said.
BRETT HUBER, legislative aide to Representative Green, reviewed the
technical changes in the CS to SB 162. He said there are two
changes. The first one is in section 9, page 6, which redefines an
allowable subdivision under the agricultural covenant. The second
change is in section 11 (e), page 7, which clarifies the remedy for
breach of covenant to be by civil proceeding.
SENATOR LEMAN asked how that was different from now. MR. HUBER
answered that now it is an administrative proceeding.
Number 99
SENATOR LINCOLN asked if there was correspondence on this issue
from the Director of the Division of Agriculture. SENATOR LEMAN
answered that the Committee was told the Division of Lands was
answering for the State. SENATOR LINCOLN asked if the Director of
Agriculture had been involved in this process. SENATOR LEMAN said
his staff had contacted Mr. Kerttula's office and his staff said
that Mr. Swanson would be providing the testimony on this bill for
the administration.
SENATOR LINCOLN remarked that it seemed a bit unusual that there
was no testimony from the Division of Agriculture which has the
expertise on this issue.
Number 148
RON SWANSON, Deputy Director, Division of Lands, said he had
testified on this bill extensively in October and asked them if the
Committee had any questions regarding his testimony.
SENATOR LEMAN asked him to summarize his position for the
Committee. MR. SWANSON said the Administration had not taken a
position on SB 162.
SENATOR HALFORD asked if that meant after the legislature leaves
town, they would or would not recommend a veto. MR. SWANSON said
he couldn't answer that now, because the Administration had not
taken a position on this issue. SENATOR HALFORD said he wanted to
know if the CS addressed any of his concerns.
Number 184
(MR. SWANSON'S testimony was inaudible and, therefore, these are
his written comments.) MR. SWANSON said that section one states
the intent of the Legislature is to convey fee simple title to
agricultural land, subject to an agricultural only covenant. This
language may make it easier for owners of agricultural parcels to
obtain financing from other than the State. If adopted, section 12
of this bill would require the Department to issue new conveyance
documents for all patents issued since August 15, 1976. We should
also point out that if the State wants to use the land for another
use (pipeline, telephone, etc.), we would have to buy those rights
back.
Section two, removes survey requirement for agricultural land sales
which they oppose. He explained that all disposals of State land
(sales or leases) are presently required to be surveyed. They have
had numerous problems with unsurveyed land and paper plats to a
point that legislation (HB 80) to make DNR the platting authority
within the unorganized borough is likely to pass this legislature.
This provision would not be supported by many municipal platting
authorities.
Section three removes the requirement that agricultural land be
included in an area plan and classified prior to disposal. The
Department opposes excluding agricultural land from the land use
planning and classification process. The planning and
classification statutes(AS38.04) are the result of a 1986 Supreme
Court case, Alaska Survival vs. State, where it was found that
disposals of State land cannot occur unless the land has been
classified as a result of an area or regional planning process.
There is no reason to exempt just agricultural land from this
requirement.
Section four removes authority to require pre-qualifications of
agricultural land buyers and allows the Commissioner to waive
development requirements based on economics. The Department
opposed this section. Pre-qualification enables the State to try
to limit sales to those people who are most likely to pursue
actively the development of agriculture. The Department supports
the ability of the Commissioner to waive, postpone, or modify
contract terms based on economic considerations. While it would be
helpful to have this authority, they also foresee a possible
increase in workload due to requests and appeals.
Number 218
SENATOR HALFORD asked if the Department now has the ability to pre-
qualify under the court's interpretation of the prior law. MR.
SWANSON said he thought they did. SENATOR HALFORD said he had a
legal opinion saying they don't and that they haven't had it since
1979. MR. SWANSON said he would check on that question for him.
Section five restricts the lottery application process on land
sales that involve land from former agricultural land disposal
projects such as Delta I-II and Pt. MacKenzie. MR. SWANSON said
they have no problem with that, although they don't see the need.
Section six allows sale of agricultural parcels described by
aliquot parts and they oppose this section. They prefer survey
requirements as noted in the discussion in Section two.
Section seven changes language to be consistent.
Section eight sets agricultural land sale interest rate at 8% and
makes interest payments also subject to a moratorium. The
Department does not support lowering the interest rate to 8% for
only agricultural purposes. HB 191, which is before the Senate
Resources Committee, establishes an interest rate for all land
loans at the prime rate, plus 4% (currently 12.2%) and not to
exceed 13.5%. They do support the change that would ensure that
interest payments are to be considered as part of any payment
moratorium.
SENATOR HALFORD requested a fiscal note on the exact consideration.
