HOUSE BILL NO. 281 "An Act providing for the issuance of general obligation bonds in the amount of $665,000,000 for the purposes of paying the cost of design, construction, and renovation of public elementary and secondary schools, renovation of state buildings, capital improvements at the University of Alaska, and capital improvements to state harbors; and providing for an effective date." Co-Chair Torgerson stated that some changes had been made to this legislation. He made a comparison of how this legislation changed from the "B" version to the proposed "Q" version, the latter of which was now before the Committee. Senator Adams referred to Section 8, line number 24 of version "Q" and asked about the use of the word "may" versus "shall." He added that he wanted to make sure funds were appropriated to these different communities by the use of this particular word. Co-Chair Torgerson responded that all of these bond reimbursements were subject to appropriation by the legislature and because of this, the use of the word "may" was appropriate. Senator Phillips inquired about a loss of funds for Juneau's harbors. He understood that Juneau chose to take $5.5 million for Southeast. Co-Chair Torgerson responded that this reference to lost money was never made in the "B" version since a new piece of legislation was going to be introduced with port and harbor funds outlined accordingly. He explained what had transpired throughout each version in regards to Juneau's harbors, at $1.77 million, the figure not accounted for in the committee substitute presently before the Committee. Senator Phillips asked why $2 million was deducted from [indiscernible] Alaska, Anchorage. Co-Chair Torgerson responded that this was part of "the walkway." [He did not specify which walkway he was referring to.] Senator Phillips stated that he thought the $36 million was for the library and that the walkway was $5 million extra. Co-Chair Parnell responded that it was his understanding that the library would cost $31 million and the walkway would cost $5 million extra to equal $36 million total. Co-Chair Torgerson concurred with this assessment. Co-Chair Parnell made a motion to adopt CS 1-LS1201\Q of HB 281 as a workdraft. Senator Phillips OBJECTED. A roll call vote was taken. IN FAVOR: Senator Leman, Senator Adams, Senator Wilken, Senator P. Kelly, Senator Green, Co-Chair Parnell, Co-Chair Torgerson. OPPOSED: Senator Phillips, Senator Donley. The MOTION PASSED: (7-2) Co-Chair Torgerson referred to a pie chart entitled, "Bond Package - HB 281." [Included in the bill file.] He noted that this chart represented $302,881,000 and he gave a breakdown of how some of these figures shifted as a result of changes to the corresponding legislation. Senator Phillips asked if there was an amortization schedule for a $28,105,000 figure as referenced. Co-Chair Torgerson responded that it was forthcoming. JOHN BITNEY, Alaska Housing Finance Corporation (AHFC) stated that there might be some forthcoming policy calls related to the package before the Committee, but noted that the technical changes in response to the Corporation's concerns had been met with this latest version "Q." He suggested two areas of clarification, the first being Section 9 on page 10. He noted that this language regarded the right to sell and receive revenue by the Commissioner. Mr. Bitney clarified that as this language is presently written, the Corporation does not intend to renew the referenced sales agreement on an annual basis. He added that only one sales agreement would be effectuated. He clarified that the Corporation will prepare a fiscal note reflecting the bond payment schedule as outlined in a spreadsheet already distributed. DAN FAUSKE, CEO, AHFC testified via teleconference from Anchorage to note that he had no further comments at this time. Senator Wilken asked what grade the corresponding bonds to this legislation would be. Mr. Fauske responded that these would be rated from an A to an AA designation. Senator Wilken noted an article about New York City selling part of their revenue stream from the tobacco sales and that the city was going to sell these at an A to an A+. He asked if it was fair to say that Alaska has a better bond rating than New York City. Mr. Fauske responded that this would depend on the investment structure which Alaska choses, but he anticipated Alaska's package to be as competitive as the one for New York City. He stated that AHFC has a good record and this Corporation's reputation in the marketplace was strong. CARL ROSE, Executive Director, Association of Alaska School Boards (AASB) stated that his organization had some grave concerns regarding this bond package, including the exclusion of major maintenance projects. He referenced the related Kasayulie suit as a violation of equal protection and a violation of the education clause. He noted that the legislature in response to this suit asserted that they were poorly represented. He continued that it did not appear that any of the concerns raised by this case would be addressed in this present legislation and he was concerned about future litigation surrounding these neglected issues. BRUCE JOHNSON, Deputy Commissioner, Office of the Commissioner, Department of Education and Early Development stated that the department appreciated the funding for the first six new school construction projects included in this legislation. He pointed out that this committee substitute totally ignores the privatization of major maintenance projects established by the department. He continued that this legislation is inherently wrong because it funds unknown projects in various urban communities, while ignoring such critical needs of schools without functional kitchens, hot running water, toilets and deteriorating foundations. Co-Chair Torgerson asked the department to prepare a fiscal note on the debt reimbursement for their portion of this legislation. Amendment #1: This amendment adds new language as follows: Page 13, after line 20 (E) Department of Transportation and Public Facilities to pay for construction and renovation of highway and road projects as follows: PROJECT Anchorage: Dowling Road Extension/ $39,200,000 Reconstruction - (Minnesota