Legislature(2003 - 2004)

03/25/2003 01:39 PM Senate TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
                         March 25, 2003                                                                                         
                           1:39 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator John Cowdery, Chair                                                                                                     
Senator Thomas Wagoner, Vice Chair                                                                                              
Senator Gene Therriault                                                                                                         
Senator Georgianna Lincoln                                                                                                      
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 103                                                                                                             
"An Act increasing certain motor vehicle registration fees; and                                                                 
providing for an effective date."                                                                                               
     MOVED SB 103 OUT OF COMMITTEE                                                                                              
SENATE BILL NO. 153                                                                                                             
"An Act authorizing a long-term lease of certain Alaska Railroad                                                                
Corporation land at Anchorage; and providing for an effective                                                                   
     MOVED SB 153 OUT OF COMMITTEE                                                                                              
PREVIOUS ACTION                                                                                                               
SB 103 - See Transportation minutes dated 3/11/03 and 3/18/03.                                                                  
SB 153 - No previous action to record.                                                                                          
WITNESS REGISTER                                                                                                              
Mr. Dwayne Bannock                                                                                                              
Division of Motor Vehicles                                                                                                      
Department of Administration                                                                                                    
PO Box 110200                                                                                                                   
Juneau, AK  99811-0200                                                                                                          
POSITION STATEMENT:  Answered questions about SB 103                                                                          
Mr. Mark Marlow                                                                                                                 
Alaska Franchise Facilities                                                                                                     
No address provided                                                                                                             
POSITION STATEMENT:  Explained the purpose of SB 153                                                                          
Mr. Tom Pease                                                                                                                   
Government Hill Community Council                                                                                               
PO Box 100018                                                                                                                   
Anchorage, AK  99510-0018                                                                                                       
POSITION STATEMENT:  Opposed to SB 153                                                                                        
Ms. Wendy Lindskoog                                                                                                             
Director of External Affairs                                                                                                    
Alaska Railroad Corporation                                                                                                     
PO Box 107500                                                                                                                   
Anchorage, AK 99510-7500                                                                                                        
POSITION STATEMENT:  Answered questions about SB 153                                                                          
Ms. Phyllis Johnson                                                                                                             
Alaska Railroad Corporation                                                                                                     
PO Box 107500                                                                                                                   
Anchorage, AK 99510-7500                                                                                                        
POSITION  STATEMENT:    Answered  questions  about  ARRC's  lease                                                             
Mr. George Utermohle                                                                                                            
Legislative Counsel                                                                                                             
Legal and Research Services Division                                                                                            
Legislative Affairs Agency                                                                                                      
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Answered questions on SB 153                                                                             
ACTION NARRATIVE                                                                                                              
TAPE 03-10, SIDE A                                                                                                            
CHAIR  JOHN COWDERY  called  the  Senate Transportation  Standing                                                             
Committee  meeting  to order  at  1:39  p.m.   All  members  were                                                               
present.  The  first  order  of   business  to  come  before  the                                                               
committee was SB 103.                                                                                                           
             SB 103-MOTOR VEHICLE REGISTRATION FEES                                                                         
CHAIR COWDERY  told members  that SB 103  was heard  in committee                                                               
last week  but was held  over to provide  time to get  answers to                                                               
questions from  Senators Lincoln and Olson.  Those questions were                                                               
answered so it  is his intention to pass this  legislation out of                                                               
committee today.                                                                                                                
SENATOR  LINCOLN said  she didn't  receive one  of the  documents                                                               
other members received.  She said she only  received responses to                                                               
