SB 224 - OPERATING APPROPRIATIONS FOR MAINTENANCE SB 225 - APPROP: BUILD ALASKA FUND SB 226 - PREVENTATIVE MAINTENANCE REQUIREMENT SB 227 - PUBLIC FACILITIES FINANCING CORP SB 228 - APPROP: PUB FACILITIES FIN CORP PROJECTS CHAIRMAN GREEN stated the deferred maintenance bills before the committee would be taken up as a package. She then invited Senator Tim Kelly, Co-Chair of the Deferred Maintenance Task Force and Dennis DeWitt, staff to the Deferred Maintenance Task Force, to present the legislation. CHAIRMAN GREEN noted the presence of Senator Mackie. SENATOR KELLY directed attention to a memorandum from Rich Tessandore, Executive Director of the Disability Law Center of Alaska, in which he voices his support for the Deferred Maintenance Task Force recommendations for a six-year plan to bring public facilities in the state of Alaska into compliance American with Disabilities Act which was passed in 1990. SENATOR KELLY noted SB 224 is a separate appropriation for maintenance. He related the task force repeatedly heard from facility managers that felt the Legislature had not adequately funded the maintenance component of the budget. Also, Finance committee members and staff have said that agencies were moving funds intended for maintenance to increase program operation in defiance of legislative intent. He added that as long as these two portions of the budget were funded in one line item this debate will continue. CHAIRMAN GREEN asked if results-based budgeting could incorporate this concept. MR. DEWITT said this proposal was made before much of the progress with program budgeting. He believed it was an issue the finance committee would grapple with. He said the bundling together of maintenance and operations budgets will continue to be a problem with any kind of budgeting discussions. He thinks the fusion of the two componets is what needs to be prevented. He did not see a conflict with this concept and program budgeting. MR. JACK KRIENHEADER, representing the Office of Management and Budget, said the administration is pleased with this package. This is a serious problem that needs to be addressed and he thinks the task force did a good job identifying the problem. He stated there are two policy issues to be decided; first, the overall level of funding for the projects and second, the financing method that will be used. He expressed a few concerns with technical issues and policy questions and said he would address them if CHAIRMAN GREEN was planning to move the bills today. CHAIRMAN GREEN said that was her intent and asked if he had any amendments. CHAIRMAN GREEN also said that a more substantive discussion would be taken up in finance. MR. KRIENHEADER noted that the Administration has been working in the area of facilities over the past couple of years. He directed the committee's attention to a memo titled, "Facility Update" in their task force report, which details some of the projects already underway. He described these projects, beginning with the development of a rental rate methodology. He said this rental rate is used in several other states and was generally supported by members of the task force. MR. KRIENHEADER said the rental rate allows the capture of additional federal funds, gives the incentive for offices to consolidate space and increase efficiency, and helps the state fund an internal facilities service fund. This fund would be used for ongoing maintenance and rents collected would be deposited into it. He said the Administration is currently working on a pilot program to do this and they hope to move forward with it in fiscal year 2000. He commented that this new system will help the administration get a better handle on what is actually being spent. Currently expenditures are not itemized in the accounting process and tracking facility costs is difficult. MR. KRIENHEADER explained a pilot project now underway in Nome. The project involves several agencies and is an attempt to consolidate costs by coordination within a computerized maintenance management system. He said this system has been used to a limited degree with some success and they are testing it for possible use on a statewide basis. MR. DEWITT said that the task force endorses the rental rate provision but he sees a potential problem with the lapse date for appropriated funds. One option might be to have the funds held by the Public Maintenance Financing Corporation. The structure of such a corporation would allow for handling funds without lapse. SENATOR KELLY presented SB 225 as the appropriation bill for 1.5 billion dollars from the Constitutional Budget Reserve Fund to the Build Alaska Fund. He said this would take place at the earliest voter approved advisory vote or July 1, 1999. He said the bill will allow the Legislature to repeal the transfer, before it becomes law, if the voters do not approve of the proposal. He identified the purpose of the fund as highlighting the importance of maintaining and improving Alaska's infrastructure. He said it could be viewed as a permanent source of funding for future capital needs that does not limit