Drive To Old Seward Highway and Lake Otis Parkway to Abbott Loop Road); Abbott Loop Road Extension To Dowling Road Fairbanks: University Area Widening 15,000,000 Matanuska-Susitna: Seward Meridian Upgrade to Seldon Road; Bogard Road Extension to Glenn Highway; Seldon West Extension Phase 1 Wasilla Fishhook to Church Road; 17,255,000 Houston: Kevlar Road 700,000 Nome: Front Street 1,000,000 Russian Village Road 900,000 Milo Fritz Road 200,000 Big Tustumena Road 500,000 N. Kenai Escape Road 950,000 Kodiak: Chiniak Road 1,500,000 Quinhagak: Sanitation Road 500,000 Russian Mission Landfill Road 450,000 Selawik Boardwalk Improvements (Phase II) 500,000 Palmer Airport Road and East Evergreen 600,000 North Pole - Old Richardson Highway 2,000,000 McGrath City Streets: Chinana and Takotna 900,000 Barrow: Isatquak Lagoon Boardwalk and Trail 1,200,000 Unalakleet Sewage Lagoon Road 475,000 Thorne Bay Shore Line Drive 350,000 Petersburg: N. Nordic U-Turn 250,000 Juneau: Old Dairy Road 650,000 Ketchikan: Bus Shelters and Pullouts 350,000 Wrangell: Church Street 700,000 Glennallen - Glenn Highway 1,500,000 Emmonak Landfill Road 550,000 TOTAL $88,180,000 Senator Donley made a motion to adopt Amendment #1. He explained that this amendment would add back in, not all, but some of the road projects, which were originally in this legislation sent over to the House. He noted that the prior project list had been pared down to $90 million. Senator Adams asked what the funding source was for this amendment. Senator Donley responded that the intent of this legislation allowed a funding source similar to the bond reimbursement system already in place. Co-Chair Torgerson objected. A roll call vote was taken. IN FAVOR: Senator Donley, Senator Adams. OPPOSED: Senator Phillips, Senator Leman, Senator Wilken, Senator P. Kelly, Senator Green, Co-Chair Parnell, Co-Chair Torgerson. THE MOTION FAILED: (7-2) Amendment #2: This amendment deletes the existing Section 10 and inserts new language as follows: Delete: Page 5, Lines 15-22 Insert: (10) subject to (h), (I), (j), and (p) of this section, and after projects funded by the cash payments, bonds, notes, or other indebtedness have been approved by the Commissioner, 70 percent of (A) payments made by the municipality during the fiscal year for the retirement of principal and interest on outstanding bonds, notes, or other indebtedness authorized by the qualified voters of the municipality on or after July 1, 1999, to pay the costs of school construction, additions to schools, and major rehabilitation projects that exceed $25,000, are approved under AS 14.07.020 (a)(11), and are not reimbursed under (n) of this section; or (B) cash payments made after July 1, 1999, by the municipality to pay costs of school construction, additions to schools, and major rehabilitation projects that exceed $25,000 and are approved by the department before July 1, 1999, under AS 14.07.020 (a)(11). Senator Adams made a motion to adopt Amendment #2. He explained that the threshold of this present legislation is too high at $200,000 for small projects. He stated that this amendment would allow municipalities to be reimbursed for cash payments, which would save interest and time, as well as, a cost saving to the state. Co-Chair Torgerson objected. A roll call vote was taken. IN FAVOR: Senator Donley, Senator Adams. OPPOSED: Senator Phillips, Senator Leman, Senator Wilken, Senator P. Kelly, Senator Green, Co-Chair Parnell, Co-Chair Torgerson. THE MOTION FAILED: (7-2) Amendment #3: This amendment would add new language as follows: On page 10, after line 28, add the following projects: Petersburg - Fascia/Soffit Repair/Replacment 112,000 Yukon-Koyukuk-Nulato Structural Repairs 400,000 Pribilof Island-Senator Taylor. George Remodel 4,385,000 Berring Strait-Shishmaref School Roof Replacement & Renovation Ph. III 8,133,000 Chatham-Angoon Elementary School Major Maintenance 126,000 TOTAL: 13,156,000 Senator Adams made a motion to adopt Amendment #3. He expressed his concern that the legislature has failed to fund major maintenance projects. He explained that this amendment would add back, the top ten items of Department of Education and Early Development's major maintenance recommendations. Co-Chair Torgerson objected. A roll call vote was taken. IN FAVOR: Senator Donley, Senator Adams. OPPOSED: Senator Leman, Senator Wilken, Senator P. Kelly, Senator Green, Senator Phillips, Co-Chair Parnell, Co-Chair Torgerson. THE MOTION FAILED: (7-2) Senator Phillips requested an amortization of this committee substitute and added that he did not support this bond approach. He felt as though the legislature was passing something that should rightfully go before the voters. Co-Chair Torgerson responded that the municipal portions of this legislation would go to the vote of the people. He added that the state would reimburse these costs after they are realized. He continued that the rural schools for tobacco cessation, does not require a vote and that the rest of the funds cover university projects. Senator Leman noted that he shared some of the same feelings expressed by Senator Phillips, yet he appreciated the work undertaken by Co-Chair Torgerson to keep this legislation under control. He stated that his preference would be to keep this funding under $250 million. Co-Chair Parnell made motion to move HB 281, version 1- LS1201\Q from Committee with individual recommendations and zero fiscal notes from the Department of Transportation & Public Facilities, the Department of Education and Early Development, and the Alaska Housing Financing Corporation, along with a $50,000 fiscal note from the Department of Revenue. Senator Donley objected. He agreed that it was essential the Committee be able to consider a projection of on-going costs that this legislation would generate. There was some general discussion about this legislation's future impact and the efforts to keep down costs as they now stand. A roll call vote was taken. IN FAVOR: Senator Wilken, Senator P. Kelly, Senator Green, Senator Leman, Senator Adams, Co-Chair Parnell, Co-Chair Torgerson. OPPOSED: Senator Phillips, Senator Donley. THE MOTION PASSED: (7-2) Co-Chair Torgerson stated that HB 281 was MOVED from Committee.