MR. SWANSON said a fiscal note had been submitted by the Division
of Agriculture stating about $1,000 per plat.
Section nine, he wrote, has a covenant running with the land that
restricts or limits the use to agricultural purposes and allowing
subdivision to a certain extent as long as the covenant runs with
the subdivided land, and as long as the resulting subdivision is
not less than 40 acres in size. The Department believes that the
State should be reimbursed by landowners when the land is
subdivided for the added rights to the land that are conveyed in
this bill. They believe that the land values will increase from
25% to 200%, based on the size of the parcel.
Section 10 provides that land classified for agriculture may be
conveyed to municipalities without any restrictions. Currently
only the agricultural interest in the land may be conveyed to
municipalities. Current law allows for transfer of other
interests, if it is in the best interest of the state.
Section 11 requires cooperation by land owners with appropriate
soil and water conservation districts when implementing soil
conservation plans. The Department supports this.
The second part, (2) as a condition of the conveyance, the
Commissioner may not require a development plan unless the
Commissioner permits modification of a plan based on economic
hardship or other extenuating circumstances, they support, but see
an increase in workload to perform the task of analyzing economic
hardship claims and appeals.
The third part states, (3) The Commissioner may not limit (a) the
right to construct improvements related to agricultural use, (b)
the right to use the land and improvements for purposes that are
incidental to and not inconsistent with the primary use, (c) the
right to subdivide and sell, if the resulting parcels are not in
violation of the minimum parcel size. The Department believes the
State should be reimbursed for lost revenue when agricultural land
is subdivided. The difference between the original price of the
agricultural right compared to the increased value of fee title for
subdivision purposes should be returned to the State. They do not
oppose incidental gravel use or disposal of timber incidental to
clearing for agricultural production.
"(e) A covenant described in (a) of this section may be enforced
only by a civil action," puts the burden of proof on the State
which still has the administrative procedures to follow and will
have the additional workload of unnecessary civil litigation.
Administrative appeals provide the applicant the ability to go to
court, if they so chose. The Department opposes that section.
The Department does not oppose the definition of agricultural
purposes, MR. SWANSON said.
Section 12 requires the Commissioner to issue new conveyance
documents to all agricultural parcels sold since 8/15/76 which they
very strongly oppose. This is a major workload and not fair to
those who choose not to purchase agricultural property, because of
the deed restrictions. There is also a very good chance of title
problems as "wild deeds" will result, because of dual title
interests being conveyed by the State. Further, there are fair
market value issues, as discussed above. (Section 11, 3(c)).
Section 13 requires conveyance documents for municipalities which
the Department opposes based on workload and title problems as
noted above. They currently have the ability to remove
restrictions, if it is in the best interest of the State.
Section 14 repeals current regulations affecting agricultural land
disposals since August 1978 and the Department opposes repeal of
executive branch regulations.
Number 354
JOHN CRAMER, former Director, Division of Agriculture, supported SB
162. He said the Administration has done a lot to help the oil
companies on the North Slope and SB 162 helps the farming community
in Alaska. He especially supported the 8% interest rate.
Number 389
KAREN LEE, Director, Farm Service Agency (USDA), said she has a
long history of agriculture in this State. USDA does a lot of farm
lending in every other state, but Alaska. The reason has been,
because of the reversionary clause that's in the agricultural-
rights-only-deeds that the State issues. She urged their favorable
consideration for modification along the lines proposed in SB 162.
Because of the reversionary clause, the Federal Farm Loan Program
has been practically dead in Alaska since the 1970's. Each year
nearly $2 million has been earmarked for the program in Alaska and
each year the money sits in an account for about six months and is
then transferred to one of the other 49 states who have reasonable
land titles. Well over $20 million has been diverted in this way.
MS. LEE said her agency took over the Federal Farm Loan Programs in
1995 and they are now actively making farm loans. However, they
are restricted to movable collateral for farms on the 500,000 acres
the State has sold. Farm ownership loans are restricted to fee
simple land such as those acquired under the old federal Homestead
Act.
Another interesting anomaly caused by the restrictive deeds is that
they have a loan program to help farmers pursue a non-agricultural
business on their farms to supplement the agricultural income.
This program acknowledges the huge shift of income experienced by
family farms in the last two decades, nation-wide. In 1994, over
90% of farms were at least somewhat dependent on off-farm income.
However, the agricultural rights restrictions mean such
supplementary income producing enterprises are actually illegal in
Alaska, even though they often mean the difference between success
and failure.
Number 420
SENATOR LINCOLN asked if a person needed a minimum acreage to
qualify for a farm loan. MS. LEE answered, no, because of the
agricultural rights only clause on land, they are actually making
farm loans to people with no land at all.
