Legislature(1995 - 1996)
02/06/1996 03:32 PM Senate STA
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SENATE STATE AFFAIRS COMMITTEE
February 6, 1996
3:32 p.m.
MEMBERS PRESENT
Senator Bert Sharp, Chairman
Senator Randy Phillips, Vice-Chairman
Senator Loren Leman
Senator Jim Duncan
Senator Dave Donley
COMMITTEE CALENDAR
SENATE BILL NO. 222
"An Act relating to the financing authority, programs, operations,
and projects of the Alaska Industrial Development and Export
Authority; providing an exemption from the procurement code for
certain projects of the authority; and providing for an effective
date."
SENATE BILL NO. 141
"An Act relating to legislative ethics; and providing for an
effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 222 - No previous senate committee action.
SB 141 - See State Affairs minutes dated 4/20/95, 4/27/95, 1/30/96,
and 2/6/96.
WITNESS REGISTER
Riley Snell, Executive Director
Alaska Industrial Development & Export Authority
Department of Commerce & Economic Development
480 W Tudor Rd., Anchorage, AK 99503-6690¶(907)561-8050
POSITION STATEMENT: representing Governor-prime sponsor of SB 222
Randy Simmons, Special Assistant
Alaska Industrial Development & Export Authority
Department of Commerce and Economic Development
480 W. Tudor Rd., Anchorage, AK 99503-6690¶(907)561-8050
POSITION STATEMENT: Commented on SB 222.
ACTION NARRATIVE
TAPE 96-9, SIDE A
Number 001
SSTA 2/6/96
SB 222 AIDEA OPERATIONS/PROJECTS/LOANS
CHAIRMAN SHARP called the Senate State Affairs Committee to order
at 3:32 p.m. and brought up SB 222 (AIDEA) as the first order of
business before the committee.
RILEY SNELL, Executive Director, AIDEA, provided the committee with
a sectional analysis of SB 222. He said the principal parts of the
bill are found in section 2, the bonding authority, which allows
them to issue bonds in order to finance loan participation, as well
as development finance projects that the authority undertakes under
different sections of its statutory powers.
Under the sunset authority of July 1, 1995, the Authority is only
authorized to do refunding bonds. This section is necessary for
them to continue to meet the economic demands of the mission of the
authority.
Sections 7 - 12 deal with the Business Assistance Program. These
modifications are being brought forward as a result of numerous
work sessions and discussions with the banking institutions and
small business operators around the State.
As a result of significant changes to the federal SBA program,
AIDEA would like to modify the existing statute to accommodate and
provide capital for the small businesses located in urban and rural
Alaska.
MR. SNELL said that the loan guarantee would be paid by the
Authority 90 days after the loan is placed in default. It is a
major condition in order to accommodate the banks' ability to go
forward and liquidate existing collateral to make the program
attractive for their use.
Number 75
Section 18 seeks legislative authorization for additional financing
on the Red Dog project. The Authority is seeking $60 million to
finance expansion to aid the transportation system facilities
serving the Red Dog Mine. The principal would be used to expand
additional storage capacity of ore that is stored during winter
months at the port.
The project is important to the Northwest Arctic Region. It
currently employs about 350 people, representing 15 percent of all
the jobs in the Northwest Arctic Borough, as well as creating 60 -
70 new jobs as a result of the expansion.
This project was originally authorized by the legislature in 1987
and construction commenced in 1989. Since the original investment,
the project has performed as required under all the financial terms
and conditions that were placed on it by the Authority.
MR. SNELL said the section 19 is the authorization for the
Authority to acquire Snettisham from the federal government, a
total of $100 million. This has been a long negotiated sale the
State undertook in the mid 1980's. It is also associated with the
acquisition of the Eklutna Power project outside of Anchorage.
That project would be acquired by the three local utilities in the
Anchorage area: Chugach Electric, ML&P, and MEA.
These acquisitions would divest the federal government's holdings
of power projects in Alaska. They believe with the proper
structuring of the financing that the project will be good for the
State. For the consumers of the Juneau and Douglas area, they
should be able to maintain existing rates. The alternative of not
proceeding with the project quickly creates rate impacts and
ultimate ownership in the private sector.
