CS FOR HOUSE BILL NO. 130(FIN) am "An Act relating to the grant of certain state land to the University of Alaska; relating to the duties of the Board of Regents; establishing the university research forest; and providing for an effective date." This was the second hearing for this bill in the Senate Finance Committee. PETE KELLY, State Relations Director, University of Alaska, specified that the University is a State land grant entity that "was founded with the intent that it would create a land grant trust" that would supplement its day-to-day activities. To that point, he emphasized that the Land Grant Trust is operational and does financially support the University. The debate regarding the University land grant issue began in 1915 when a territorial delegate, James Wickersham, envisioned a State university. He lobbied before the United States Congress for this land grant endowment, and, in 1929, the State received its University land grant entitlement. Unfortunately, at the time, a vast majority of the State was not surveyed; therefore the process of transferring land was slow. Only two grants, totally approximately 113,000 acres, had been transferred to the University by the time of Statehood, and "the Statehood Act superseded all of the federal legislation dealing with Alaska." Mr. Kelly stated that the total acreage that was provided to the University's land grant program amounted to 140,000 acres: the combination of the 113,000 federally granted acreage and other land grants to the University. The University is "a very small land grant institution" which only ranks ahead of Hawaii and Delaware's land grant university programs in size. 7:32:04 PM Mr. Kelly characterized the University as having "a very successful land department". Since 1986, the University has sold 1,200 parcels of land. The University is "the most successful public entity in the State for getting land into private ownership". The University's educational endowment, which is established as a percent of market value (POMV) payout structure, nets the University approximately $5,000,000 annually. The endowment fund currently has a value of approximately $135,000,000. Mr. Kelly stated that during the process involved with this legislation, a significant amount of public comment in regard to how the University "treats its disposal of land" occurred. 7:32:40 PM Mr. Kelly communicated that the University has attempted "to assure everyone at every step" that "a very very public process" is in place. "University land issues are routine subjects of Board of Regents meetings" which are public forums. The Board's decisions on land are formed in consideration of the public process. Mr. Kelly noted that one of the greatest areas of concern relating to this bill has been in regard to land parcels in Southeast Alaska. To that point, he noted that private land holdings in Southeast Alaska amount to approximately one percent of the landmass. This bill would change that percentage "to one and two- tenths of one percent". The University has addressed the concerns of municipalities that might attempt to form boroughs at a later date, and in addition has agreed to take lands that might be subject to federal claims. Furthermore, the University would accept land containing established trails. In the past, agreements regarding such trails have been made, to include such things as providing easements or relocation of the trail. Nonetheless, a few concerns continue. "The University is a responsible land developer and a successful land developer." Even were the University to be granted the entirety of the lands proposed in this bill, it would continue to be defined as a small land grant institution. Nonetheless, the University is looking forward to increasing its land holdings to a level "that is consistent with most universities". 7:34:18 PM Co-Chair Green asked for verification that the land being proposed for transfer to the University was currently State owned land. Mr. Kelly affirmed. Co-Chair Green understood therefore that the State has the authority to either sell that land or give it to someone else. JANET BURLESON-BAXTER, Special Assistant to the Commissioner, Department of Natural Resources affirmed that the land in question could be sold. Co-Chair Green ascertained therefore, that the legislation would not change the classification of the land, or making it more available or more or less restrictive. The proposal would simply move land from one State entity to another. BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources testified via teleconference from an offnet site and agreed that, "in general", Co-Chair Green is correct that the State "could do any number of things with the land although there are land use plans that say what" the State is going to do with the land. "For the most part, the lands" identified in this bill that are located in Southeast Alaska are currently included in "development categories". To that point, the State could plan "to set the land aside for a kind of development whether that be sales or commercial lodges or whatever. However, he noted that there are two to four parcels, however, that are inconsistent with "what the State's planning says". 