SENATOR TAYLOR asked if a reversionary clause is a normal thing in
other states. MS. LEE answered that nobody else has it.
SENATOR HALFORD asked her if she thought the covenant was just as
enforceable as the reversionary clause. MS. LEE replied,
certainly. She thought in reality they would have to go to court
in either case.
Number 444
CHARLES FORCK, Delta Junction, said on page 4, section 6 he thought
that aliquot parts needed to be specifically defined.
MR. FORCK supported the 8% interest rate. Language on page 6, line
3, he thought should reference section 11, (3) (B) because
explanations are made of land uses. He also had a concern whether
or not the covenant is as protective of the agricultural rights as
the present provision. He couldn't remember there ever being a
provision allowing the Commissioner to take the land back and that
bothered him.
Number 499
BILL WARD, Delta Junction owner of agricultural land, said he
supported SB 162. He said he had talked to a lot of agricultural
people and none of them had ever intended to violate any
agricultural restricted use. Their focus is on the ownership of
the land, itself. Existing statute says they own an "interest" in
the land and they are referred to as the land holder, not the land
owner.
MR. WARD also thought a covenant had a greater degree of
enforcement behind it, since a violation would go to court right
away instead of getting tied up for years in an administrative
proceeding.
Number 546
MIKE SCHULTZ, Delta Junction, supported SB 162. He said over 12
years he had been working to put several parcels together to build
up an operation and make it economically viable. He said they are
using the agricultural land for its highest and best use which is
growing crops. There is no pressure to divide into housing lots.
He thought interest rates should be down in the 8% - 10% range.
Existing rates are above market.
SENATOR PEARCE asked him what interest the farmers in the midwest
were paying for their farm loans. MR. SCHULTZ answered that the
rate a year ago was in the 7 - 8% percent range.
TAPE 96-2, SIDE B
Number 588
SENATOR PEARCE asked why they decided to peg the interest rate at
8%, instead of floating with the market like in the lower 48. MS.
LEE said the rate a couple of days ago was 6.25% and a commercial
bank would probably charge 2 - 2 1/2% on top of that. She
explained that the "Farmer Mac" rate is the whole credit system.
A direct loan from them would be about 7% interest. There is also
the guaranteed program which guarantees up to 90% to a commercial
bank. They would add whatever the bank would want to charge to
their rate.
SENATOR FRANK commented that maybe we should explore changing the
way in which farm land has been financed. Going to a fee simple
basis would allow Alaska to participate in some federal programs
that will allow the State to pass through a subsidized rate to the
farm community. Maybe the State could be cashed out of this
business.
SENATOR TAYLOR suggested looking at the federal formula for their
rate and using the same formula for total consistency between the
programs.
SENATOR FRANK said they should look at all the State's rates as a
policy matter.
HERB SIMON, Glennallen, supported SB 162. He questioned the
estimated $250,000 to implement this program. He thought the cost
was too high. MR. SWANSON said he submitted a letter to the
Committee on November 13 explaining the reasons for the expense.
He said he would be happy to provide this to Mr. Simon.
MR. SIMON said the use of agricultural land and its disposal
seriously needs to be revised and updated. He thought SB 162 was
a step in the right direction.
Number 451
DON KRATZLER, Nenana agricultural land owner, supported SB 162,
because he thought a fixable title with an agricultural covenant
would protect the agricultural integrity of agricultural lands
better than what we have now. It would give farmers a true sense
of ownership. Now the land simply cannot be collateralized,
because of the restrictions on the title. He also supported
lowering the interest rate from 12% - 13% down to 8%.
Number 408
BILL SPENCER, Nenana land owner, supported SB 162. He has a 225
acre parcel on which he raises pigs, potatoes, and hay. He drew
the parcel in 1985 and has developed it for the last 10 years by
hard work and not borrowing any money. He said this bill would
treat Alaskan farmers like all other farmers in the United States.
SCOTT MILLER, President, Delta Farm Bureau, said they unanimously
passed a resolution supporting SB 162. As a member of the Delta
Community Coalition, he reported that at their last meeting,
agriculture and economic development was voted as the most popular
economic development idea that they would like to spend grant
monies pursuing. Clearing up title in SB 162 is a step in the
right direction. He noted that he was getting calls from in-state
and out-of-state people on a weekly basis who want to pursue
farming in Alaska.
As a farmer with agricultural land, MR. MILLER said, he found it an
extreme hardship to not be able to get any financing.
