HB 94-PROHIBITED COMMERCIAL LEASE PROVISIONS  3:35:36 PM CHAIR KREISS-TOMKINS announced that the final order of business would be HOUSE BILL NO. 94, "An Act prohibiting the use of certain restrictive provisions in leases of space for business use in certain federally established zones; and adding an unlawful act to the Alaska Unfair Trade Practices and Consumer Protection Act." 3:35:58 PM PAUL LABOLLE, Staff, Representative Neal Foster, Alaska State Legislature, on behalf of Representative Foster, prime sponsor, explained that HB 94 would prohibit contract clauses that prevent or limit either partys ability to participate in business that compete with the other party. In essence, it would add noncompete clauses to Alaskas Unfair Trade Practices for lease agreements in HUBZones. He noted that HUBZones are defined by the United State Small Business Administration (SBA) under 15 U.S.C. 657a (HUBZone Act of 1997). CHAIR KREISS-TOMKINS asked Mr. Labolle whether he wanted to make any additional refresher comments on the bill. MR. LABOLLE addressed questions from the previous bill hearing pertaining to HUBZones and where they are located. He noted that at that time they were under review; however, that process has been frozen until June 30, 2023, due to pending U.S. Census data. 3:37:46 PM REPRESENTATIVE VANCE inquired about the specific instance that highlighted the need for this legislation. MR. LABOLLE conveyed that the local Native corporation in Mountain Village had entered into a lease agreement with Alaska Commercial (AC) Company; however, due to the noncompete clause, they couldnt open a smaller store that would compete with AC. He explained that in rural areas, it's hard enough to get competition to begin with because the population base is so low. He said the added barrier to competition is what the bill hopes to remove. 3:39:19 PM REPRESENTATIVE CLAMAN asked whether this legislation raises any equal protection issues. TERRY BANNISTER, Legislative Legal Services, confirmed that it does raise equal protection issues as everyone would not be treated equally. REPRESENTATIVE CLAMAN pointed out that the population within the HUBZone would be treated the same and the population outside the HUBZone would be treated the same. He questioned why that doesnt resolve the equal protection issue. MS. BANNISTER remarked Because the people outside the zone are treated differently than the people inside the zone. REPRESENTATIVE CLAMAN contended that the equal protection problem would be a federal issue, as it pertains to the HUBZones. 3:40:25 PM MS. BANNISTER said she had not examined federal law on the HUBZones yet. REPRESENTATIVE CLAMAN asked whether there are issues related to delegation of authority to the federal government. MS. BANNISTER answered yes. She said the bill depends on establishing operation of the HUBZones, which is a federal activity. She added that Alaska provisions would depend on the federal governments actions as they relate to the HUBZones. Therefore, the issue of delegating authority to the federal government is raised. 3:41:51 PM CHAIR KREISS-TOMKINS asked whether ultimately, these are constitutional problems. MS. BANNISTER answered yes. She noted that the equal protection issue also concerns local and special legislation, which is a state constitutional issue. Further, she said, the improper delegation would be the activity that the legislature is allowed to perform their activities, which is ultimately a constitutional issue. CHAIR KREISS-TOMKINS asked Ms. Bannister to speak to the local and special legislation consideration. MS. BANNISTER stated that the bill would only apply to HUBZones in certain areas of the state. She explained that a provision in the constitution indicates that the legislature cannot pass a law that only applies locally. Alternatively, a general law could be made applicable at the will of the courts. She added that if the courts would decide whether the bill bears a fair and substantial relationship to legitimate state purposes. CHAIR KREISS-TOMKINS asked Ms. Bannister to opine on whether the legislation bears a fair and substantial relationship to legitimate state purposes. MS. BANNISTER said she has no opinion at this time. CHAIR KREISS-TOMKINS asked whether she has an opinion on the broader constitutionality of the bill. MS. BANNISTER answered no. She said she didnt have enough time to consider the facts. CHAIR KREISS-TOMKINS sought to confirm that she was just flagging them as issues. MS. BANNISTER confirmed that she was merely bringing attention to issues that may be raised. 