her individual questions and she  was interested in the responses                                                               
to  other  members' questions.  She  asked  for the  response  to                                                               
Senator  Olson's  question  about whether  the  Anchorage  School                                                               
District's school buses would be exempt from registration.                                                                      
The committee took a brief at-ease.                                                                                             
CHAIR  COWDERY noted  that Mr.  Dwayne Bannock  was available  to                                                               
answer questions via teleconference.                                                                                            
SENATOR OLSON  asked Mr.  Bannock whether  school buses  owned by                                                               
private schools must pay a registration  fee and, if so, how much                                                               
that fee would increase.                                                                                                        
MR. DWAYNE  BANNOCK, Director of  the Division of  Motor Vehicles                                                               
(DMV),  Department of  Administration  (DOA),  told members  that                                                               
school buses  fall under  a number  of classifications.  A school                                                               
district that owns school buses  falls under Class 5G. The school                                                               
district  pays  a  form  of  exempt  registration  fees.  Private                                                               
schools or church  schools that own buses fall  under the "Exempt                                                               
Bus  Charitable"  classification.  They  pay  $10.  If  a  school                                                               
district contracts  for bus service  with a private  company, the                                                               
private contractor pays traditional commercial fees.                                                                            
SENATOR OLSON asked about the increase in fees.                                                                                 
MR. BANNOCK  said there is no  proposed increase in fees  for the                                                               
exempt buses.                                                                                                                   
SENATOR LINCOLN  noted that Senator Therriault  asked whether the                                                               
Alaska State Constitution grants  local governments the option of                                                               
charging a vehicle license fee.                                                                                                 
MR.  BANNOCK told  members that  DMV  has a  formula called  MVRT                                                               
(Motor Vehicle  Registration Tax). That  tax can be  exercised at                                                               
the  option of  a local  municipality or  borough. He  provided a                                                               
list of communities  that participate in the  MVRT schedule. That                                                               
cost is added to the state  registration fee and then returned to                                                               
the local government.                                                                                                           
SENATOR THERRIAULT noted  the list on pages 2 and  3 contains the                                                               
names of  all the communities  that require no  vehicle licensure                                                               
or insurance.                                                                                                                   
MR. BANNOCK replied,  "I can't speak to the insurance  side of it                                                               
Senator, but I  can only tell you that those  are exempt from the                                                               
registration portions."                                                                                                         
SENATOR  OLSON  asked Mr.  Bannock  if  he  is familiar  with  AS                                                               
28.10.011(a)  and   (b),  which  address  vehicles   exempt  from                                                               
MR. BANNOCK said he is.                                                                                                         
SENATOR OLSON  said a number  of communities within  his district                                                               
are listed in that statute. He  asked if those communities do not                                                               
have roads that were built or are maintained by the state.                                                                      
MR. BANNOCK apologized for not  having good information about the                                                               
compilation of  that list.  Its effective date  was July  1, 2001                                                               
and he is not aware of what was involved in making that list.                                                                   
SENATOR THERRIAULT  referred to item 10  on page 1 of  the memo -                                                               
vehicles  operated  on the  roadway  not  connected to  the  land                                                               
highway  system or  to a  highway with  an average  daily traffic                                                               
volume greater than 499 - and  said he believes that is where the                                                               
list originated.                                                                                                                
SENATOR OLSON  pointed out neither  Nome nor Kotzebue is  on that                                                               
list and they are not connected to the land highway system.                                                                     
SENATOR  THERRIAULT  said  Nome  is not  connected  to  the  land                                                               
highway system,  but would fall  under a highway with  an average                                                               
daily traffic volume greater than 499.                                                                                          
SENATOR  OLSON asked  Mr. Bannock  if it  is restricted  to state                                                               
built or maintained roads.                                                                                                      
MR.  BANNOCK said  Senator  Olson  is correct  in  that the  list                                                               
contains  things  that  allow  a   community  to  file  for  that                                                               
exemption. Nome would be greater than 499 units.                                                                                
SENATOR OLSON asked about Barrow.                                                                                               
MR.  BANNOCK  said  he believes  the  registration  records  will                                                               
reflect that Barrow has more than 499 vehicles.                                                                                 
There  being no  further questions,  Senator Therriault  moved SB
