SB 108 - STATE LAND LOTTERY PROGRAM CHAIRMAN HALFORD announced SB 108 to be up for consideration. MS. MEL KROGSENG, Staff to Senator Taylor, said the proposed committee substitute addresses a lot of the concerns discussed previously. It no longer offers land under a lottery system, but instead offers land under two other approaches: a land auction and an open to entry program patterned after the old remote parcel program. Section 1 sets forth the findings as they were in the original bill, although she pointed out on page 2, line 1 the 1,000,000 acres should have been changed to 500,000 acres. Section 2 is the meat of the bill and describes the program and the conditions under which land would be offered for sale. The first subsection deals with exemptions. Only land that is unclassified or classed as agricultural, grazing, settlement, or recreational land will be offered. Certain lands are exempt from the offering and land offered is also exempt from the requirements of AS 38.04 and AS 38.05, the other statutes dealing with land disposal. The other exemptions are under AS 16.20, State refuges, critical habitat areas, sanctuaries, and ranges. AS 41.15.300 - 330 is the Haines State Forest Resources management area. AS 41.17 is the Tanana State Forest, AS 41.23 are public use areas and recreational rivers. The administrative sites that are exempt are lands that would have a cabin that's been built for a park ranger or for recreational use and has not been included under the other recreational use statute. If land has been sold that has a lease, the lease would go with the property including grazing leases, mining leases, etc. The Commissioner may not convey mineral or resource rights of the State. MS. KROGSENG said that currently according to statistics from the Division of Lands, the State has around 580,000 acres. Number 200 CHAIRMAN HALFORD noted that the disposals are 200,000 acres three times a year, but the requirement is for only 500,000 for a total year. MS. KROGSENG explained that was to give the Division of Lands the opportunity to develop necessary regulations. They start out with the existing land bank. Once the land is gone, every fiscal year the Department would offer not less than 500,000 acres through one of two methods in the bill which she reviewed. She also reviewed the financing mechanism in the bill. She said there is no requirement for school construction in the bill. The State shall retain a 100-foot right-of-way along each section line of land sold and does not have a duty to construct or maintain a road to a parcel of land purchased by a person under this chapter. Land disposed of is subject to municipal zoning laws and regulations and there is a 40 acre limit near Willow and a 5 acre limit in Southeast Alaska. She reviewed the sections on surveys, liabilities, the security deposit, additional terms and conditions, and the aerial geophysical mapping. Number 300 MS. JANE ANGVIK, Director, Division of Lands, said the fiscal note her Department had prepared was on the former bill and doesn't reflect the committee substitute. If the goal is to increase the sale of land by the State of Alaska, we have existing programs that can do that. The principal thing we lack right now is money to do it. She suggested if they fund the land disposal program and such a proposal is included in the capital improvement program for this year, it might address the concerns that motivated this bill. She suggested just $300,000 to the Capital Improvement Program (CIP) would allow her to sell approximately 200 of the lots currently in the land bank disposal and to actualize the remote recreational program that was created in statute last year. This would take care of some of the demand. As a result of discussions at this table last year, the Division of Lands staff has devoted a lot of time to try to figure out how to meet the needs for land disposals in the State. One of their challenges is to figure out how to do it with existing resources. MS. ANGVIK said that this bill, as proposed, would glut the market for land very quickly and would probably have a chilling effect on the real estate market. It would probably undervalue that land that is held by the University and the Mental Health Trust that was designed to try to produce income for those programs. Currently there are about 600,000 acres in the land bank account that have been previously surveyed and under existing statute it would have to be appraised before they could be sold. Brief calculations of the lands in this bill include approximately 6 million acres and there are probably another 8 million acres that are not classified. That would be a pool for SB 108 of about 14 million acres. There are some technical issues associated with the bill where it contradicts itself. In Southeast, you can't have anything over 5 acres, so it's hard to figure out what you would give people in Southeast an opportunity for. There are concerns about trying to keep track of every person who ever bought acreage from the State in order to make sure that when they hit