7:36:47 PM JOE BEEDLE, Vice President, Finance, University of Alaska, testified via teleconference from an offnet site and spoke in appreciation for the Committee subcommittee's May 2, 2005 three hour public hearing in which approximately 40 individuals testified about the bill. He also noted that "numerous misconceptions or misunderstandings" about this legislation were addressed in a report titled "Department of Natural Resources University Land Transfer Factsheet February 4, 2005" [copy on file]. Mr. Beedle expressed that the University has deemed the language proposed in the Committee's committee substitute, draft Version 24- GH1034\P as being acceptable. Co-Chair Green asked whether any of the land parcels selected for sale would negatively impact the Iditarod Trail Sled Dog Race or other traditional dog sled racing trails. 7:38:10 PM Mr. Loeffler informed the Committee that the Iditarod trail would not be affected by the proposed land selection; however the Haessler-Norris Trail System does transit one of the selected parcels. In response to this concern, the State has agreed to reserve the Haessler-Norris Trail System before that parcel was conveyed to the University. He also noted that that specific land parcel is classified for "settlement, meaning the State had the expectation of selling it". Regardless of whether that parcel was sold to the University or sold for settlement, the trail system would be preserved and protected. Co-Chair Green acknowledged the comments. 7:39:10 PM Senator Hoffman noted that during the public testimony hearings on this bill, concern was voiced regarding Native claims on land, specifically to Parcel 10 around McCarthy. Mr. Loeffler informed the Committee that the Department of Natural Resources is unaware of any Native land allotments in the McCarthy parcel. Nonetheless, were Native allotments uncovered, "they would have precedence over conveyance to the University". Senator Hoffman asked whether this would also be the case with any other parcels being considered for conveyance. Mr. Loeffler affirmed that to be true. Language was added to the bill that specifically stated that Native allotments were "a valid possessary right that would remain valid". In addition, the question pertaining to Native allotments to parcels such as Biorka Island and Lisianski Peninsula in Southeast Alaska would be addressed before those parcels could be conveyed to the University. Senator Stedman asked that the report from the Committee's subcommittee assigned to review this bill be provided. In addition, he asked that the public process involved with this legislation be reviewed. Co-Chair Wilken read the May 7, 2005 memorandum [copy on file] he wrote to Co-Chair Green on behalf of the Committee's subcommittee on HB 130 as follows. The Senate Finance Subcommittee for House Bill 130, University Land Grant/State Forest, met Monday evening, May 2, 2005. The purpose of the meeting was to provide the opportunity for statewide public testimony. The following is a numerical summary of the testimony given: 1) Total Number of Participants  39 2) Geographical Area of the State S.E. Alaska Participants 24 61% McCarthy Area Participants 7 18% Mat-Su Area Participants 5 13% Other Area Participants 3 8% 39 100% In addition, I would make the following comments: 1) In regards to Southeast Alaska: The testimony was spread across many sites in Southeast Alaska. As you would expect, the testimony was localized by sub-area across the broad region. Most participants recommended that specific land parcels not be conveyed to the University of Alaska. 2) In regards to the McCarthy area: The testimony revolved around the United States Park Service's continued restriction and constriction of usable land around the McCarthy area. It was stated that further withdrawals by the University would just make a bad situation worse. 3) In regards to the Mat-Su area: The testimony was almost entirely confined to the Frying Pan Lake area and the multiple system of world-class dog mushing trails situated therein. Thank you for the opportunity to accept the public's input on this important legislation. I commend House Bill 130 to you and stand ready to assist in passing it from Committee. Gary Wilken, subcommittee chair Senator Stedman spoke of his concerns regarding "the lack of" a public process pertaining to this bill. The multitude of correspondence he has received from House District 2 includes correspondence from mayors, councils, and assemblies as well as individuals. The fact that the majority of communities in a specific district have requested their elected official to "slow the process down and to have more dialogue with the communities affected and each community has a little difference issues…" is a matter of concern. The issue for some of the unorganized communities that were considering expanding and forming boroughs, was that the land selected was the only land available. He allowed that some of those issues have been addressed. Senator Stedman continued that communities