103 from  committee with individual recommendations  and attached                                                               
zero fiscal note. He then asked for unanimous consent.                                                                          
CHAIR  COWDERY  announced  that  without  objection,  the  motion                                                               
2:00 p.m.                                                                                                                     
           SB 153-LONG-TERM LEASES OF ALASKA RR LAND                                                                        
CHAIR COWDERY informed  members that HB 97 is  the companion bill                                                               
to SB 153  and that staff from the House  was available to answer                                                               
questions. He asked Mr. Marlow to testify.                                                                                      
MR.  MARK  MARLOW,  Alaska  Enfranchise  Facilities  (AEF),  told                                                               
members  that SB  153 is  about AEF's  desire to  apply for  next                                                               
fiscal year's 202 grant from  the Department of Housing and Urban                                                               
Development (HUD).  To obtain  202 grant  funds, the  land leased                                                               
for a building must have a lease duration of at least 75 years.                                                                 
CHAIR  COWDERY  asked  Mr.  Marlow  to  explain  why  SB  153  is                                                               
MR.  MARLOW  explained that  the  Section  202 grant  program  is                                                               
designed  to serve  the  housing  needs of  very  low income  and                                                               
independent-living elderly people of at least 62 years of age.                                                                  
CHAIR COWDERY added that SB  153 would extend the Alaska Railroad                                                               
Corporation (ARRC) lease for this project.                                                                                      
MR. MARLOW said  that is correct and noted the  piece of property                                                               
in question is approximately 2  acres on Government Hill. He said                                                               
at least  a portion  of that  acreage is the  former site  of the                                                               
Hollywood Vista  Apartments. That  building was razed  some years                                                               
ago and the property is in ARRC's inventory.                                                                                    
CHAIR COWDERY asked how long a  lease extension AEF would need in                                                               
order to get the 202 funds.                                                                                                     
MR.  MARLOW  said  last  year  the  Legislature  extended  ARRC's                                                               
ability to lease  its land for duration of 55  years. The statute                                                               
allows ARRC  to lease land  for longer duration  with legislative                                                               
approval. The  202 grant funds require  the lease to be  at least                                                               
75 years so AEF needs a 20 year extension.                                                                                      
CHAIR  COWDERY  asked if  the  proposed  building would  last  75                                                               
MR.  MARLOW  said he  believes  modern  buildings that  are  well                                                               
maintained  should  last at  least  75  years. The  HUD  contract                                                               
requires that the  building be kept available  for senior housing                                                               
for at least 40 years.                                                                                                          
SENATOR LINCOLN  said she was  asked whether SB 153  violates the                                                               
constitutional prohibition against local  or special acts in art.                                                               
11,  sec.  19   of  the  Alaska  Constitution,   which  says  the                                                               
Legislature shall pass  no local or special act if  a general act                                                               
can be made  applicable. She questioned why  not pass legislation                                                               
that increases all ARRC leases to 75 years.                                                                                     
MR.  MARLOW said  he could  not answer  that question.  He simply                                                               
read the  statute that allows  ARRC to  lease its land  and found                                                               
that legislative approval  is required for leases  longer than 55                                                               
CHAIR COWDERY  said if the  legislature passes SB 153,  AEF would                                                               
still need ARRC board approval.                                                                                                 
MR.  MARLOW said  that  is correct.  SB 153  will  give ARRC  the                                                               
authority to  extend the lease  but does  not require ARRC  to do                                                               
so. Once  the legislation becomes  law, it will  become incumbent                                                               
upon  him to  petition the  ARRC board  of directors  to write  a                                                               
lease of long enough duration to qualify for the 202 grant.                                                                     
SENATOR LINCOLN  asked if the  Government Hill  Community Council                                                               
is opposed to SB 153.                                                                                                           
MR. MARLOW  said the council  has not directly  communicated that                                                               
to him but  it would not surprise him, although  he could not say                                                               
SENATOR  LINCOLN read  from  a  letter dated  March  21 from  the                                                               
Government Hill Community Council:                                                                                              
     The  community voted  ...  unanimously  to oppose  this                                                                    
     bill because they believe that  the bill is focusing on                                                                    
     a  single piece  of real  property, is  narrow, special                                                                    
     interest legislation,  is unsound public policy  and is                                                                    
     not  in  the best  interest  of  our neighborhood,  the                                                                    
     Alaska Railroad [Corporation] or the State of Alaska.                                                                      