3:45:08 PM REPRESENTATIVE CLAMAN asked whether the constitutional issues that have been identified are state related or federal constitutional issues. MS. BANNISTER said the equal protection issue might raise a problem with federal legal protection laws. REPRESENTATIVE CLAMAN asked whether Ms. Bannister agrees that the Alaska equal protection provisions are stronger than the federal equal protection provisions. MS. BANNISTER answered yes. 3:45:57 PM REPRESENTATIVE VANCE asked where the HUBZones are located in Alaska. MR. LABOLLE said HUBZones cover all of Alaska for different reasons. Generally speaking, he said, Anchorage, Mat-Su, and Fairbanks are the areas outside the HUBZones. REPRESENTATIVE VANCE sought to confirm that it's the bill sponsors interpretation that the bill would not conflict with Alaska statutes. MR. LABOLLE said the thought process behind the bill is that equal protection provisions can be violated if there is a compelling state interest. In this case, he indicated that the compelling interest would be socioeconomic. He added that the bill sponsor stuck with the federally defined HUBZones rather than site specific ones in consideration of the special legislation provision. 3:48:02 PM REPRESENTATIVE EASTMAN directed attention to Section 2 and asked why not make the law apply to every area of the state, as opposed to only in HUBZones. MR. LABOLLE said the bill sponsor wouldn't be opposed to that if it is the will of the committee. He explained that Representative Foster is looking at the issue from a rural- centric perspective and didnt want to involve Anchorage; however, if Anchorage, Mat-Su, and Fairbanks wanted to be included, it wouldnt pose any problems. 3:49:02 PM CHAIR KREISS-TOMKINS asked whether Sitka and Homer would be affected by the geographic scope of the proposed legislation. MR. LABOLLE offered to follow up with that information. 3:49:30 PM REPRESENTATIVE CLAMAN, in response to Representative Eastman, surmised that if Anchorage, Fairbanks, and Mat-Su were included, property owners would want to control whos on their property. For example, if the bill were to pass and a quick-stop convenience store was required to go up in a mall wherein Fred Meyer was located, Fred Meyer would be concerned with that, he opined. He shared his belief that its different in a small community that only has one strip of stores owned by a single landlord. CHAIR KREISS-TOMKINS, in reference to the HUBZones Map located on the SBA website asked, What is designated by the red, Mr. Labolle? MR. LABOLLE said the red indicates that the HUBZone is qualified as a county. CHAIR KREISS-TOMKINS sought to confirm that red signifies a HUBZone. MR. LABOLLE replied, Not just red. He provided a brief explanation of how to use the interactive map. CHAIR KREISS-TOMKINS returned to his original question, asking whether Sitka and Homer are qualified HUBZones. MR. LABOLLE confirmed that they are both in HUBZones. 3:51:31 PM REPRESENTATIVE KAUFMAN suggested that there could be unintended consequences that may dampen businesses interest in an area. He opined that monopolies arent good unless its the only way to get goods and services into an area. 3:52:30 PM REPRESENTATIVE EASTMAN suggested that a geographically neutral way to write the bill would be to base the limitations on the size of the business involved or the number of locations it has. MR. LABOLLE said he is unfamiliar with any statutes that use that specific categorization. He said another route to consider would be by population size. 3:53:44 PM REPRESENTATIVE VANCE urged further consideration of the impacts to the affected boroughs or municipalities. MR. LABOLLE acknowledged that if the committee decided to look at alternate methods of application, that would be an important consideration. 3:54:48 PM REPRESENTATIVE EASTMAN said he is always reticent of referencing federal law in state statute because it is subject to change in the future. He conveyed that he would be more amenable to implementing the legislation without a reference to HUBZones due to the level of uncertainty. MR. LABOLLE confirmed that he would be following up on the issue of delegating authority to the federal government. He further acknowledged that the HUBZones are subject to change, as they are reassessed every five years. 3:56:37 PM CHAIR KREISS-TOMKINS announced that HB 94 would be held over.