HOUSE BILL NO. 352 "An Act giving notice of and approving a lease-purchase agreement with the City of Palmer for a fire management facility at the Palmer Airport." REPRESENTATIVE SCOTT OGAN, sponsor HB 352, testified in support of the legislation. He noted that HB 352 would 2 provide authorization for a lease-purchase agreement with the City of Palmer to finance and build a Department of Natural Resources fire management facility at the Palmer Airport. He asserted that the agreement will save the State $282.0 thousand dollars a year. He stressed that the State will save $8.5 million dollars over 20 years. He observed that the new facility would consolidate four wildland fire facilities in the area of the Palmer Airport. He observed that the Department of Natural Resources' flight operations are currently run from a lease space at the Palmer Airport. The administrative operations are coordinated in Anchorage. Warehouse support is provided in Eagle River. Additional administrative and warehousing activities occur at Big Lake. He asserted that the legislation will make wildland fire fighting response time more efficient. He explained that materials are transported from the warehouse in Eagle River to the Palmer Airport. He noted that response time effects the level of fire support needed. He observed that the Governor's Budget Summary recognizes that the project will save the Department of Natural Resources money. The State would own the facility at the end of the agreement. Representative Ogan stressed that the City of Palmer has an airport and undeveloped land available. The runway at the Palmer Airport is long enough to operate fire support planes. He emphasized that air traffic at the Palmer Airport is less than at the Anchorage International Airport. He maintained that the Palmer Airport is centrally located. He added that Palmer also has community services and commercial support options available. He observed that the City of Palmer supports the project. Representative Brown questioned how the project will improve access. Representative Ogan observed that burning permits would be transferred from Big Lake to Palmer. Representative Brown questioned what services are located in the Anchorage Frontier Building that would be moved to Palmer. TOM BOUTIN, DIRECTOR, DIVISION OF FORESTRY, DEPARTMENT OF NATURAL RESOURCES replied that 4,200 square feet for wildland fire logistics would be transferred. He noted that the Urban and Community Forestry Program, Support Services, Forest Stewardship and Resource Management Program will remain in the Frontier Building. He clarified that Wildland Fire Logistics would be the only function transferred. Representative Brown asked why the legislation was not introduced by the Governor. Mr. Boutin noted that the legislation had already been introduced. He emphasized that the Commissioner of the Department of Natural Resources strongly supports the project. 3 Representative Brown noted that the Department has pursued a policy of letting fires burn. Mr. Boutin agreed that the majority of land under state protection is in the let burn category. He added that due to suburban sprawl the percentage of land in the let burn category is at the maximum. In response to a question by Representative Brown, Mr. Boutin clarified that AS 41.15 requires the State to perform fire suppression on state, municipal and private land. He noted that the federal government reimburses the State for fires fought on federal land and on Alaska Native Claims Settlement Act lands. He noted that the 56 fire districts around the State act under a cooperative agreement. DEAN BROWN, DEPUTY DIRECTOR, DIVISION OF FORESTRY, DEPARTMENT OF NATURAL RESOURCES clarified that the Division responds to wildland fires within the Municipality of Anchorage. The Division does not respond to structure protection unless a structure is threatened by an out growth of a wildland fire. The Division does not respond to house fires. Representative Brown questioned if fees for services have been considered. Ms. Brown stated that they have not considered instituting user fees. Representative Brown asked if the City of Palmer is available to bond for the facility. Mr. Boutin noted that financing would be identical to the lease financing obligation used to build the Palmer Courthouse. Representative Brown suggested that most of the economic benefit goes to the City of Palmer. She expressed concern over the number of lease purchase agreements the State has acquired. Mr. Boutin observed that lease purchases for real estate are located in the front section of the operating budget. Representative Parnell asked if the State currently owns other facilities used by the Division. Mr. Boutin observed that the Eagle River facility is a portable warehouse that could be moved or used by other agencies. It is on state land. The Big Lake facility is state owned and is on state land. He observed that the Department will not be out of the lease space in the Frontier Building until the end of the current rental agreement. The lease will expire in July, 1999. The State could rent the space for another agency. Representative Parnell questioned if the savings would be to the State or to the Department only. Mr. Boutin argued that there will be a savings to the State. He added that materials are transported back and forth from Eagle River to Palmer. Representative Ogan noted that other agencies are interested in the Eagle River facility. 