MR. MARLOW said  he has not seen  that letter but it  is hard for                                                               
him to imagine  how this type of project could  be detrimental to                                                               
the community.                                                                                                                  
CHAIR COWDERY asked Mr. Marlow if  AEF plans to move forward with                                                               
another project if SB 153 does not pass.                                                                                        
MR. MARLOW said  that is correct. He has already  leased the land                                                               
with the intent  of positioning the property on behalf  of AEF to                                                               
be  able to  apply for  this  year's 202  grant. If  that is  not                                                               
possible, he  will build a  different multi-family  type property                                                               
on  that land  with the  55-year lease.  He said  the land  lease                                                               
would  be  transferred  to the  non-profit  organization  at  the                                                               
appropriate  time.  Therefore,  in   any  event,  a  multi-family                                                               
property will  be built on that  land. It is zoned  R-4 and comes                                                               
under  the  direct oversight  of  the  Municipality of  Anchorage                                                               
(MOA)  planning department.  He said  his first  objective is  to                                                               
position the property on behalf of  AEF so that 202 housing could                                                               
be built there.                                                                                                                 
CHAIR COWDERY asked Mr. Marlow about property taxes.                                                                            
MR. MARLOW  said he  began paying  the taxes  when he  leased the                                                               
property late last year.                                                                                                        
CHAIR  COWDERY  asked  the  estimated   value  of  the  completed                                                               
MR. MARLOW  said he  believes that 202  projects are  exempt from                                                               
local property taxes because of the population served.                                                                          
SENATOR THERRIAULT  asked Chair Cowdery,  as prime sponsor  of SB
153,  if  legal  counsel  produced  a  memo  advising  that  this                                                               
legislation violates the single subject rule.                                                                                   
CHAIR COWDERY  said he did  not receive  such a memo.  He pointed                                                               
out that  SB 153  is identical  to the  House companion  bill. He                                                               
assumed  the  legal  drafter  would   have  alerted  him  of  any                                                               
constitutional problems.                                                                                                        
SENATOR OLSON asked  if anyone was available  from the Government                                                               
Hill Community Council to testify.                                                                                              
CHAIR COWDERY said  he has never been convinced  that a community                                                               
council actually represents the community.                                                                                      
MR. TOM  PEASE, Government Hill  Community Council,  told members                                                               
the council unanimously  opposed SB 153 at its  last meeting. The                                                               
council  views  SB  153  as  special  interest  legislation  that                                                               
extends  a railroad  lease to  a  single individual  on a  single                                                               
parcel of land in the  heart of the Government Hill neighborhood.                                                               
He pointed  out that no  legislator representing  Government Hill                                                               
has signed  on to this legislation.  He also noted that  ARRC has                                                               
remained neutral on this legislation.                                                                                           
MR. PEASE said  last May, the community met  with the leaseholder                                                               
to discuss development plans on  this parcel. The community asked                                                               
about  the design,  use, and  size of  the footprint,  financing,                                                               
etcetera.  The developer  had no  answers to  those questions  at                                                               
that time,  other than to  report that  he planned to  build low-                                                               
income housing on  the parcel. The community was  assured that he                                                               
would  maintain an  open line  of  communication but  no one  has                                                               
heard  from  the  developer  in  nearly  a  year.  The  developer                                                               
declined an invitation to attend  the Council's February meeting,                                                               
at which time the Council planned  to discuss HB 97. He said last                                                               
year the  Legislature enacted legislation extending  the lease on                                                               
the same ARRC property from 35  to 55 years to meet HUD financing                                                               
requirements. HUD  then extended  its leasing requirements  to 75                                                               
years. At the time, two applicants  were vying for the ARRC lease                                                               
and the playing  field was level. One  applicant withdrew knowing                                                               
that HUD funding  would not be available because  of the duration                                                               
of the  lease. The  current developer  pursued the  lease anyway.                                                               
Now that  same leaseholder is  pursuing a second  extension after                                                               
the fact. He offered to answer questions.                                                                                       
CHAIR COWDERY  asked if  the community  council supported  the 20                                                               
year lease extension last year.                                                                                                 
MR. PEASE believed  the council took no position  but voiced some                                                               
concerns to the ARRC board.                                                                                                     