that are boroughs have voiced concern that the public process guidelines that the Department of Natural Resources must follow regarding land disposal "are substantially different" than those required of the University. The concern is that the in-depth planning that was conducted over the last couple of decades including such things as comprehensive plans and coastal management plans, has been "virtually derailed". Senator Stedman informed the Committee that letters of concern are continuing to arrive in his office from communities throughout Southeast Alaska. "When there's that much concern, there's something wrong with the system." As there does not appear to be a pressing time element pertaining to this legislation, and even though "technically the legislative process being conducted is the proper process, "extra efforts" could be taken "in such a small state" when there are such "broad concerns from communities". Senator Stedman also echoed Senator Hoffman's concern regarding Native allotment issues. Many of the parcels "in Southeast Alaska are intertwined with either Native grave sites or Native allotments or potential Native allotments". Written records prior to the creation of the Tongass Regional Forest in 1907, were sparse. As Native elders die, it is difficult to transfer the knowledge from one generation to the next and attempt "to substantiate it to the Western world of paper and documentation". While some Native land has been deeded and several allotments have been platted but not of yet deeded, quite a few have not reached the platting phase. 7:48:07 PM Senator Stedman opined that "the more legitimate concerns of watershed issues and planning issues" are "screened or derailed" by objections from people who simply do not "want a neighbor". He urged that Committee members "look beyond those "non-substantiated or non-substantial concerns and focus more on the issues" brought forth by the local communities. He opined that "a poor public process" has been experienced with this legislation, as "unfortunately" the concerns of the major communities have been drowned out". It has not "instilled good will" between the University and the local communities. Co-Chair Wilken moved to adopt the SCS CS HB 130(FIN), Version 24- GH1034\P as the working document. Senator Stedman remarked that Version "P" "looks better than some of the other bill versions". There being no objection, Version "P" was ADOPTED as the working document. Amendment #1: This amendment deletes "." following "Bay" in Sec. 3(n)(7) on page six, line nine and inserts "; (8) Parcel Number ST. 1002, Pelican; (9) Parcel Number MF. 1002, Idaho Inlet; (10) Parcel Number PA 1002, Mite Cove; (11) Parcel Number ST. 1001, Middle Island; (12) Parcel Number PA. 1002, Biorka Island; (13) Parcel Number PA. 1001, Port Conclusion; (14) Parcel Number ST.LS.1001, Lisianski Peninsula; (15) Parcel Number SD. 1001, Beecher Pass; (16) Parcel Number SD. 1001, Favor Peak; (17) Parcel Number CS.TL. 1001, Three Lake Road; (18) Parcel Number SD. 1001, Read Island; (19) Parcel Number SD. 1001, Whitney Island; (20) Parcel Number CS.EW. 1001, Earl West Cove; (21) Parcel Number CS.OV. 1001, Olive Cove; (22) Parcel Number SD. 1001, Thoms Place; (23) Parcel Number PW.HK. 1001, Hook Arm; (24) Parcel Number HA.CH. 1001, Haines-Chilkoot; (25) Parcel Number PW.NA. 1001, Naukati Sound." In addition, this amendment deletes subsections "o", "p", and "q" in Sec. 3 beginning on page six, line ten through page seven, line 15. Senator Stedman moved Amendment #1. Co-Chair Green objected. Senator Stedman stated that this amendment would increase the amount of parcels in Southeast Alaska that would not be conveyed to the University. He noted that were this amendment adopted and the University and the State to continue their desire to convey these parcels, "a more amiable public process and working relationship with the communities" could be established. [NOTE: Co-Chair Wilken chaired this portion of the meeting.] A roll call was taken on the motion. IN FAVOR: Senator Stedman OPPOSED: Senator Dyson Co-Chair Wilken, Senator Hoffman, Senator Olson, and Co-Chair Green ABSENT: Senator Bunde The motion FAILED (1-5-1) [NOTE: Co-Chair Green resumed chair.] Amendment #2: This amendment deletes "." following "Bay" in Sec. 3(n)(7) on page six, line nine and inserts "; (8)Parcel Number ST. 1001, Middle Island; (9) Parcel Number PA. 1002, Biorka Island; (10) Parcel Number PA. 1001, Port Conclusion; (11) Parcel Number ST. LS. 1001, Lisianski Peninsula;" Senator Stedman moved to adopt Amendment #2. Co-Chair Green objected. Senator Stedman explained that this amendment would remove land parcels within the City and Borough of Sitka. He noted that language had been added to the bill that would allow the unorganized boroughs of Petersburg, Pelican, and Wrangell to organize by the year 2009. Were that action to occur, those communities could select from State land around their communities by the year 2013. That language could not apply to Sitka as the specified parcels are within the borough. Lisianski Peninsula has been logged; Biorka Island, which is a secluded uninhabited island, contains an aircraft communication station. 