the 160 acre number, they would stop giving them land. They would also have to keep track of lands that were returned. It would be a very complicated process to keep track of the restrictions on lands that were sold, for instance, when they can cut the trees and when the State gets a 20 percent royalty for them or for the gravel extraction. Another great concern is the dream of owning land in Alaska would attract people from other states and countries and large portions of Alaska would be purchased by people who wouldn't be living here. MS. ANGVIK concluded her comments saying if the goal is to sell more land, she recommends using the existing two programs. The Department intends to have a sale of 70 acres this spring of lands that exist in the current land depository. If they could get the CIP funding, they could have another major land disposal like they had in 1995. CHAIRMAN HALFORD asked how the remote cabin program works. MS. ANGVIK explained that people can lease land for 10 years and at the end, they can buy it for the appraised value and the cost of the appraisal and survey. There is no requirement to build anything so the Department doesn't have to check on that. CHAIRMAN HALFORD asked what the acreage was. MS. ANGVIK replied that there is no minimum established by law or regulation. They are open to suggestions, she said, although it would be reasonable to have a minimum of 10 acres and a maximum which she didn't specify. CHAIRMAN HALFORD said there should be something small for Southeast where there's not much land and at least 40 acres for remote parcels so someone could have an airstrip and a homesite. MS. ANGVIK said that the bill sets the minimum price at $100 per acre and she is concerned that that would quickly become the standard price for all land. Right now remote parcels that have no access are selling for $600 per acre up to $3,000 per acre. Number 421 SENATOR LEMAN asked why $100 has to become the default value and why can't the Department set the market price. MS. ANGVIK said the theory is if they put 200,000 acres in the market every four months, the value of land would become depressed. CHAIRMAN HALFORD said there is a conflict of interest in getting land to the people, because most of the people who make decisions about land disposals already have land that will be worth less, if they are successful in creating a good land disposal program. SENATOR TAYLOR said they have already appropriated the money to have the 600,000 acres currently on the books surveyed and it just sits there. CHAIRMAN HALFORD noted that the Department's proposal is to spend $190,000 to make $2 - $4 million. SENATOR TAYLOR said he wanted to hear what the Department's plan really was to get land to Alaskans. MS. ANGVIK responded that her proposal is the CIP which funds land disposals. The State gets the opportunity to sell the land and get some income. They would prefer to use existing programs that have been set up to sell it. In 1995, they had the first land sale that had happened since the Mental Health Land Trust froze the whole thing. They sold 333 parcels and averaged about 10 acres a piece. There are now a few left of those and she agrees that there is a continual demand for some land for Alaskans to purchase. She explained there is some mythology associated with land that suggests that one can live on the land in a cabin and make a go of it and another one that many Alaskans would like land for free. There are other persons in Alaska who want to buy land and her Department wants to make an opportunity for them to do so. Other statutes say that they need to get a fair market value. If they change the conditions of the market, she didn't think it would benefit any of the private land owners who would find themselves in competition with the State. The majority of good land that is near communities has been conveyed to the boroughs and cities. Land one hour from Anchorage or Fairbanks on a lake is gone. It has already been conveyed to governments, about 600,000 acres - 300,000 of which has been surveyed. One goal of the legislature has been to make sure that the municipal governments have some opportunity to be able to provide land to their citizens. CHAIRMAN HALFORD said that they have 600,000 acres in a disposal bank that they have paid the money to get ready to dispose of. MS. ANGVIK responded that they are ready to roll. CHAIRMAN HALFORD said he has heard that they don't want nonresidents involved, which is easy to fix in the bill before them, and the restrictions on use of resources probably isn't worth putting in there. Now how do they focus the bill on getting the land disposal program working? The proposal in the fiscal note is a pretty small proposal. MS. ANGVIK replied that it pays for appraisal updates so they can put land on the market. CHAIRMAN HALFORD said they have had the remote program for a year and nothing has happened with that. MS. ANGVIK responded if the CIP was funded, they would do it. CHAIRMAN HALFORD asked what happened when the bill passed. What happened to the fiscal note? MS. ANGVIK