CHAIR  COWDERY said  that even  if SB  153 is  enacted, the  ARRC                                                               
Board must still approve the project.                                                                                           
MR. PEASE agreed the ARRC Board has the final word.                                                                             
SENATOR THERRIAULT  asked if ARRC or  the developer had to  go to                                                               
the MOA to get a waiver  from zoning requirements or whether this                                                               
land was already zoned for this type of activity.                                                                               
MR. PEASE  said he believes it  falls within the zoning  for that                                                               
MR. MARLOW added  the property is zoned multiple  family. He then                                                               
asked  to  make  one  correction to  Mr.  Pease's  testimony.  He                                                               
explained  that last  year's bill  had  nothing to  do with  this                                                               
project.  That  was a  general  piece  of legislation  to  update                                                               
ARRC's  policies to  be  in step  with the  needs  of the  people                                                               
seeking to lease any of ARRC's lands.                                                                                           
MR. PEASE said he believes  this project was probably the impetus                                                               
for introducing that legislation.                                                                                               
MR. MARLOW said that is incorrect.                                                                                              
CHAIR COWDERY  agreed that  is incorrect  because lessees  in the                                                               
railroad  yards raised  the lease  extension issue  at least  two                                                               
years ago.  The Coca-Cola Company  had a building  partly located                                                               
on leased land and wanted to straighten up that situation.                                                                      
SENATOR OLSON asked  Mr. Pease if he participated  in the ongoing                                                               
discussion between ARRC and AEF.                                                                                                
MR. PEASE  said the other  co-president of the  Community Council                                                               
went to the ARRC Board with  certain concerns and requests but at                                                               
no  time were  council members  invited to  any meetings  between                                                               
those two entities.                                                                                                             
SENATOR  OLSON said  that  one  does not  need  an invitation  to                                                               
attend a public meeting.                                                                                                        
MR. PEASE  said it  is hard  to attend a  meeting you  don't know                                                               
2:17 p.m.                                                                                                                     
SENATOR OLSON  asked what  ARRC's response  was to  the community                                                               
council's concerns.                                                                                                             
MR. PEASE  said he was  told that two  members of the  ARRC Board                                                               
opposed  the action;  the remainder  of the  board was  in favor.                                                               
However,  several   members  acknowledged  that   ARRC's  leasing                                                               
practices,    particularly    on   land    within    high-density                                                               
neighborhoods,  needs to  be addressed.  Currently, ARRC  has one                                                               
leasing  policy that  it applies  to  all of  its lands,  whether                                                               
those lands are  remote or urban. ARRC members  realized the need                                                               
to take neighborhood plans and concerns into account.                                                                           
SENATOR OLSON asked which legislators represent Government Hill.                                                                
MR.  PEASE  replied,  "Representative  Les  Gara,  Representative                                                               
Nancy Dahlstrom,  Senator Johnny  Ellis -  and I  believe Senator                                                               
Fred Dyson represents a very small piece of the neighborhood."                                                                  
CHAIR COWDERY  asked how  many residents  live in  the Government                                                               
Hill area.                                                                                                                      
MR. PEASE said maybe 3,000.                                                                                                     
CHAIR COWDERY asked  how many people attended  the meeting during                                                               
which the letter was written to the committee.                                                                                  
MR. PEASE  said about 25, which  is a relatively high  number. He                                                               
pointed out the  Government Hill Community Council is  one of the                                                               
most  active  and well  attended  of  the community  councils  in                                                               
SENATOR THERRIAULT  asked if the council's  position on extending                                                               
the lease  to 55 years  for this project  last year was  mixed so                                                               
the  council decided  not  to take  a stand  for  or against  the                                                               
MR.  PEASE said  the  council  did not  take  a  position on  the                                                               
legislation itself.                                                                                                             
MR.  MARLOW  said that  he  had  applied  to  ARRC to  lease  the                                                               
property through its  real estate department before  it was known                                                               
that HUD  extended its  lease requirement to  75 years.  ARRC had                                                               
its  real  estate committee  take  up  the issue.  The  committee                                                               
recommended  to the  ARRC Board  of Directors  that the  lease be                                                               
granted.  The board  took up  the issue  and the  Government Hill                                                               
Community Council opposed  the lease. ARRC approved  the lease by                                                               