In addition, there is section 17 which repeals certain project
authorizations worth approximately $40 million of bond
authorizations that was given to the Authority to participate in
financing of the aircraft fueling facilities at Anchorage
International Airport. As a result of the parties not agreeing on
how to structure the financing, mostly revolving around
environmental indemnification issues, the Airport Fueling
Consortium members elected to undertake the project on their own,
without the assistance of AIDEA's tax exempt financing abilities.
They are also asking for the repeal of the legislative
authorization for AIDEA to issue up to $50 million in bonds for the
Midrex Facility which was originally proposed to be located at
Point Mackenzie but never commenced.
Number 154
CHAIRMAN SHARP asked if there was a way for the legislature to
maintain some control of the loans up to $10 million. MR. SNELL
responded that the $10 million authorization was to assist in
development finance projects, not in the loans, themselves. These
projects are ones the Authority owns outright, like Red Dog and the
Unalaska Dock Facility in Skagway. They were given these powers in
1992 or 93 and there is a three year sunset provision.
SENATOR DONLEY said he didn't see a sunset provision now. RANDY
SIMMONS, Assistant to MR. Snell, said that there was no sunset
provision for the $10 million limit. SENATOR DONLEY said that
sunset provisions are healthy, because they guarantee things get
revisited.
Number 188
SENATOR LEMAN asked if $100 million was close to the appraisal
value of the Snettisham project. MR. SNELL said that figure is
close and is from a formula negotiated between the State and the
Federal Power Administration as to how to set the price for the
project acquisitions. They are doing a risk assessment and looking
at deferred maintenance. The actual purchase price is approaching
$83 million. The balance of the fund could be used to create
reserves and replacement fees for future equipment failures.
Number 213
SENATOR LEMAN referred to the transmittal letter that says not
having the bonding authority that expired on June 30 has severely
restricted AIDEA's ability to assist key development projects and
asked if they had missed any opportunities. MR. SNELL said there
are currently customers waiting for AIDEA to participate.
SENATOR PHILLIPS asked how much capital would be tied up if they
were all authorized. MR. SNELL said the rule of thumb is that you
need $1.50 of revenues to support $1.00 of acquisition.
Number 250
CHAIRMAN SHARP asked what section 14 intended. MR. SIMMONS said
that section clarified the definition of the loan participation,
itself. It doesn't change how the program is run. They
participate in a percentage of the loans that a bank brings forward
to them; so their customer is the bank.
CHAIRMAN SHARP asked if there was any State land or rights of way
along the Red Dog road and what value is the road to the State.
MR. SNELL answered that the road is classified as industrial use
highway and is limited only to industrial users. The area is a
mineral rich area and there are other potential projects that could
come on line to using the same port facilities as the Red Dog.
There is a mixture of land ownership (between the State of Alaska,
the federal government, and native corporations).
CHAIRMAN SHARP asked if they had looked at the feasibility of
additional debt on the Red Dog's additional 36 percent production
capacity. This would increase AIDEA's share of the debt by 62
percent over what they have now. MR. SNELL replied that with the
additional expansion and the new discoveries, the economic life of
the project is easily 50 years. As a result of the expansion, it
will be the largest zinc/lead mine in the world. In addition to
that, the quality of the product is probably as high as any
operating mine that exists in the world. In addition to that, the
credit worthiness of Cominco, Ltd. has substantially improved.
They believe that with properly structured financing, this would be
a credit worthy investment.
CHAIRMAN SHARP asked if the State could use the road to access
other development. MR. SNELL said that was correct and that the
agreements were in place with all the land ownership participants
that it was a public facility, but it was classified as an
industrial use highway.
Number 315
MR. SNELL said the SBA is not able to guarantee as much of a loan
as they previously were able to do. It has been reduced from 80
percent and their fee structure is substantially higher which makes
it harder for small businesses to use it.
CHAIRMAN SHARP commented that what surprised him was that AIDEA was
guaranteeing not only the principal of the loan, but also the
interest payment. MR. SNELL clarified they are proposing only a 90
day grace period to allow the bank to liquidate the collateral.
