SB 396-INTERIOR RIVERS PORT AUTHORITY    CHAIR STEDMAN announced SB 396 to be up for consideration. He didn't intend to move the bill that day and there would likely be a committee substitute offered at the next hearing. PAUL FUHS introduced himself and said: At the request of Representative Morgan I helped draft this legislation and helped him work on it. It was his idea to provide a regional approach to providing economic development and provision of some services in the Interior rivers area. I'll hold up a map for you to see. It's all pretty much small communities. They're all 80 to 300 people. They all face a lot of the same issues of high cost of energy, limited transportation, limited economic development opportunities although there are some pretty good mineral developments in the area. In studies on the area for its municipal government, there isn't enough there to really justify it so they've really been looking for the ways how can they do some of the things that local government would do especially in the economic development area. They're looking for transportation - with the Donlin Creek Mine going in - to help facilitate that - some of the other mines. Transportation in the area, the bill would allow them to do bulk fuel purchases. It would allow them to look at inter-ties if that made more sense and could provide power cheaper or could help develop some of the mining properties. Also look at tourism development in the area. In your packet you'll see that all the major landholders and agencies in the area have supported this and are looking for a way to try and lift the whole region up. Port authorities have been used around the world because they really provide a clear focus for economic development or whatever purpose they're put up for. We've seen a couple of others. The Prince of Wales Island Port Authority that's doing the ferry transportation down here has been real successful [and] we've got the Knik Arm Crossing. There's also been a proposal for airport authority at the international airports. It provides a legal framework for providing financing for economic development projects and I think one of the most important provisions that you want to look at in the legislation is on page 15. And if I was sitting in your seat, this is one of the things I'd be concerned about. You're setting up an authority that has the ability to issue bonds and go into debt and yet it's set up as a state corporation and that's necessary because there is no local government there. Alaska's port authority legislation, which authorizes municipalities to form it - which I worked on in '93 with Drew Pearce - you have to have municipalities to do it. The reason state legislation is needed here is because this is an unorganized section of the state. And I would say that this is probably one of the first times that the Legislature is really acting as the borough assembly for the unorganized borough, which is one of your mandates under the constitution. So it is one of those steps. The question would be if they take on debt, is that something that the state is going to end up being responsible for? And under this section, the credit of the state is not pledged. If they go out and issue revenue bonds, they are dependant upon the revenues of the project. They have to pass an independent third party independent evaluation by both investment banking firm to take the deal to Wall Street and then for Wall Street to buy the bonds so it would have to be pretty strong. If the project failed, it would be the bondholders who would be responsible, not the State of Alaska. So we gave that protection. Other than that, the authority has pretty broad powers to act in the interests of its residents. It is permissive legislation. The only thing that they have to do is on page 23. They really have to come back with a development plan and say: 'Here's the transportation under regional development plan - energy and tourism related.' The Department of Environmental Conservation has been very interested in is regional landfills and things like this where it can be more efficient. We've got a lot of uncovered landfills out there that are creating some serious health issues and they'd really like to have a regional entity to look at to do it more efficiently and to do it better. So I would leave it at that Mr. Chairman. I would be glad to answer any questions that you may have. I would just say that part of the reason that Representative Morgan asked me to do this is I've been involved in the writing of almost every authority in the state so far and I also served as chairman of the AIDA Board, the Energy Authority, and the State Bond Committee so I could answer questions concerning financing also. SENATOR GARY STEVENS remarked that the governor appoints a board of directors, but that board could be making communities liable for bonds. He asked how the communities buy into what the board has decided to do. MR. FUHS told him that because the communities aren't organized, this would be the debt of the authority as a whole not of those communities. The entire region would take on the debt as the authority and go out with revenue bonds or whatever else. There's no municipal tax base or general obligation taxing authority in the area. CHAIR STEDMAN questioned whether it would