4 Representative Parnell questioned if there would be a savings to the State to build the facility with state funds. Mr. Boutin noted that the true interest cost would be tax free at approximately 5 percent. The state general fund is invested at a taxable yield. He added that there is arbitrage every time the State enters into a tax exempt obligation. Representative Therriault noted that the let burn policy is based on the decision that there are benefits to letting some areas burn. He pointed out that the policy is not necessarily driven by the budget. He added that fees would be difficult to administer and could have adverse effects on fire suppression efforts. Representative Navarre noted the Majority's budget plan calls for significant reductions in the operating budget. He suggested that it is premature to consider the project authorization until the impact of reductions is seen. He stated that the project does not appear to be a bad idea. He asked what kinds of needs assessments are being done. He maintained that today's assumptions will not hold true over time. Representative Brown referred to backup material provided to the Committee by the Department of Natural Resources, "South Zone Facilities Consolidation, Proposed Lease Finance at Palmer Airport (copy on file). Brown noted that the FY 99 savings is shown at $24.8 thousand dollars. Mr. Boutin explained that the on going annual facility savings is estimated at $282.9 thousand dollars. There will be an additional one time savings of $24.8 thousand dollar in FY 99. Ms. Brown explained that the transfer would occur in phases transfer due to the seasonal nature of the fire season. NICO BUS, ACTING DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES clarified that the savings in FY 99 will occur as the Department partially vacates the office space at the Frontier Building. He explained that General Services can move other positions into the space as they are vacated before the lease expires. As positions are transferred other rental space can be cancelled as leases expire. Representative Brown noted that the Department stated that the cost of underground fuel storage tank replacements will be mitigated by the move. Ms. Brown explained that the move to Palmer will allow the Department to use available commercial facilities for fuel storage. The Department would no longer need to use underground oil tanks located at 5 the Big Lake facility. These tanks would need to be replaced if their use was continued. TOM SMITH, CITY MANAGER, CITY OF PALMER testified via the teleconference network. He observed that the City of Palmer passed Resolution No. 1049 in support of the Forestry Consolidation Project at the Palmer Municipal Airport. Ms. Brown reviewed charts provided to the Committee. She noted that 80 percent of fires are caused by humans. She noted that the Department's operations are spread between five locations. She emphasized that if the Department can catch a fire when it is small that the cost is minimal. She stressed that a project fire can cost the State $2.0 million dollars or more. She emphasized that consolidation will decrease response time and increase safety. She pointed out that there are 30 miles between the Eagle River facility and the Palmer Airport. (Tape Change, HFC 96-51, Side 2) Ms. Brown noted that basic public services would be maintained in Anchorage. The central office which houses all the federal programs and urban and community forestry will remain in the Frontier Building. She stressed that expenses associated with large project fires can be reduced through greater efficiencies. She observed that population has increased in areas that are not readily accessible by road. Co-Chair Foster MOVED to report HB 352 out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HB 352 was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Revenue, dated 2/2/96; and with a zero fiscal note by the Department of Transportation and Public Facilities, dated 2/2/96. Representative Navarre OBJECTED for purpose of discussion. He questioned where the debt service on the project fits into the Majority's overall plan and with the impact of budget cuts. Representative Navarre WITHDREW his objections. Representative Brown OBJECTED for purpose of discussion. Co-Chair Hanley stressed that the State will always have fire fighting capability. He asked how current costs will be financed if consolidation does not take effect. He stressed that consolidation will save money over time. 6 Representative Navarre questioned if consolidation will result in savings. Mr. Boutin stated that the numbers show both a future value and a discounted net present value savings. He emphasized that the State will own the building at the end of the lease. Representative Navarre argued that reductions in the budget could result in deferred maintenance. He emphasized that deferred maintenance could result in the failure of the building before projected savings can be realized. He stressed that any budget plan must build in the project's cost over the next 20 years. Representative Brown WITHDREW her objection. Representative Kohring observed that savings will be realized by increased efficiencies and improvements in response time. Representative Brown asked how the $6.0 million dollar construction cost will be financed. Mr. Boutin noted that the City of Palmer will issue a lease obligation.