a 7 to 1 vote.                                                                                                                  
SENATOR THERRIAULT said what he was  trying to get at is that the                                                               
community council decided  not to take a position  on last year's                                                               
decision to extend  the lease to 55 years, but  now it opposes an                                                               
additional  20   years  for   the  same   project  in   the  same                                                               
neighborhood on a  piece of property that is  currently zoned for                                                               
multifamily  housing. He  said  he does  not  understand why  the                                                               
community council is now viewing it differently.                                                                                
MR.  PEASE  explained  that  from   one  perspective,  the  lease                                                               
extension does  not seem like a  significant difference. However,                                                               
from another  perspective, what began as  a 35 year lease  is now                                                               
being doubled  in one  year. Although  the footprint  remains the                                                               
same, the  community does  not know what  that footprint  is. The                                                               
council asked  the developer for  specific information  about the                                                               
plans but  all of those  questions have gone unanswered.  That is                                                               
after he agreed to maintain communication.                                                                                      
SENATOR THERRIAULT said  if he owned the property  and Mr. Marlow                                                               
was leasing  it from  him, Mr.  Marlow would  not be  required to                                                               
meet  with the  council. He  would only  have to  meet the  local                                                               
zoning  requirements and  building codes.  He questioned  why, if                                                               
the project meets all codes,  the council should direct what does                                                               
or does not take place on his piece of property.                                                                                
MR.  PEASE said  if it  were privately  owned, the  council would                                                               
hope  that the  developer would  act  responsibly and  be a  good                                                               
neighbor. However,  this is railroad  land, which  is essentially                                                               
public land and  the time it will  be locked up for  a single use                                                               
is now being doubled.                                                                                                           
SENATOR THERRIAULT  agreed that  makes a  big difference,  but in                                                               
that case,  everyone owns  the land. The  Legislature has  made a                                                               
policy call that  directs the railroad to develop  those lands to                                                               
develop a revenue  stream from them. He asked if  Mr. Pease feels                                                               
there is  anything suspect about  the project regarding  the rate                                                               
of return that ARRC will receive.  ARRC is trying to get its land                                                               
into active use and on the tax roles.                                                                                           
MR.  PEASE responded  by saying  that  ARRC is  not pursuing  the                                                               
highest and  best use  of this  piece of  property. He  stated if                                                               
pursuing the  highest and  best use, ARRC  would try  to generate                                                               
more interest before awarding the  lease. Regarding the tax role,                                                               
this project  will not generate  tax revenue if  it is a  HUD 202                                                               
SENATOR  THERRIAULT  asked a  representative  from  ARRC to  tell                                                               
members whether this project will be leased at the market rate.                                                                 
CHAIR COWDERY  interjected to ask  Mr. Pease whether  he believes                                                               
it is fair to expect Mr.  Marlow to provide anything other than a                                                               
conceptual design  until he is  assured the project  is approved.                                                               
He pointed out that detailed plans are expensive.                                                                               
MR.  PEASE said  he  does not  believe  expecting detailed  plans                                                               
would be reasonable, but he  does believe someone entering into a                                                               
55 year lease should be able  to answer questions about what will                                                               
be put  on that  property. He added  that good  business practice                                                               
dictates   that  one   maintain  good   communication  with   the                                                               
neighborhood after offering to do so.                                                                                           
MR. MARLOW said the fact of the  matter is that there has been no                                                               
activity  with this  project  during the  last  year because  the                                                               
nature of  202 projects is  to hurry up  and wait. He  said there                                                               
simply has not been any information to convey.                                                                                  
CHAIR COWDERY  noted that he spoke  with Mr. Gamble of  ARRC last                                                               
week and  he said this  issue was basically in  the Legislature's                                                               
hands at  this time. The project  would then have to  be approved                                                               
and there is no guarantee the board would approve it.                                                                           
MS. WENDY  LINDSKOOG, Director of  External Affairs,  ARRC, asked                                                               
Senator Therriault to repeat his question.                                                                                      
SENATOR THERRIAULT said he was  wondering, in terms of the lease,                                                               
whether it  is at market rate  or, because it is  longer term, it                                                               
falls in  the "middle  of the  pack." He said  he wanted  to make                                                               