legislative discretion. Any project would still have to be approved by the legislature. Four factors: the new budget method, declining oil prices, the majority's five-year plan, and the balances projected for the Constitutional Budget Reserve Fund are forcing this bill to be revamped. Staff is working on reducing the figure to one billion and SENATOR KELLY anticipates this will happen when the bill reaches the finance committee. MR. FORREST BROWNE, Department of Revenue, said this bill will manage any funds transferred to the Build Alaska Fund as the Constitutional Budget Reserve Fund is managed currently. He anticipated there would be staffing needs for this facility. He asked the State Bond Council and the state's financial advisors about this funding mechanism and both reported a high degree of confidence in the structure's success. He said the bonds will have a very high rating (single A) with Moody, Standard and Poor and Fitch and he feels this will be an efficient structure for financing state capital expenditures. He said the staff requirements will be minimal and this is indicated in the comprehensive fiscal notes along with the fact that any interest accrued would be deposited into the general fund. He suggested there might be only one new accountant position created by this bill for the Department of Revenue and no employees for the Public Facilities Corporation. SENATOR MACKIE was pleased to hear this last statement. SENATOR KELLY commented that extensive work has been done with a bond consultant since the introduction of the original bill. CHAIRMAN GREEN asked if SB 227 and SB 225 were conjoined. She asked if there was further testimony on SB 227. MR. BROWNE said one bill was simply a financing conduit for the other and his comments were complete. SENATOR MILLER moved the adoption of the E version of SB 227 as the working draft. There was no objection and it was adopted. MR. DENNIS DEWITT explained the changes from the original bill. He said the italicized changes were in response to suggestions from the bond community. He said the task force's bond counsel is the major authority in the United States and these changes in the bill simply reflect their experience in public bonding. SENATOR KELLY focused on SB 226 and said it came out of the task force's realization that the best way to prevent a recurrent deferred maintenance problem is a proactive approach requiring a preventative maintenance program for every agency and school district. If an agency or district does not have such a program they are ineligible to receive any funding for deferred maintenance or renovation. CHAIRMAN GREEN asked if this bill could stand alone and MR. DEWITT replied it could. MR. DEWITT said the Department of Education had provided the committee with some recommended amendments. CHAIRMAN GREEN said there was not much opposition to the proposed changes so they could deal with them as one amendment. MR. DEWITT said the first change dealt with a computerized maintenance management program. He said there are other formal means of systematically tracking maintenance and all the task force wanted was to get away from the dry-erase board and individual possession of necessary facility knowledge. He said this provision would expand to create more valid options. He explained that the second change dropped the phrase "all buildings" since the inclusion of these words required the inclusion of storage sheds and other things that ought not be included under certain provisions of the bill. This change removes that phrase in sections 4ii and 4iii and allows some discretion in identifying deferred maintenance buildings. Another change limits who would be trained, identifying only facility managers and maintenance workers rather than "anyone who turns a wrench." The last change would drop the inclusion of the phrase "all buildings" for the previously stated reason. MR. DEWITT said he is concerned that this may already be done but MR. MORGAN from the Department of Education is concerned only that it gets done. MR. DEWITT prefers it not bb done now in this work in progress. CHAIRMAN GREEN clarified this would require the phrase "To match" remains after .020. She said as an amendment to the amendment they would delete AS 37.05.315, 316 and 317. MR. DEWITT agreed and asked that they adopt the same change in section four and leave it as something to be discussed with the department. CHAIRMAN GREEN asked for MR. MORGAN's feedback on this and he said another option would be to move the paragraph after the effective date so it would not be a necessary criterion for a program, but a ranking criteria. He said it would allow this criterion to be used to rank a project but would not be totally necessary for a program to go ahead. In this manner, it would reward progress and implementation of these programs. SENATOR MACKIE asked if there was a problem with this last change and MR. DEWITT replied that there was no particular problem but that the task force had been very adamant that preventative maintenance programs be in place and he does not feel comfortable accepting a change