Number 332
SENATOR DONLEY said he biggest concern was removing the provision
requiring the a majority of ownership be Alaskans for these
programs. He said this was a provision they fought hard to get and
he strongly opposed taking it out. He was also concerned with the
new section 7 where the federal government steps out and we are
stepping in. The state is supposed to be cutting down on
bureaucracy. He hated to see expansion again into an area where
businesses might default as they did in Anchorage in the 80's. He
said that he thought AIDEA was doing a great job since then.
SENATOR LEMAN asked if AIDEA had made a decision on the $60 million
(on Red Dog). MR. SNELL said they were in early discussions with
the company on the structure of the financing. They have
commissioned the Stanford Research Institution to do an independent
financial analysis of the project with the additional AIDEA debt
and additional company debt that would be involved to determine
that the project economics work as viewed from an outsider. They
also must have certain findings before the project can proceed.
They must find that the applicant has the ability to repay to debt,
that the amount of money the State is participating with has
adequate returns, and about eight more findings that the Board of
Directors would be required to make prior to issuing the authority
to proceed into the project. The legislature would also have to
authorize the project.
Number 382
SENATOR LEMAN asked for some documentation of what they had gone
through so far. MR. SNELL said he would provide him with that.
SENATOR LEMAN asked if there needed to be additional congressional
action to allow use of the road for other developments. MR. SNELL
answered no further action would be needed.
SENATOR LEMAN asked if it would have to be a resource extraction
industry. MR. SNELL said that was correct.
SENATOR LEMAN asked if he thought development was reasonably
possible within the next decade. MR. SNELL replied that there were
two or three projects: the Kennicott, for one, and bringing the
Arctic Slope coal reserve down into the Red Dog port area, for
another.
CHAIRMAN SHARP asked if the original $103 million AIDEA bonds on
the Red Dog facilities obligated the full faith and credit of
AIDEA. MR. SNELL replied that it had the full faith and credit of
the State of Alaska. CHAIRMAN SHARP asked if the additional $60
million would be the same. MR. SNELL said no, they are proposing
that that be backed only by the Authority.
CHAIRMAN SHARP asked about the Snettisham project. MR. SNELL
answered that was covered by the full faith and credit of the
State. CHAIRMAN SHARP asked why would the full moral obligation of
the State be used instead of just AIDEA. MR. SNELL replied if they
were adding another $60 million to the Red Dog obligation, it would
dilute the ability of the Authority to issue other debt using its'
moral obligation.
MR. SNELL explained that with reasonable reserves and replacements
built into the Snettisham project there should be minimal exposure
to the State.
CHAIRMAN SHARP asked if they would have a take-or-pay power sales
agreement in their hand before they culminate the deal with the
feds. MR. SNELL answered yes.
Number 435
CHAIRMAN SHARP asked who would run Snettisham. MR. SNELL answered
that the local utility (AEL&P) would run it.
CHAIRMAN SHARP said they would prepare a CS and would show it to
him before they take action on it.
SENATOR LEMAN asked Senator Duncan if it was reasonable to have
AEL&P take over management of Snettisham. SENATOR DUNCAN said that
AEL&P believes that, as well as the City of Juneau.
CHAIRMAN SHARP asked for the installed capacity at Snettisham. MR.
SNELL answered 78 megawatts, compared to 109 megawatts at Bradley.
SSTA 2/6/96
SB 141 LEGISLATIVE ETHICS
CHAIRMAN SHARP announced SB 141 to be up for consideration and
they would be starting on section 31.
JOE DONAHUE, a public member of Legislative Ethics Committee, said
the reason for section 31 was to clarify the vote they take is to
be kept confidential.
SENATOR DONLEY asked if there was anything in existing law that
says those functions are private. MR. DONAHUE answered that the
existing law was not clear.
MR. DONAHUE said section 32 clarified the discovery aspect. In
addition, there are some procedures on releasing some information
the committee acquires in the course of its deliberation.
Section 33 concerns attendance in executive sessions and
confidentiality. They have chosen not to allow legislators into
the deliberations.
Sections 34 and 35 recommends who the appointing authority is for
legislative employees when the violator is a legislative employee
and gives the authority to impose sanctions.
SENATOR DONLEY commented that section 35 is new and it goes through
item by item and explains who the appointing authority is.