sure that  ARRC is granting no  special favors to Mr.  Marlow and                                                               
that ARRC  is getting good  value for  the long-term use  of this                                                               
MS.  PHYLLIS  JOHNSON,  Chief  General  Counsel  for  ARRC,  told                                                               
members  that  this  lease  is   being  handled  like  any  other                                                               
commercial lease under  the terms of the statute  and the board's                                                               
long-term lease policy.  She noted that lease value  is set using                                                               
an appraisal  of the property.  The appraiser is required  to use                                                               
standards,  which include  highest  and best  use.  She said  she                                                               
could  not say  whether  the length  of the  lease  would make  a                                                               
difference  in the  appraisal.  She did  not  believe so  because                                                               
appraisers appraise the full fee  simple interest in the property                                                               
at the time of the appraisal.  Then ARRC applies what is known as                                                               
the capitalization rate each year,  which she guessed to be eight                                                               
percent. She  said that rate  is determined by a  periodic survey                                                               
of rental  properties in the  area. She pointed out  that whether                                                               
or  not competition  is involved,  highest and  best use  is what                                                               
appraisers consider  when determining value. She  said the across                                                               
the board fair market rental rate is being charged.                                                                             
SENATOR THERRIAULT  indicated the City of  Fairbanks negotiated a                                                               
lease  on a  piece  of property  in  the 1940s  or  1950s and  is                                                               
currently  getting  a pittance  for  it.  He  asked if  ARRC  has                                                               
something that protects the state down the line.                                                                                
MS. JOHNSON  said typically, ARRC  does a reappraisal  every five                                                               
years and  so the value is  subject to new fair  market value but                                                               
is also  subject to  caps and floors.  The ARRC  board instituted                                                               
the cap  and floor provision  in its long-term lease  policy rule                                                               
in 1988 in  response to testimony from  long-term leaseholders in                                                               
Anchorage.  Those  leaseholders  felt  it was  fair  to  have  an                                                               
increase but  also needed  stability to  run their  businesses so                                                               
asked for a cap. She said the  cap is usually 135 percent for the                                                               
five-year increase while the floor is the prior period rent.                                                                    
TAPE 03-10, SIDE B                                                                                                            
SENATOR  THERRIAULT asked  Mr. Marlow  if he  has entered  into a                                                               
lease on  this property and  is currently  paying taxes on  it so                                                               
the  issue before  the  Legislature today  is  whether it  allows                                                               
modification of the lease to get the HUD 202 financing.                                                                         
MR. MARLOW replied, "That is absolutely correct."                                                                               
SENATOR THERRIAULT  said Mr. Marlow's  intent is to put  a multi-                                                               
family dwelling  on that  piece of property  and the  question is                                                               
what financing package he can apply.                                                                                            
MR. MARLOW said that is correct.                                                                                                
CHAIR COWDERY  informed members that he  requested Mr. Utermohle,                                                               
legal   counsel,   to   answer  questions.   He   should   arrive                                                               
SENATOR WAGONER  said, regarding  the 5-year  lease, the  City of                                                               
Kenai operates in  the same way as  ARRC. At the end  of 5 years,                                                               
the  property  value is  reappraised  and  the interest  rate  is                                                               
adjusted.  He  pointed  out  the  property  is  always  appraised                                                               
without improvements.  Therefore, an improvement that  may not be                                                               
the highest  and best use  may not have  anything to do  with the                                                               
property value.                                                                                                                 
SENATOR  LINCOLN  indicated  that Senator  Therriault  succinctly                                                               
stated  the committee  mission. She  then noted  that Mr.  Marlow                                                               
listed one of  AEF's seven goals as involving  local and regional                                                               
leadership in  the entire  process. She asked  Mr. Marlow  how he                                                               
interprets local, and whether that means  ARRC and the MOA or the                                                               
community council.                                                                                                              
MR. MARLOW said  he is not a  board member of AEF but,  on all of                                                               
the   buildings  that   AEF  has   successfully  constructed   in                                                               
Anchorage, AEF has worked with  the community planning department                                                               
at the MOA to  achieve an outcome so that anyone  would say it is                                                               
a  good  neighbor to  the  pre-existing  properties. He  said  in                                                               
response to Senator Lincoln's question,  he would say local means                                                               
Anchorage,  but his  experience with  the  AEF Board  is that  it                                                               
would  consider  any  thoughts   the  Government  Hill  Community                                                               