7:56:27 PM Senator Stedman noted that the State has already sold the shoreline areas of Middle Island. Therefore, the majority of the land on Middle Island that would be conveyed to the University would consist of a small mountain in the center of the island. Discussions have occurred regarding demolishing that mountain as jets fly over it on their approach to the Sitka airport. Neither Middle Island nor Lisianski Peninsula would be considered desirable land sites. Port Conclusion has issues as well. Senator Dyson asked Senator Stedman whether Middle Island was one of the areas that contained military gun sites. Senator Stedman clarified that Biorka Island had gun placements. Mr. Loeffler expressed that the University could utilize these areas in a manner consistent with the needs of the Federal Aviation Administration and within other physical parameters. Senator Olson, himself a pilot, stated that he has some aviation concerns relating to conveying Biorka Island and Middle Island to the University. Co-Chair Green asked the Department of Natural Resources whether selection of these areas might raise aviation concerns. Mr. Loeffler viewed the University as being "an intelligent developer". While there could "be things they would want to develop around"…there is "no significant disadvantage". They could develop the sites in a manner "consistent with" the needs of the Federal Aviation Administration (FAA). Were the land was not developed within ten years, the University's Board of Regents could decide to return it to the State if they deemed the land of "no value". Mr. Kelly informed that while the FAA has not objected to the transfer of these land parcels, they have asked that the University contact them. The University has agreed to do so. Senator Stedman noted that Biorka Island contained some Native land allotments. In addition, Native gravesites have been found "scattered amongst the islands" around Sitka. Such sites could also be found on Lisianski Peninsula. Co-Chair Green stated that this concern could be addressed by language in Sec. 3(e), page three lines 27 through 31 that reads as follows. (e) Land conveyed under this section to the Board of Regents in trust for the University of Alaska is subject to any valid possessory interest or other valid existing right, including any lease, license, prospecting site, claim, sale, permit, right-of-way, Native allotment, or easement held by another person, including a federal, state, or municipal agency, on the effective date of this section. 8:01:55 PM Co-Chair Green declared that the language in this section would provide "pretty good safeguards for the various interests that exist or might be found to exist". Senator Stedman expressed that the only Native cemetery gravesites in Sitka were developed after the Russians settled in Sitka. Other gravesites are unmarked. A roll call was taken on the motion to adopt Amendment #2. IN FAVOR: Senator Stedman, Senator Dyson, and Senator Olson. OPPOSED: Senator Hoffman, Co-Chair Wilken, and Co-Chair Green. ABSENT: Senator Bunde The motion FAILED (3-3-1). Amendment #2 FAILED to be adopted. Amendment #3: This amendment deletes "AS 14.40.365 - 14.40.367[AS 14.40.365 - 14.40.368] in Sec.2, page two, line 31 through page three, line one and replaces it with "AS 14.40.365 - 14.40.368". [NOTE: This amendment was drafted to a bill version that was not in the Committee's possession. The intent of the Committee was to conform the amendment to Version "X".] The amendment also adds a new bill section on page ten following line nine as follows. Sec. 7. AS 14.40.368 is repealed and reenacted to read: Sec. 14.40.368. Sale of land received under AS. 14.40.365. (a) The sale of land conveyed to the Board of Regents in trust for the University of Alaska under AS 14.40.365 shall be made at public auction to the highest qualified bidder as determined by the Board of Regents. The Board of Regents may accept bids and sell land under this section at no less than 70 percent of the appraised fair market value of the land. To qualify to participate under this section in a public auction of land under this section that is other than commercial, industrial, or agricultural land, a bidder shall have been a resident of the state for at least one year immediately preceding the date of the auction and submit proof of that fact as the Board of Regents requires. A bidder may be represented by an attorney or agent at the auction. An aggrieved bidder may appeal to the Board of Regents for reconsideration within five days after the sale. The sale shall be conducted by a person designated by the Board of Regents, and, at the time of sale, the successful bidder shall deposit with the Board of Regents an amount equal to at least five percent of the purchase price. The person designated by the Board of Regents to conduct the sale shall immediately issue a receipt containing a description of the land or property purchased, the price bid, and the amount deposited. The receipt shall be acknowledged in writing by the