SRES 1/22/96 SB 162 AGRICULTURAL LAND Number 020 CHAIRMAN LEMAN brought up SB 162 as the only order of business before the Senate Resources Committee. The chairman noted there was a new proposed committee substitute before the committee containing one change. SENATOR TAYLOR made a motion to adopt the committee substitute to SB 162. CHAIRMAN LEMAN, hearing no objection, stated the committee substitute was adopted. The chairman asked Senator Green to explain the change contained in the committee substitute. Number 035 SENATOR GREEN, prime sponsor of SB 162, stated the change addresses a concern that the Division of Land had with the interest provision in the bill. The committee substitute sets the interest rate at 9.5%, which is the only change from the prior version. In the prior version, the rate was set at 8.0%. CHAIRMAN LEMAN noted that change is on page 5, Section 8. He commented he would rather see a floating interest rate than a fixed one, but he recommended the Finance Committee work further on developing the interest rate. Number 065 SENATOR LINCOLN expressed concern that under SB 162, the value of agricultural land would increase to such an extent that property taxes would increase to the point of becoming a burden. She asked if participating in the program set up in SB 162 could be voluntary, so that an owners' property taxes would not be affected. Number 103 SENATOR TAYLOR did not think SB 162 would have that effect. Nothing in SB 162 would encourage boroughs to increase the valuation on agricultural land. Number 145 SENATOR LINCOLN asked if by passing SB 162, we are allowing prime agricultural land to be subdivided and sold off for purposes other than agricultural uses. Number 160 SENATOR GREEN responded that would not occur under SB 162, because the required use for that land would still be agricultural. CHAIRMAN LEMAN noted that under SB 162, subdivided agricultural land would still carry the agricultural covenants. Section 9 contains the agricultural restrictions. Number 198 CHAIRMAN LEMAN asked if any committee members have proposed amendments. SENATOR TAYLOR proposed a conceptual amendment on page 5, lines 7- 10 establishing the interest rate at the federal reserve lending rate plus 1%. Number 208 SENATOR PEARCE objected for the purposes of commenting that she would rather send the bill to the Finance Committee and ask them to change the section in order to allow farmers to utilize federal loan programs. Number 223 SENATOR TAYLOR responded it wasn't the intent to restrict that. He just doesn't want to pass a bill out with a fixed rate. He certainly would not want to preclude anyone from having access to federal funds. Senator Taylor asks for withdrawal of his amendment, with the stipulation that his intent travels with the legislation. Number 240 CHAIRMAN LEMAN asked if there is any objection to withdrawal of the amendment. Hearing none, the chairman stated the amendment was withdrawn. Number 247 SENATOR FRANK commented that business people tend to like fixed interest rates, if the rate is reasonable. The argument could be made that it ought not to float with the market. Number 280 SENATOR TAYLOR stated there are some good reasons to have floating interest rates. Number 291 CHAIRMAN LEMAN commented we ought to enable farmers to get other financing, and the state should not necessarily be the number one stop for financing. The chairman asked if there was any more testimony. Number 305 JOHN DUFENDACH, testifying from Delta Junction, stated he is a farmer with the Delta Junction Barley Project and he supports SB 162. Number 312 FRANK BURRIS, testifying from Delta Junction, stated he is a principal in Eagle's Ridge Ranch, one of the Barley Projects, but that most of his land is either in CRP (Conservation Reserve Program - farmer is paid to leave land fallow) or is unfarmable. He supports SB 162, and especially likes the language in Sections 11-13. SENATOR HALFORD asked Mr. Burris how many acres he has in CRP. MR. BURRIS responded he has 1,400 acres in CRP, out of a total of 2,900 acres. SENATOR HALFORD asked what the annual federal payment was for that CRP land. MR. BURRIS replied he receives about $50,000 per year. This is the last year of the CRP contract. He is not sure if the ranch will re-up in the CRP program after this year. SENATOR HALFORD asked if the length of the contract was for 10 years at approximate level payments. MR. BURRIS responded that it was. Number 338 KYM SWIFT, testifying from Anchorage, stated she does not understand why the State is still in the agriculture business. In one year, the Division of Agriculture wrote off $41,000,000 in loans. She does not think it makes sense for loans to be administered by political entities. She thinks some of the provisions of SB 162 are good. SENATOR TAYLOR asked Mr. Swanson if the Department of Natural Resources supports the committee substitute for SB 162. RON SWANSON, Deputy Director, Division of Lands, Department of Natural Resources, stated the concerns of the department have all been answered except for the mandatory issuing of new passes to all current pass holders. The department is willing to do that, but we feel the applicant should bear the cost. Number 380 SENATOR TAYLOR asked again if the department supports the legislation. MR. SWANSON responded that the department does support the legislation except for the provision that the state should bear the cost of conversion of passes. Number 380 SENATOR TAYLOR does not understand what the cost would be, other than the issuance of a new deed. MR. SWANSON replied the drafting of the deeds is not the issue. Since Alaska is a non-mandatory recording state, the fiscal note reflects contracting with private industry to prove who owns the land. The alternative would be for the applicant to provide that information to the department. That process should be applicant driven, and not mandatory for the state. CHAIRMAN LEMAN does not disagree with Mr. Swanson on which party should bear the cost, and asked Senator Green what her opinion is on that matter. Number 390 SENATOR GREEN thinks it would be fairly easy to work out that concern to the department's satisfaction. She has no problem with that concern. SENATOR TAYLOR expressed the opinion that the amount stated in the fiscal note seemed rather high to him. He asked that the department do a little better job in giving the legislature some written explanation. Number 400 CHAIRMAN LEMAN informed Senator Taylor that there was a fairly detailed analysis with the fiscal note that he might want to review. SENATOR TAYLOR agreed that the person receiving the benefit should be paying the cost. SENATOR HOFFMAN asked Mr. Swanson if he had any problems with the removal of the survey requirements by Section 2. Number 407 MR. SWANSON sees the removal of survey requirements as optional, so he does not have a problem with that. But that does seem to conflict with Section 6. He prefers using the word "may", instead of the word "shall". SENATOR GREEN commented that sounded fine. SENATOR TAYLOR made a motion to discharge SB 162 from the Senate Resources Committee and then objected to the motion for purposes of discussion on the motion. SENATOR TAYLOR asked Mr. Swanson the departments' time frame for selling state-held agricultural land. Number 428 MR. SWANSON responded that the state holds an agricultural land sale at least once a year, with the last one being held in October 1995. Of the land made available for sale, about half was successfully bid upon. CHAIRMAN LEMAN asked if there were minimum bids required. MR. SWANSON replied that minimum bids are set based upon fair- market value. Existing agricultural land owners or lease holders are given preference to meet high bid to add land to their existing farm in order to make their operation more economically viable. Number 443 SENATOR HOFFMAN asked Mr. Swanson if a strip mall could be built upon subdivided land. Number 452 MR. SWANSON responded that agricultural covenants would continue to apply to subdivided land. Number 463 SENATOR TAYLOR expressed concern over "eternal" covenants made by the department. Perhaps there should be a sunset date on covenants. He would like the department to consider putting a time limit on covenants. Number 490 CHAIRMAN LEMAN asked if the objection to discharging SB 162 from committee was maintained. SENATOR TAYLOR replied, "no." CHAIRMAN LEMAN asked if there were further objections to discharging SB 162 from committee. Hearing none, the chairman stated SB 162 was discharged from the Senate Resources Committee. He requested the Finance Committee to take into consideration the instruction regarding interest rates.