SENATOR DUNCAN asked, under (b) (1) if some who works for him, as
an individual, is the appointing authority considered the
legislative council. MR. DONAHUE said it would be the legislator,
himself. SENATOR DUNCAN said it didn't say that anywhere and that
needed clarification.
SENATOR DUNCAN said he wanted individual legislators to have the
authority to be the appointing authority for their own members. He
didn't have a problem with the Budget and Audit Committee being the
one that oversees fiscal analysts and employees of that Division.
Standing committees needed clarification, also.
MR. DONAHUE explained that section 34 says the appointing authority
has the power to impose a sanction recommended by the committee or
to impose a different sanction. It is clear they couldn't be
directed.
SENATOR DUNCAN said he was concerned that they were changing
something that had been standing for a long time. Right now the
Rules Committee does not dictate who you hire, they tell you how
many positions you have. He didn't want to imply that the Rules
Committee has to sign off on who every individual legislator hires.
CHAIRMAN SHARP agreed with that.
TAPE 96-9, SIDE B
Number 578
SENATOR LEMAN illustrated his point by describing a scenario in
which he had a service station business as a client. The fuel tax
is paid by the customer, through the conduit of a service station.
According to APOC's definition, that business would have a
substantial interest in state government even though the service
station owner's participation in state government might only be to
vote. That scenario differs considerably from ARCO's lobbyists who
deal with legislation.
SENATOR DONLEY suggested clarifying that section.
CHAIRMAN SHARP asked committee members to submit suggestions on
Section 37 before the end of next week. He explained the only
change to Section 38 discussed by committee members was the date
change to an earlier date during the legislative session.
MR. DONAHUE explained that there was a two-fold purpose for
choosing that date. First, all required reports would have the
same filing date (February 15), and that date would provide the
public more complete information of possible conflicts of interests
earlier in the session, than the April 15 deadline.
Section 39 provides a penalty for late disclosure or failure to
disclose. SENATOR PHILLIPS asked if failure to file is a big
problem. MR. DONAHUE explained it is usually a case of people
forgetting to file and notifying the committee six months after the
deadline. The committee has been allowing people to file late, but
did not have a penalty for doing so. The purpose of the
disclosures is to provide information to the public, not to
penalize, but without a penalty, people tend to put off filing.
Section 39 provides authority to establish a fine, Section 40
establishes the amounts.
Number 367
CHAIRMAN SHARP noted Section 41 provides an effective date. MR.
DONAHUE stated the committee would prefer the date to coincide with
start of the calendar year rather than the start of session.
SENATOR LEMAN suggested if guidelines are included for fines, the
committee consider similar fines for inadvertent omissions of APOC
filing requirements. He felt APOC's fines are very inconsistent.
The committee discussed amendments to SB 141. MR. DONAHUE
explained amendment K.10 is an entirely new section which would
provide a definition of "substantial interest", which was
originally defined in the handbook. The definition is a proposal
of a series of tests that must be met to determine whether a
substantial interest exists. Ethics Committee members were
concerned about requiring a declaration of conflict of interest on
votes, even though most legislators vote anyway according to the
Uniform Rules. The Ethics Committee proposed the change from
prohibition to disclosure. Current law prohibits a legislator from
taking action at the moment on any administrative or political
action, which includes committee actions.
Number 325
CHAIRMAN SHARP commented he has heard a declaration of conflict of
interest during floor sessions many times, but not during committee
hearings. MR. DONAHUE stated the Ethics Committee is primarily
concerned with declaration and countered that legislators may want
to review what is considered legislative or administrative action.
The Ethics Committee interpreted that to include committee action.
SENATOR DONLEY felt legislators should be required to orally
disclose the conflict prior to a vote, rather than to file written
documents.
SENATOR PHILLIPS questioned whether under test #1 of the
"substantial interest" provision, a person who owned shares in a
mutual fund that may have $2,000 of oil company stock would be
considered to have substantial interest in that company. MR.
DONAHUE stated $2,000 worth of stock would not be considered
substantial, and explained that clients often only control which
mutual fund is purchased, rather than the mutual fund's investment
portfolio which changes constantly.
SENATOR DONLEY asked, if the amendments are adopted into a
committee substitute, whether oral disclosure could be included.