Council wanted to share.                                                                                                        
SENATOR LINCOLN asked Mr. Marlow  if the proposed facility is for                                                               
seniors only  and, if the  lease extension  does not pan  out, he                                                               
could build a McDonald's restaurant on the property.                                                                            
MR.  MARLOW  said   the  property  is  zoned  R-4   so,  if  this                                                               
legislation  does not  pass,  it  is his  intent  to utilize  the                                                               
property to  build a different  multifamily project. His  goal is                                                               
to  facilitate this  legislation so  that AEF  can build  on this                                                               
property with 202 funds.                                                                                                        
SENATOR LINCOLN  asked Mr.  Pease to  define the  Government Hill                                                               
Community  Council   objection  to  building  a   senior  housing                                                               
facility   on  that   property   if  it   meets  all   government                                                               
MR. PEASE  said the  council has no  objection to  development of                                                               
that land.  In fact,  the neighborhood has  been listed  in MOA's                                                               
2020 plan for increased density so  it is not an issue of whether                                                               
the land gets  developed. The issue is how it  gets developed and                                                               
whether  the developer  will take  the community's  concerns into                                                               
consideration. So far, the council has not seen that occur.                                                                     
CHAIR COWDERY  asked if the  senior housing project would  be for                                                               
all Alaskans, not just Anchorage seniors.                                                                                       
MR. MARLOW said  that is correct provided those  seniors meet the                                                               
income qualifications.                                                                                                          
SENATOR  LINCOLN asked  if it  is common  language to  extend the                                                               
lease  beyond  55  years  without   including  a  provision  that                                                               
reserves ARRC's right to terminate the lease.                                                                                   
MS. JOHNSON answered  that by statute, ARRC  must get legislative                                                               
approval  if it  wants  to lease  land for  more  than 55  years,                                                               
unless ARRC  reserves the right  to terminate. She said  the same                                                               
rule applied when  the maximum lease term was 35  years. ARRC has                                                               
rarely leased  for longer  than the  statutory maximum  term and,                                                               
when it  has, it includes  the right  to terminate. About  two or                                                               
three years ago, ARRC requested  legislative approval for a lease                                                               
longer than the maximum term  for the Tri-Valley subdivision near                                                               
Healey  because of  individual mortgage  requirements. She  noted                                                               
this is the second time that  a lease has come up for legislative                                                               
SENATOR THERRIAULT noted,  in response to the charge  that SB 153                                                               
is  special legislation,  this kind  of  legislative approval  is                                                               
exactly what the statute requires.  Passage of legislation is the                                                               
only means for legislative approval.                                                                                            
MS. JOHNSON said that is correct.                                                                                               
CHAIR COWDERY  noted his  intent to move  the legislation  out of                                                               
SENATOR  LINCOLN  asked Mr.  Utermohle  if  SB 153  violates  the                                                               
provision that prohibits  local or special acts in  art. II, sec.                                                               
19 of the Alaska Constitution.                                                                                                  
MR.  GEORGE  UTERMOHLE,  legal  counsel,  Legislative  Legal  and                                                               
Research  Division, explained  that a  statute does  provide that                                                               
ARRC may enter into certain  kinds of land transactions only with                                                               
the prior approval  of the Legislature. That  creates a situation                                                               
whereby there is no other  general law that's applicable. This is                                                               
also  a case  where  the standard  applied  to determine  whether                                                               
legislation  prohibits  local  or   special  acts  is  whether  a                                                               
legitimate public  purpose is being  pursued. If the state  has a                                                               
reasonable  reason  for  dealing  with  site  or  lease  specific                                                               
legislation,   the  legislation   would  be   upheld  under   the                                                               
prohibition against local and special acts.                                                                                     
SENATOR  THERRIAULT said  a generic  piece  of legislation  would                                                               
give ARRC the power  to lease all of its properties  for up to 75                                                               
years and that is not a  public policy call the Legislature wants                                                               
to make.                                                                                                                        
MR. UTERMOHLE said that is correct.                                                                                             
SENATOR WAGONER motioned  to move SB 153 from  committee with the                                                               
zero fiscal note and asked for unanimous consent.                                                                               
CHAIR  COWDERY  announced  that  without  objection,  the  motion                                                               
carried. He then adjourned the meeting at 2:49 p.m.                                                                             

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