bidder. (b) Before the signing of the formal conveyance, the Board of Regents may reject all bids when the best interests of the state and the University of Alaska justify this action. Land offered at public sale but not sold may be made available at private sale for not less than its appraised value. (c) The contract of sale for land sold at public auction under this section shall require the remainder of the purchase price to be paid in monthly, quarterly, or annual installments over a period of not more than 20 years, with interest at the rate provided in (i) of this section. Installment payments plus interest shall be set on the level-payment basis. (d) The contract for each sale must set out the period for the payment of installments and the total purchase price plus interest. With the consent of the Board of Regents, the contract may also include conditions, limitations, and terms considered necessary and proper to protect the interests of the state and the University of Alaska. A violation of any provision of the contract of sale subjects the purchaser to appropriate administrative and legal action, including specific performance, foreclosure, ejectment, or other legal remedies in accordance with applicable state law. (e) If a contract under this section has been breached, the Board of Regents may issue a decision to foreclose and terminate the contract at any time that is more than 31 days after delivering by certified mail a written notice of the breach to the address of record of the purchaser. A breach caused by the failure to make payments required by the contract may be cured within 30 days after the notice of the breach has been received by the purchaser by payment of the sum in default together with the larger of a fee of $50 or five percent of the sum in default. If there are material facts in dispute between the Board of Regents and the purchaser, the purchaser may submit a written request for a public hearing for the review of the facts within 30 days after the notice of the breach has been received. (f) On a determination that there has been a breach of the contract based on the administrative record and the evidence presented at a hearing, the Board of Regents shall issue a decision foreclosing the interest of the purchaser and terminating the contract. The obligation to make payments under the contract continues through the date of the decision to foreclose by the Board of Regents. (g) The Board of Regents shall deliver the decision to foreclose and terminate personally to the purchaser or send the decision to foreclose and terminate by certified mail, return receipt requested, to the address of record of the purchaser. If the breach is a failure to make payments required by the contract, the decision must include a notice to the purchaser that if, within 30 days, the purchaser pays to the University of Alaska the full amount of the unpaid contract price, including all accrued interest, and any fees assessed under (e) of this section, the Board of Regents shall issue to the purchaser a deed to the land. If full payment is not made within 30 days or the breach is for other than failure to make payment, the decision forecloses and terminates all legal and equitable rights the purchaser has in the land. (h) Within 30 days, the purchaser may request that the Board of Regents reconsider the decision. The final decision by the Board of Regents is reviewable under AS 44.62.560. (i) The interest rate for contracts under this section is the prime rate as reported in the Wall Street Journal on the first business day of the month in which the contract is sent to the purchaser for signature, plus three percent; however, the total rate of interest may not exceed 13.5 percent. In addition, the amendment deletes "AS 14.40.368 is repealed." on page 11, line one and inserts the following. AS 38.05.125(a) is amended to read: (a) Each contract for the sale, lease, or grant of state land, including land conveyed to the Board of Regents in trust for the University of Alaska under AS 14.40.365, and each deed to state land, properties, or interest in state land, including land conveyed to the Board of Regents in trust for the University of Alaska under AS 14.40.365, made under AS 14.40.368, AS 38.05.045 - 38.05.120, 38.05.321, 38.05.810 - 38.05.825, AS 38.08, or AS 38.50 except as provided in AS 38.50.050 is subject to the following reservations: "The party of the first part, Alaska, hereby expressly saves, excepts and reserves out of the grant hereby made, unto itself, its lessees, successors, and assigns forever, all oils, gases, coal, ores, minerals, fissionable materials, geothermal resources, and fossils of every name, kind or description, and which may be in or upon said land above described, or any part thereof, and the right to explore the same for such oils, gases, coal, ores, minerals, fissionable materials, geothermal resources, and fossils, and it also hereby expressly saves and reserves out of the grant hereby made, unto itself, its lessees, successors, and assigns forever, the right to enter by itself, its or their agents, attorneys, and servants