be just revenue bonds. MR. FUHS said yes and it also has the authority to receive funds from federal, state and private sources. It could receive land or enter into contracts with other entities. The Denali Commission is also interested because they're looking for ways to do deliver services more efficiently in that area so they would welcome this and perhaps be able to provide technical assistance grants or funding for projects. Also quite a lot of federal money has been identified for the Donlin Creek Road, which would connect the two rivers with a port on each side. CHAIR STEDMAN remarked it's a good concept. It creates economic development in the area and some inter-tie among the communities, which might raise the standard of living for everyone in the area. SENATOR GARY STEVENS asked if this would ever have an opportunity of moving outside that specific geographic area or would it be limited to the one area. MR. FUHS replied that it's limited to the described area unless the state changes the statute to include other areas. "But it could just by contract, memorandum of agreement or any other mechanism have joint ventures or do things with other parts of the state," he said. CHAIR STEDMAN asked him to speak to the board structure. MR. FUHS explained that it's a nine-member board. All land owners and organizations in the area would propose a list of people to the governor who would freely choose and then there would also be a couple of public members chosen. They're trying to get everyone in the area that has a stake in the authority to be involved. CHAIR STEDMAN said everyone should be represented. MR. FUHS agreed. SENATOR LINCOLN asked whether the administration supported the legislation. MR. FUHS said he didn't know whether the administration had taken a formal position, but he knew that some of the departments were interested in the regional approach. SENATOR LINCOLN said perhaps Representative Morgan had an answer and that she would like to hear from the departments that had expressed support. MR. FUHS told her the Department of Commerce, DOT and DEC had expressed interest. SALLY SADDLER with the Department of Community and Economic Development stated, "the concept has merit particularly as we talk about putting an economic development entity in place that can help this region take control and charge of their economic destiny." Currently they are evaluating the bill and if any questions arise they pledge to work toward a resolution. CHAIR STEDMAN asked Ms. Saddler to be at the next hearing of the bill. MS. SADDLER agreed to be at the next hearing. REPRESENTATIVE CARL MORGAN, bill sponsor, first noted that some were concerned that there was too much Native corporation representation in the original board composition. He then explained that the board has nine members; three seats are public members appointed by the governor, one seat is an industry member who is working in the area, and the rest are Native corporation members. CHAIR STEDMAN asked him to speak to the fiscal note. REPRESENTATIVE MORGAN said the fiscal note is indeterminate. CHAIR STEDMAN asked him to talk about the economic benefit this would bring to the region. REPRESENTATIVE MORGAN explained that this area has been studied extensively and the conclusion is always the same. It's difficult to do business in the region, it's impoverished, and it's mineral rich. The Donlin Creek Mine holds much promise, but it's held back because of a lack of infrastructure. SENATOR WAGONER asked what kind of commercial enterprises are in the area currently. REPRESENTATIVE MORGAN told him that it's largely barge service and air transportation freight currently. With the possibility of the road corridor tying the Yukon and Kuskokwim rivers, it'll basically be railroad to rivers to roads to resources. SENATOR LINCOLN asked whether the public members would specifically not be Native. REPRESENTATIVE MORGAN said it would be up to the governor. CHAIR STEDMAN stated that neither nationality nor ethnic or religious backgrounds should preclude anyone from having access into and benefit of the economic system. SENATOR LINCOLN said she appreciates that very much and she commended Representative Morgan for having put the bill together at such a late date. SENATOR WAGONER stated that, "just because they're Natives from the Native corporations and the Native association sets out the representation of those groups, it doesn't mean they have to be a Native. ... It doesn't matter. I think if this thing happens, I think it should be controlled by the people in that district." REPRESENTATIVE MORGAN added that this is the first of its kind. It has taken considerable time trying to get all the entities to agree. The 25 villages and communities are scattered throughout the region with populations that average 225 people. They can't support a municipality, but getting them to work together was a major step. There were no further questions asked of Representative Morgan. BOB CHARLES, the Calista Corporation president, testified via teleconference in support of SB 396. The measure has a focused approach to economic development and they look forward to its passage so they can get to work. There were no questions. CHAIR STEDMAN announced he would hold SB 396 in committee and adjourned the meeting at 3:15 pm.