HOUSE BILL NO. 112 "An Act establishing the Alaska public building fund; and providing for an effective date." REPRESENTATIVE JEANETTE JAMES, SPONSOR testified in support of HB 112. She observed that HB 112 would establish the Alaska Public Building Fund as recommended by the Deferred Maintenance Task Force. The fund would be established within the general fund. The money in the fund would not lapse at the end of the year. The Administration plans to set up a rent schedule for state owned office space. The rent would be deposited into the Alaska Public Building Fund. It could then be used for maintenance. Co-Chair Therriault pointed out that the House Finance Committee reviewed similar legislation during the previous session. The legislation failed to pass in the final hours. Representative James clarified that agencies would pay rent for the space they utilize in state buildings. The rent would be calculated based on the depreciation and value of the property. The rent money could then be used for maintenance issues. She observed that money needs to be accumulated for long term maintenance. Co-Chair Therriault pointed out that the money would still be general funds. There would be no prohibition on future legislatures. He asked if the money would be identified as other funds. Representative James felt that it would be general funds. Co-Chair Therriault noted that "agencies" was changed to "occupant" in order to take into account private occupancy in the Bank of America building. Representative Grussendorf spoke in support of the legislation. Co-Chair Therriault noted that pressure to spend the funds for other items would remain. Representative J. Davies expressed concern that not all agencies would participate in the program equally. He suggested that participation be based on a square foot formula. He asked the meaning of "use" on page 2, line 1. Representative James observed that maintenance has to be described. She emphasized the need to fund long term maintenance. ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION testified in support of the legislation. She explained that there are a variety of federal rules that govern the way rental rate funds are established. The Administration is working with a statewide indirect cost consultant to develop a rate schedule to take to the federal government for approval. The rate schedule includes annual maintenance costs, janitorial service, and utilities. These costs are currently appropriated in the Department of Transportation and Public Facilities's budget for public facility maintenance. She stressed that it allows them to add depreciation. Depreciation would be added into the rental structure and collected for major maintenance renewal and replacement components. Each program will pay based on their space occupancy. The money will go into the fund. Annual operating and maintenance costs would be appropriated out of the fund. The capital budget would use the fund for replacement of building components. The monies would be accounted as general fund in the agency's program budget. When the funds are appropriated out of the building fund they would be accounted as an internal service fund source. The legislation would allow the state to leverage other funds. Co-Chair Therriault questioned if the same dollar would be counted twice. Co-Chair Mulder explained that the funds would be backed out. Co-Chair Therriault questioned if the funds carried forward for renewal and replacement would also be backed out. Ms. Elgee clarified that the capital expenditure would also be backed out as duplicated expenditures. Representative J. Davies summarized that there would be annual operating expenses and capital expenses. He asked the definition of "use". Ms. Elgee clarified that "use" is intended to encompass all of the components of the maintenance schedule. She observed that the components of the rental schedule would be the management (administration and overhead of operating maintenance personal), operations (utilities), maintenance (janitorial), and the depreciation costs (renewal and replacement). "Use" was used to clarify the sentence. She emphasized that everything would be covered under management, operation, maintenance and depreciation. Representative Austerman observed that major maintenance and depreciation are the two new things that would be accomplished by the legislation. Ms. Elgee explained that the failure to provide sufficient funding on an annual basis creates problems. The deferred maintenance backlog has developed because of an inability to replace major building components on a timely basis and because major building components have deteriorated more rapidly then anticipated. The legislation would allow an expansion of dollars available for annual maintenance by leveraging other fund sources that are not being charged for their space cost and provide a pool of funds for major building component replacements. Representative Grussendorf asked if the federal government or other entities occupy space in state buildings. Ms. Elgee stated that there is federal and private occupancy in the Bank of America building and private occupancy in the Court Plaza building. Representative Grussendorf observed that "use" broadens the language, but that the wording "management, operation, maintenance, and depreciation" would be sufficient. Co-Chair Therriault noted that there is a zero fiscal note. Representative Kohring MOVED to report HB 112 out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 112 was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Office of the Governor, dated 3/10/99.