answered that the fiscal note wasn't associated with that; it was associated with the agricultural patents. CHAIRMAN HALFORD said if a program was created in a bill that she provided a fiscal note to the legislature on and the legislature didn't fund it, she could come back to them and say they didn't fund it, and that's why it didn't happen. But if the Department submitted a $0 fiscal note or didn't provide them with one, it's her fault. MS. ANGVIK said she understood his concern. MS. CAROL CAROLL, Special Assistant, DNR, said there was a $0 fiscal note. CHAIRMAN HALFORD said if $0 was submitted by the Department, it was assumed it would be done within the existing budget authority of the Department. MS. ANGVIK said she would find out, but he was correct that they hadn't pursued the remote program to date. SENATOR TAYLOR asked why doesn't the phrase, "program receipts" pass anyone's lips. MS. ANGVIK answered that they would be happy to fund land sales with program receipts. She said the fastest and cheapest way to get land out to the public is to fund the appraisals. SENATOR TAYLOR said he meant they could have a percentage of the program receipts. CHAIRMAN HALFORD asked what would happen if someone came in and said they would pay for the appraisal on a parcel, if they could buy it. MS. ANGVIK said all she has to do is make sure they have established the price at whatever market value is through appraisals. SENATOR TAYLOR moved to adopt the proposed committee substitute to SB 108. There were no objections and it was so ordered. SENATOR TAYLOR moved to delete on page 6, lines 5 - 16, the removal of surface resources. TAPE 98-15, SIDE B There were no objections and it was so ordered. SENATOR TAYLOR moved to change 1,000,000 to 500,000 on page 2. There were no objections and it was so ordered. SENATOR TAYLOR moved to delete page 7, lines 13 -19. There were no objections and it was so ordered. SENATOR TAYLOR moved to delete page 5, lines 2 - 6. There were no objections and it was so ordered. CHAIRMAN HALFORD suggested usable water frontage that didn't exceed more than 25 percent of the exterior boundary of the parcel which makes it a little more flexible. SENATOR TAYLOR moved a conceptual amendment of 1/3 useable water frontage. There were no objections and it was so ordered. Number 524 MS. ANGVIK said her surveyors couldn't figure out how to do the aerial geophysical maps on page 8, because they are for mineral purposes and are not helpful in locating boundaries, nor can a G.P.S. locate them with any accuracy. SENATOR TAYLOR moved to delete the word, "geophysical" from page 8, lines 15 - 16. There were no objections and it was so ordered. SENATOR TAYLOR moved to delete lines 24 - 31, page 3, taking care of how to figure things out, if someone gives land back to the State. CHAIRMAN HALFORD said they would have to take out, "except as provided in (b) of this section." There were no objections and it was so ordered. Number 430 CHAIRMAN HALFORD suggested changing "shall" to "may" on page 2, line 8 because when you are saying, "Notwithstanding any other provision of this title, the commissioner shall sell state land as provided in this chapter...", the "Notwithstanding" can have the effect of repealing all other programs in that chapter. SENATOR GREEN moved to change "shall" to "may" on page 2, line 8 and delete the last half of the sentence. There were no objections and it was so ordered. SENATOR GREEN asked if the one-year residency was constitutional. CHAIRMAN HALFORD said he thought it probably was, because they have had that language in a lot of land disposals in the past. MS. ANGVIK asked on page 2, line 22 if it was their intention for income from the lease payments to go to the purchaser or to be retained by the State. CHAIRMAN HALFORD replied that the subsurface is constitutionally mandated to stay with the State. SENATOR LEMAN interjected that that could be part of the purchasing price and could be left to the discretion of the Department. CHAIRMAN HALFORD said a lease is an existing contract and stays with the State unless the buyer wants to buy it out. MS. CAROLL asked how grazing leases, in particular, would work. CHAIRMAN HALFORD said that grazing leases of any size are reindeer leases. He said you have to protect valid and existing rights whether they want to buy out or not. MS. ANGVIK informed the Committee when municipalities receive lands that were owned by the State with existing leases on it, they get the leases and the income. CHAIRMAN HALFORD added that they have to follow the terms of the lease - and any renewals. Number 389 MS. ANGVIK said the term of the lease would have to be continued until the expiration date. The Committee agreed. SENATOR LEMAN said on page 7, line 28 they ought to clarify unless it's the person who caused the contamination they aren't liable for it. SENATOR TAYLOR said no one could tell what impact this program would have on the market price, but it would do something to it. CHAIRMAN HALFORD assigned Senator Taylor to help the Department with that section.