MR. DONAHUE replied the Ethics Committee intent was oral disclosure
for both committee and floor action. Written disclosure would only
be required when drafting legislation or testifying at an
administrative hearing. SENATOR DONLEY asked for clarification.
MR. DONAHUE stated the testimony at an administrative hearing would
have to be related to legislation, but could be presented by a
legislator representing his or herself.
The committee discussed when legislators testify before boards, to
determine whether or not they are acting in a legislative capacity,
they would have to have a substantial interest in the issue to
necessitate disclosure.
MR. DONAHUE explained amendment K.17 which relates to the immediate
family. This amendment changes the term "spousal equivalent" to a
"person cohabitating with the person in a conjugal relationship."
SENATOR LEMAN thought this term was sufficient and found it
preferable because it removes the element that develops the
equivalency to the legal relationship of marriage. The other
intent of the amendment is to lessen the burden of legislators from
knowing what associations every family member has with the state.
Right now, a legislator could be held liable for an adult sibling
who is involved in deals with the State. This definition tightens
the meaning to immediate family members.
Amendment K.15 gives the Ethics Committee a right of follow-up to
ensure that corrective action occurs for a violation.
CHAIRMAN SHARP asked if the committee would have the ability to
charge the violator under civil procedure. MR. DONAHUE explained
if the Ethics Committee formally charged a person, the formal
charges currently in the code would be used. At present it is not
clear whether a person can be formally charged which makes the
process toothless. Amendment K.15 addresses corrective action as
well as sanctions for legislative employees.
MR. DONAHUE explained amendment K.19 covers corrective action for
legislators, but does not cover sanctions.
SENATOR DONLEY asked if amendment K.19 adds a timeline to a
sanction. MR. DONAHUE replied that the Ethics Committee can
already add a timeline, however if the corrective action does not
occur within that timeline, the Ethics Committee can take no
further action.
SENATOR DONLEY believed the Ethics Committee already has the
authority to take further action. MR. DONAHUE stated the Ethics
Committee has tried to exercise it, but was not successful.
SENATOR DONLEY felt the Ethics Committee does not have the ability
to do follow-up, but it does have the authority to recommend
sanctions to the legislature of time lines and penalties for
failure to comply. MR. DONAHUE believed the amendment would
require the Ethics Committee to include a time frame.
SENATOR DONLEY felt the amendment to be redundant as that ability
is already permitted by statute.
MR. DONAHUE clarified amendment K.19 allows for follow-up when a
legislator does not comply with a sanction.
CHAIRMAN SHARP discussed amendment K.20 which allows trainees to
volunteer services. It addresses concerns of interns under bona
fide programs. MR. DONAHUE stated the Ethics Committee had no
problem with that amendment.
SENATOR DONLEY brought up topics discussed at an earlier date, such
as telephone usage, and vague language about office usage
(regarding back-up data from campaigns). He explained that records
were never intended to fall under the general prohibition on
keeping campaign materials. He suggested making a simple exception
for maintaining campaign and APOC records.
TAPE 96-10, SIDE B
Number 000
Regarding telephone usage, SENATOR DONLEY commented that a
legislator has no control over who calls the legislator, and
whether the call is for state-related business. He felt there
should not be a rule requiring legislators to control who can call
the office, and people should not be prohibited from calling on the
phone, since providing phone access allows the legislator to be
available at the office. MR. DONAHUE commented that the words
"limited" and "nominal" are currently in the law. If it is the
legislature's intent that any amount of telephone use is
acceptable, then the language needs to be changed. He did not know
whether the Ethics Committee would recommend that change.
SENATOR DONLEY clarified the law allows unlimited use of the phone
as long as there is no special charge attached; but limits use for
other things. He felt there is confusion about seminars, and felt
the original intent was not to limit people from making non-charge
phone calls. MR. DONAHUE felt there are probably legislators and
legislative employees who spend more time during the day making
personal phone calls than doing legislative business.
SENATOR DONLEY stated that was never the intent of the law, and
those cases should be management decisions rather than an ethics
question, and such a person should be fired.
CHAIRMAN SHARP thanked Mr. Donahue for his testimony and announced
the committee would reschedule SB 141 in the form of a committee
substitute incorporating the recommended amendments. He adjourned
the meeting at 5:10 p.m.
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