HOUSE BILL NO. 315 "An Act relating to the financing of technological developments by public corporations of the state; and relating to the financing of the Kodiak launch complex, the Fairbanks satellite ground station space park, and a low-rank coal water fuel technology project." 1 PAT LADNER, EXECUTIVE DIRECTOR, ALASKA AEROSPACE DEVELOPMENT CORPORATION (AADC) testified in support of HB 315. He stressed that the legislation is a combination of efforts between the Alaska Industrial Development Export (AIDEA), Alaska Aerospace Development Corporation (AADC), Alaska Science and Technology Foundation, the Governor's Office and a bipartisan group of legislators. He emphasized that since September 1992, AADC has won $1.85 million dollars from the U.S. Air Force for the construction of a satellite launch facility in Kodiak and a ground station in Fairbanks. He reviewed accomplishments of AADC in regards to implementing plans for the launch facility and ground station. He emphasized the interest of private industry. Mr. Ladner provided members with charts demonstrating Alaska's favorable position as a launch site and ground station (copy on file). He emphasized that Fairbanks is the northern most location in the United States to control and data down link satellites. He maintained that Fairbanks has everything that is required for a ground station. Mr. Ladner noted that interest has been expressed by representatives of Lockheed-Martin, NASA, U.S. Air Force, TRW Corporation, and PSLP/Minuteman System. He assured members that financial and business support exists. He asserted that the legislation allows Alaska to enter into the high technological world of the 21st century. In response to a question by Representative Martin, Mr. Ladner observed that the State has not supplied any capital funding. He acknowledged that state support through the operating budget is $1.7 million dollars. Representative Martin expressed support for an amendment requiring 50 percent participation by industry. He emphasized the need for private funding. He asked if there is a payback schedule from AIDEA. He questioned if funding would be provided by the Alaska Science and Technology Foundation. Co-Chair Hanley clarified that section 6 states that the board of the Alaska Science and Technology Foundation may award up to $5.0 million dollars for the Kodiak launch complex and the Fairbanks satellite ground station and up to $4.0 million dollars to AIDEA for low-rank coal water fuel technology. ARLIS STURGULEWSKI, INTERIM EXECUTIVE DIRECTOR, ALASKA SCIENCE AND TECHNOLOGY FOUNDATION clarified that the low- rank coal water fuel technology has been granted phase I status by the Alaska Science and Technology Foundation. She 2 explained that the Alaska Science and Technology Foundation has committed $3.6 million dollars to the project. She emphasized that business conditions must be met before the project continues. Ms. Sturgulewski stressed that the Alaska Science and Technology Foundation is committed to directing 50 percent of their funding to small projects. Ms. Sturgulewski noted that the Legislative Budget and Audit Committee recommended in a letter dated September 29, 1994, that the Alaska Science and Technology Foundation's strategy of supporting applied research and development to be appropriate and in conformity with the legislative intent that led to its creation. The auditor found ambiguities in the enabling legislation and recommended revisions. Ms. Sturgulewski reviewed the legislation. She noted that section 1 adds "development and commercialization of technology." She explained that sections 2 and 3 address larger projects. She observed that section 3 would place in statute the requirement that 50 percent of the endowment income is distributed to small projects. Section 4 clarifies when it is appropriate for the Foundation to act in executive session. Section 5 allows for additional return to the principal of the endowment. Section 6 allows the transfer of funding to AIDEA and the Alaska Aerospace Development Corporation for the launch facility and ground station and to AIDEA for low-rank coal water fuel technology. In response to a question by Representative Martin, Ms. Sturgulewski stated that the legislation codifies current practices of the Alaska Science and Technology Foundation. Representative Martin asserted that the Legislative Budget and Audit Committee concluded that the Alaska Science and Technology Foundation had gone too far from the original legislative intent. Ms. Sturgulewski disagreed with Representative Martin's conclusion. She asserted that most meritorious projects have been funded. She noted that there is a peer review policy. She added that projects must include private money and commitment. Representative Martin maintained that the projects contained in the legislation will utilize the available funding. RANDY SIMMONS, DEVELOPMENT AND FINANCE MANAGER, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY spoke in regards to the financing for the projects. He explained that AIDEA has completed a feasibility review of the legislation. A 3 cursory financing plan was reviewed to assess whether the facility could pay for itself. The operating expenses, revenue sources, construction cost estimates, and construction time were reviewed. He concluded that the business plan by AADC is reasonable and has merit. He noted that the next step would require a comprehensive review including statutory findings to conclude that the project is economically advantageous to the State and will provide or retain employment for the State. He noted that actual contracts with users would have to be in place. He noted that there would be a third party review of the construction costs and time line. He asserted that AIDEA would not provide funding for the project's construction without the demonstration of financial feasibility. Representative Navarre questioned the return to the State in terms of jobs as offset by demands on the State's infrastructure. Mr. Ladner stated that 25 to 30 local persons would be trained initially for med-tech jobs. He estimated that there would be a $5.0 million dollar a year positive impact on the community. He stressed that launch functions would be operated by locally trained individuals. Representative Navarre acknowledged that the project has the potential to have a positive impact. Mr. Ladner emphasized that the legislation contains checks and balances. Representative Martin provided members with Amendment 1 (Attachment 1). Amendment 1 would require that the appropriation be "conditioned upon at least 50 percent private enterprise matching funds being made available". (Tape Change, HFC 95-98, Side 1) Mr. Ladner spoke against Amendment 1. He reassured the committee members that all the business arrangements and contracts will be in place before funding is spent. Representative Therriault stressed that nothing will be built until the contracts are in place to provide the payback through use. He stated that contracts for payback through use may not be construed as fulfilling the private match. Representative Navarre spoke against the amendment. HB 315 was HELD in Committee for further consideration.