SENATOR TAYLOR said he wanted to personally thank Senator Green for
bring this issue before them. He said it is the first major piece
of reform legislation on agriculture in this State he has seen in
12 years.
Number 359
SENATOR PEARCE said she remembered with the State dairy project,
the farmers complained they were required to build farm buildings
on each farm, rather than being able to take advantage of economies
of scale and build one barn to handle all the dairy cattle. Now
people are being told they can't build fixed, farm-related
structures on their land. She asked how they could be restricted
in both directions. MR. SWANSON replied that it was possible the
buildings were not going to be built in the right places. He said
they had to make sure the buildings' primary use was agricultural.
Number 337
NIILO KOPONEN said he homesteaded in 1952 and proved up in five
years. He thought one of the principal problems is that the banks
and "credit outfits" were using a form of urban red-lining, because
in other states, agricultural rights are accepted by loan agencies.
He thought the banking agencies were trying to force some changes.
He thought the legislature had never done anything to adequately
protect farm land in organized boroughs and didn't think this bill
would do much for them, either. He thought it was extremely
important to have adequate title. To ensure adequate rights-of-way
to property, there must be a survey. He said the State was remiss
in not developing surveys and adequate property descriptions when
it disposes of land. Going from covenants to ag rights is another
subsidy for the bar association.
MR. KOPONEN thought that section 10, "However, only rights in the
land for agricultural purposes may be transferred and all other
interests in the land will remain with the State." should not be
deleted. He thought it was necessary to increase our agricultural
production in the State for local use and also to meet the
developing Asian market.
SENATOR TAYLOR noted that Mr. Koponen had earned his land through
his own hard work and now owns it fee simple. He asked if he would
support a State homestead bill that would provide others with the
same opportunity he had. MR. KOPONEN replied, certainly. He added
that he is still being taxed at the rate of suburban subdivision
land. He said that sort of pressure is one of the things that has
destroyed the agricultural support businesses. He thought it was
also the people who do business with the farmers who are hurt by
the disappearance of agriculture.
Number 209
TIM GREEN said he has had property in the Trapper Creek area since
1984. It was part of a larger parcel that was subdivided and there
are covenants on it that say "no building of fixed or immoveable
structures." Because of that, it is worthless for a greenhouse
operation which is what he wants to do with the property. He said
he has paid taxes on it for 11 years.
SENATOR FRANK asked him what the value of his ag land was compared
to other land in the area that is fee simple. MR. GREEN said that
it was appraised at $6,000 for the 40 acres. He said there was not
even a road to his property, so it was completely undeveloped and
not worth as much as property with a road to it.
SENATOR FRANK said there should be a way property values could be
quantified for the purpose of this legislation.
SENATOR GREEN explained that the frustration was that once the
original five-acre developable plot is peeled off, the rest of the
land cannot have any structure on it.
SENATOR PEARCE asked if the law had changed since he bought his
land and he said no.
Number 110
HARVEY BASKIN, Pt. MacKenzie, said he is one of the two remaining
dairymen at Pt. MacKenzie and he has an agricultural use only
tract. He was concerned that he couldn't sell his property to his
heirs, because he doesn't have a fee simple title.
ED BOSTROM, North Pole, said he was a full-time farmer for 10
years. He said the important issue in Alaska is economic
development.
TAPE 96-3, SIDE A
Number 001
He said he had developed 100 of his 240 agricultural acres. He had
to diversify to make it work economically. His is the exception
where smaller is better. They cannot handle all the things they
are doing and will need to lease or sell some of their operations,
like their haying operation. Under current regulation, he can't
lease it out so that a person could build a cabin on the part that
is leased, in order to run the haying operation.
LARRY DEVILBISS, Palmer, said he is a third generation farmer in
the Mat-Su Valley. He said they are living with subdivision all
the way around them, but he has just doubled the size of his farm
in his generation. All the dynamics in this State are not to
subdivide, he said. In his area, subdivisions are being bought up
and put back into farming. In the subdivision process he would
like to make sure there are both physical and legal accesses.
Number 120
MIKE BRONSON urged the committee to oppose SB 162. He thought the
solution to poor planning by DNR was to give the farmers more
discretion to deal with land. The title provision is not a
solution to those problems. He said the original agricultural land
program was not meant as a means of getting public lands into the
private sector, it was meant to protect farming as a land use in
Alaska. Specifically, he opposed section 1, the fee title section
and section 11, the provision for improvements that are only
incidental to agricultural use.
Number 200
SENATOR LEMAN thanked everyone for their testimony, said they would
hold SB 162 over, and adjourned the meeting at 5:20 p.m.
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