without consulting them. SENATOR MACKIE moved amendments one thru five as stated on the memo sent from Mike Morgan of the Department of Education. CHAIRMAN GREEN said without objection, those amendments through section five are adopted as amentment one. SENATOR MACKIE moved as amendment two the change in wording to match in AS 37.06.010, AS 37.16.020, deleting 315, 316 and 317. CHAIRMAN GREEN said since there was no objection, these changes would be incorporated into a committee substitute. MR. DEWITT interjected that there was another change in Section four - the effective date to July 1, 1999. SENATOR MACKIE so moved this change as amendment three and without objection, the effective date was changed to July 1, 1998. MR. DEWITT said the task force is still wrestling with how these bills apply to the Department of Transportation. He said that agency's mission is maintenance of roads and airports and similar things. He has been working with the Department to apply the bills in a helpful manner, as intended. He believes they will reach closure in these talks soon but did not want the committee to be surprised if the department expressed some dissatisfaction in the meantime. SENATOR KELLY presented SB 228 and said it authorizes funding from the Public Facilities Finance Corporation. He said it is a big wish list and has been considered by the Deferred Maintenance Task Force. He said there was a conscious effort to keep this from becoming a pork-barrel project. The task force carefully considered the criteria listed on page 5.1 and made an attempt to balance projects throughout the state. He said even so, only 20 percent of the projects are in Anchorage, where 40 percent of the population lives. He informed CHAIRMAN GREEN that the Mat-Su valley has the most money spent per capita, mostly going toward schools due to the increase in student population. He hoped the majority of people could concur with the final results. He concluded by saying the bill is subject to immense and immediate change by the finance committee. SENATOR MACKIE stated this is the first time he has looked at the projects and he likes the criteria used to select them. He asked SENATOR KELLY if the priority list submitted by the agencies was also used in the determination of projects. DENNY DEWITT replied that these lists were used significantly as guides but did not control the process. He said there were two lists to work with, a major maintenance list and a construction list. He said the department leans more heavily toward maintenance rather than construction. The task force tried to combine all these factors to create a viable list. However, the task force did give preference to specific projects that communities had previously bonded for individually. These projects would be undertaken in the first year due to community commitment to them and support for them. SENATOR KELLY said the communities of Anchorage, Sitka, Wrangell, Mat-Su and Barrow would be reimbursed partially for projects. He does not yet know if the level of reimbursement would be 50 percent or 70 percent. SENATOR MACKIE asked specifically why a school ranked number five on the education department's new construction list would end up in the year 2002, rather than in the first year. MR. DEWITT replied he expected that when combining the maintenance and construction lists they ended up farther down the maintenance list for the same dollars. The construction list proceeded more slowly. SENATOR MACKIE said he understood this but thought that a project very high on the construction list should be very high on the construction list. He asked if there was any picking and choosing going on that may delay some projects and MR. DEWITT said the task force looked at various components of need, including harbors, schools, Americans with Disabilities Act compliance and others. He said they then looked at the aggregate need and tried to determine a ratio to carry across the funding of each particular type of project. He added that, to the best of his knowledge, no particular school was maliciously or arbitrarily downgraded. SENATOR MACKIE replied he hoped no one will prove MR. DEWITT wrong on this point and emphasized the importance of integrity within the process and a good geographic balance of projects. He said this, along with the absence of personal promotion of projects, lends credibility to the entire process. MR. DEWITT admitted that there was a $200,000 project that he simply lost. He has since been waiting for someone to bring it to his attention. CHAIRMAN GREEN asked if there were further questions on any of the bills relating to the deferred maintenance task force report. SENATOR MACKIE asked if there had been a committee substitute adopted for SB 227 and CHAIRMAN GREEN said yes. SENATOR MACKIE moved SB 224, SB 225, CSSB 226, CSSB 227 and SB 228 from committee with individual recommendations. Without objection the bills were moved out with individual recommendations and accompanying fiscal notes. With no other business to come before the committee, CHAIRMAN GREEN adjourned the meeting at 4:35 p.m.