SCR 6-LOCATION OF NEW SEAFOOD LAB    CHAIR GARY STEVENS asked Senator Wagoner to introduce the bill. SENATOR THOMAS WAGONER, bill sponsor, stated there are two current issues pertaining to the resolution. · The lease on the existing seafood lab located in an old Piggly Wiggly Store in the Matanuska Valley is not available for releasing. · The Alaska Industrial Export Authority currently owns a 250,000 square foot underutilized, state of the art seafood processing facility in Anchorage. There is no evidence that indicates the processing unit will be used to process fish in the foreseeable future. He paraphrased from the sponsor statement: The funding history for replacement of the lab began in FY 1999 with a $145,700 appropriation for a feasibility study. In FY 2001, at a cost of $240,000, the Department of Environmental Conservation contracted for a conceptual design. A state-owned parcel adjacent to the Anchorage Department of Health and Social Services public health lab was determined as the most accessible and economical site for a new lab. In FY 2002, an appropriation of $1.3 million was allocated for a complete design. This year, the legislature is being asked to approve a bond bill for construction costs of some $14.285 million. This resolution suggests that a better use of state funds would be to incorporate the proposed lab into the existing AIDEA owned building that currently houses Alaska Seafood International (ASI). AIDEA has provided $50 million for construction and long-term financing for the processing building and retains a 29 percent equity position in ASI and ownership of the plant and land underlying the plant. The state could realize substantial cost savings by construction of the lab within this existing state owned facility. SENATOR JOHN COWDERY understood Alaska Seafood International does some lab work in the facility and wondered whether this would become an extension of that lab or remain separate. SENATOR WAGONER advised the proposal was exploratory in nature but the design called for the two to remain separate. He remarked $15 million is a lot of money for the state to spend on a lab particularly when much of the lab, as designed, is devoted to office space. SENATOR COWDERY asked how many square feet were needed for the lab and whether it was available in the AIDEA building without jeopardizing ASI needs. SENATOR WAGONER replied they need a little more than 20,000 square feet and it wouldn't jeopardize ASI needs in the foreseeable future. CHAIR GARY STEVENS asked Doug Bell to speak to the ASI position. SIDE B 4:25 pm DOUG BELL, Alaska Seafood International representative, advised they are neutral with regard to the resolution. They do have the room and would be willing to share the space. CHAIR GARY STEVENS asked for confirmation that this would present no conflict and ASI would be comfortable working with the seafood lab. MR. BELL assured him there were no space issues. SENATOR FRED DYSON asked for the square footage of the AIDEA building. MR. BELL replied the building has 202,000 square feet and they occupy about 25 percent. SENATOR COWDERY asked whom the seafood lab would pay for use of the facility. MR. BELL wasn't sure those arrangements had been made but they were open to the discussion. SENATOR COWDERY asked what the state was currently getting in return for its $50 million investment in the AIDEA building. He said, "I know you had about 80 something in it." MR. BELL replied he was correct. Currently AIDEA is deferring ASI rent and that will continue until October 2003. SENATOR COWDERY asked whether the seafood lab rent would be similarly deferred. MR. BELL advised AIDEA would have to speak to that question. SENATOR COWDERY asked whether ASI would have any problems paying rent beginning in October. MR. BELL was unable to give a definitive answer but, at this point, is would be difficult. SENATOR COWDERY stated for the record he hosted a legislative lunch using ASI donated product. CHAIR GARY STEVENS asked if an AIDEA representative was present and was advised they were on line. SENATOR GRETCHEN GUESS asked whether the operating costs would remain the same regardless of where the lab was located. SENATOR WAGONER said personnel costs would probably remain the same and lab costs are basic. He advised it would be a three way process between ASI, AIDEA and DEC and AIDEA could speak to the costs better than anyone else. SENATOR COWDERY asked him to state for the record exactly what the lab would do. SENATOR WAGONER explained the lab runs a variety of tests on dairy products, on animal meats and meat products, and shellfish products. Any food tests the state is required to run are handled in the lab. SENATOR GUESS advised one of the arguments for moving the lab into Anchorage was to provide better access to the airport. SENATOR WAGONER agreed time is of the essence when testing a food product. This is a more complex issue than he was initially aware. CHAIR GARY STEVENS added this is extremely important to the seafood industry particularly when testing for paralytic shellfish poisoning. He announced Matt Tanaka from DOT, Tom Livingston from Livingston Sloan Architects, Elise Hsieh from the Department of Law, Ron Miller and Sara Fisher-Goad from AIDEA were all on-line and available to answer questions. He asked an AIDEA representative to speak to the questions regarding payments. RON MILLER, AIDEA representative in Anchorage, testified they have discussed the DEC and DOTPF proposed plans and have proposed rental rates for that portion of the building. The arrangement would be a lease between AIDEA and DEC for the space in the facility. CHAIR GARY STEVENS asked how ASI fit into the picture. MR. MILLER explained AIDEA owns the building, ASI leases the building and the lease payments are deferred until October 2003. Should DEC move into the building and ASI continue to occupy the building after October, AIDEA would make some lease adjustment to ASI since they would be occupying less space. They would make a separate lease agreement with DEC. There were no further questions for Mr. Miller. KRISTIN RYAN, Director for the Division for Environmental Health, explained DEC started a process with DOTPF to see whether SJR 6 was feasible. DOTPF manages state leases and DEC does not. A significant portion of the funds have already been allocated to design the lab that would be built on state-owned land next to the public health facility so they wanted to act quickly to determine the feasibility of this proposal. The current lease expires in December 2006 and a new lab must be in place on or before that time. With regard to Senator Cowdery's questions about lab functions she explained it tests raw dairy product to make sure the fat content is correct and to ensure the pasteurization process is working. Every portion of dairy products that are sold to the military and to schools must be state certified. The lab also tests shellfish for paralytic shellfish poisoning, and reindeer