upon said land, or any part or parts thereof, at any and all times for the purpose of opening, developing, drilling, and working mines or wells on these or other land and taking out and removing therefrom all such oils, gases, coal, ores, minerals, fissionable materials, geothermal resources, and fossils, and to that end it further expressly reserves out of the grant hereby made, unto itself, its lessees, successors, and assigns forever, the right by its or their agents, servants and attorneys at any and all times to erect, construct, maintain, and use all such buildings, machinery, roads, pipelines, powerlines, and railroads, sink such shafts, drill such wells, remove such soil, and to remain on said land or any part thereof for the foregoing purposes and to occupy as much of said land as may be necessary or convenient for such purposes hereby expressly reserving to itself, its lessees, successors, and assigns, as aforesaid, generally all rights and power in, to, and over said land, whether herein expressed or not, reasonably necessary or convenient to render beneficial and efficient the complete enjoyment of the property and rights hereby expressly reserved. Senator Stedman moved Amendment #3. This amendment would require the University to conduct the "more restrictive" public process required of the Department of Natural Resources in regards to land disposal. MARY MONTGOMERY, University of Alaska, testified via teleconference from an offset site and stated that, while she had not been able to review the amendment, "the University would object to turning ourselves into another Department of Natural Resources". She credited the absence of the process required of Department of Natural Resources as being one of the reasons that the University is successful in its land management program. The University currently has "a very adequate public process". The Department of Natural Resources is required to meet a larger public interest. The University's Land Grant program "is to generate revenue for the Trust while balancing the community's interest". Adoption of this amendment would serve "to turn the University into another" Department of Natural Resources. That Department "has a difficult time in getting real estate available and into public hands because of the cumbersome process" they must conduct. Co-Chair Green objected to the amendment. Co-Chair Wilken identified language in Sec. 4, page seven, line 16 through page eight, line 12 as "clearly" defining the process the University must conduct before disposing its land to a third party. He reviewed the policies mandated in the section. The attempt to address land disposal concerns "is very inclusive" and would involve the local community. 8:06:08 PM Senator Olson stated that one of his concerns was in regards to the conveyance of University land "to another entity or private person". To that point, he asked whether preference language was included in the bill that could provide a local community or municipality priority conveyance rights over another entity. Mr. Loeffler responded in the affirmative. Language in this regard is included in Sec. 4(c) on page seven, lines 29 through 31. (c) Before the Board of Regents of the University of Alaska offers a parcel of land for sale under this section, the board shall offer first refusal to the closest municipality. Co-Chair Green commented that several issues have been considered, as exampled by language in Sec. 3(k) page three, lines 12 through 14 combined with language in Sec. 3(k)(3), page three, lines 19 though 21. This language reads as follows. (k) Notwithstanding any other provision of this section, within 10 years after conveyance of land under this section, the Board of Regents may reconvey to the Department of Natural Resources land (3) that the Board of Regents and the commissioner of natural resources jointly agree is in the best interests of the state and the university to reconvey. A roll call was taken on the motion to adopt amendment #3. IN FAVOR: Senator Stedman OPPOSED: Senator Olson, Senator Dyson, Senator Hoffman, Co-Chair Wilken, and Co-Chair Green ABSENT: Senator Bunde The motion FAILED (1-5-1) Amendment #3 FAILED to be ADOPTED. Co-Chair Wilken moved to report SCS CS HB 130 (FIN) from Committee with individual recommendations and accompanying fiscal notes. Co-Chair Wilken amended his motion to include the House Finance Committee Letter of Intent. Senator Stedman objected. A roll call was taken on the motion. IN FAVOR: Senator Dyson, Senator Hoffman, Senator Olson, Co-Chair Wilken, and Co-Chair Green OPPOSED: Senator Stedman ABSENT: Senator Bunde The motion PASSED (5-1-1) S CS CS HB 130(FIN), accompanied by the House of Representatives Finance Committee Letter of Intent, was REPORTED from Committee with zero fiscal note #1, dated January 25, 2005 from the Department of Fish and Game; $21,600 fiscal note #2, dated January 11, 2005 from the Department of Law; $380,000 fiscal note #3, dated January 12, 2005 from the Department of Natural Resources; and $500,000 fiscal note #4, dated February 4, 2005 from the University of Alaska. 8:10:38 PM