and other large animals shipped out of state for brucelosis. It also performs the Fish Monitoring Project analysis to test for persistent organic pollutants such as heavy metals. DOT director Matt Tanaka contracted with Livingston Slone to analyze the AIDEA building as an option to relocate the lab. She noted preliminary information was in the packets and page 2 provides a comparative analysis. CHAIR GARY STEVENS asked if she was referring to the Seafood and Food Safety Laboratory Replacement spreadsheet dated 4/3/03. MS. RYAN said that was correct. It compares building the lab as planned to building it in a portion of the AIDEA building that is leased by ASI. Putting the lab in that building would save the state a bit more than $700,000. The reason the savings is not greater is that the state has already spent $1 million in design work and that is a sunk cost. If the lab were to share the ASI space, the state would have to start over. Only $2 million could be saved in construction costs because the requirements for a lab are very specific. All heating and ventilation systems would have to be completely separate and the only existing infrastructure that could be used is the floor and one wall. Contingency costs are about $500,000 more to put the lab in the building ASI leases because of the unexpected costs to modify an existing structure. SENATOR COWDERY asked if she said it would cost $500,000 more to put the lab in the existing facility. MS. RYAN responded it would cost about $700,000 less to use the ASI leased building. The $500,000 covers contingencies. They worked with the Department of Revenue to analyze the impacts to the funding options. For one thing, certificates of participation couldn't be used to modify an existing state facility, which means the construction costs would require a $13.2 million general fund appropriation. SENATOR DYSON asked, "As opposed to what?" MS. RYAN explained the lab that is already designed could be funded with certificates of participation. They could sell bonds and debt service would assume the annual cost of paying back that bond debt. The Governor is introducing a bond bill to provide that option if the Legislature elects to take that route. If the lab were built in the ASI leased building, DEC would have concerns about vibration to their microscopes and scales from ASI or other tenants. Fulcrum scales that measure one part per billion are so sensitive that a person walking into the room can impact the reading. DEC has discussed these concerns with AIDEA with regard to ASI and other tenants. The lab would occupy just ten percent of the building and house 14 people. Labs are built as stations for each type of analysis that is done with each station representing a function. SENATOR COWDERY asked if sharing the building would cause problems. MS. RYAN replied it might because lab equipment is sensitive to vibration and fumes. CHAIR GARY STEVENS asked about the seafood processing business already on the premises. MS. RYAN replied ASI business is compatible with the lab but there could be ethical issues because the lab would oversee and regulate ASI. SENATOR COWDERY asked whether another food vending entity would have an impact on the lab. MS. RYAN said they regulate any food processing and might test their products. AIDEA would have to determine the possible conflicts with every potential tenant. SENATOR DYSON said he was startled by the cost to convert one quarter of the building. He asked whether the heating system was hot air. TOM LIVINGSTON with Livingston Slone Architects replied the existing system was built for manufacturing and food processing occupancy. The lab would need a separate ventilation system to prevent mixing and contamination. More control over the ventilation systems is also required. SENATOR DYSON restated his question regarding the heating system. MR. LIVINGSTON replied they propose to put in a stand-alone heating and ventilation system specifically for the lab. The projected cost per square foot is $85, which is commensurate with Anchorage building costs. SENATOR DYSON asked if it was correct that the temperature and environment in the lab had to be carefully controlled. MR. LIVINGSTON said that was true. They designed the lab to occupy a corner of the two-story building. For economy and to utilize the volume effectively they propose a two-story build- out within that space. Two insulated exterior walls and the roof and floor slab could be used, but all interior utility systems would be independently provided. The lab would be an independent building with the opportunity to expand the building outside the current footprint at some point. SENATOR DYSON asked if the existing heating system was hot air. MR. LIVINGSTON replied it was hot air with an air exchange rate that is lower than required by the seafood lab. SENATOR DYSON asked why they couldn't use a heat exchanger off the existing hot air system to provide a hydronic system or whatever was needed for the proper environmental control in that quarter of the building. MR. LIVINGSTON advised they are trying to utilize existing systems wherever possible and would tap into the emergency power system. SENATOR COWDERY asked whether placing an environmentally sensitive lab in the building would jeopardize any other options for usage. MR. MILLER responded it is a concern that DEC would be a preemptive tenant. They also noted the proposed footprint would take up two or three of the current loading docks, which might serve as a disincentive for a future tenant. CHAIR GARY STEVENS asked him to comment on what has already been spent in the design phase of a new lab because he understood $145,000 was spent on a feasibility study. MR. MILLER explained that money was spent by DEC and DOTPF. CHAIR GARY STEVENS noted $240,000 was spent on conceptual design. He asked whether the $1.3 million appropriated in FY 02 had been expended. MR. MILLER advised they were not involved; DEC and DOTPF might be able to answer the question. CHAIR GARY STEVENS asked Mr. Tanaka whether the $1.3 million FY 02 design appropriation had been expended. MR. TANAKA replied part had been expended. Footnote (1) on the spreadsheet states that if the decision is made by 4/15/03 about $650,000 would be available to carry forward for the design of a lab in the building ASI leases. To date they have spent somewhere in excess of $700,000 on the design of a lab to go next to the existing public health lab on Tudor Road. That design effort would be shelved if the direction were changed to pursue building a lab in the ASI building. When comparing the two proposals and including sunk costs for the Tudor Road lab, the projects are a wash. Both would be $14 million projects. SENATOR COWDERY noted he wanted to move the bill on to Finance, but he questioned whether the change of direction proposed by SCR 6 would actually save the state money. He made a motion to move SCR 6 from committee. There being no objection, it was so ordered.