HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE March 25, 1995 1:06 p.m. MEMBERS PRESENT Representative Ivan, Co-Chair Representative Alan Austerman, Co-Chair Representative Kim Elton Representative Al Vezey Representative Pete Kott Representative Irene Nicholia MEMBERS ABSENT Representative Jerry Mackie OTHER LEGISLATORS PRESENT Representative Norman Rokeberg COMMITTEE CALENDAR HB 154: "An Act requiring the Department of Law to provide guidelines regarding unconstitutional state and municipal takings of private real property; relating to the taxation of private real property taken unconstitutionally by state or municipal action; establishing a time limit for bringing an action for an unconstitutional state or municipal taking of private real property; and providing for an effective date." HEARD AND HELD WITNESS REGISTER REPRESENTATIVE VIC KOHRING Alaska State Legislature State Capitol Building, Room 428 Juneau, AK 99801 Telephone: (907) 465-2186 POSITION STATEMENT: Introduced HB 154 CRAIG LYON, Legislative Aide to Representative Vic Kohring Alaska State Legislature State Capitol Building, Room 428 Juneau, AK 99801 Telephone: (907) 465-2186 POSITION STATEMENT: Answered questions regarding HB 154 JIM MCALLISTER, Regional Forester Division of Forestry Department of Natural Resources 400 Willoughby Ave., 3rd floor Juneau, AK 99801-1796 Telephone: (907) 465-5401 POSITION STATEMENT: Explained buffer zones as they pertained to HB 154 LARS EHRLANDER P.O. Box 8420 Fairbanks, AK 99708 Telephone: (907) 451-8342 POSITION STATEMENT: Testified in support of HB 154 MICK MANNS Paradise Valley Bettles, AK 99726 Telephone: (907) 479-5704 POSITION STATEMENT: Testified in support of HB 154 WILLIAM SAMPLES, Project Manager Federal Government 315 Cope St. Kodiak, AK 99615 Telephone: (907) 486-2906 POSITION STATEMENT: Testified against HB 154 PAT CARLSON, Assessor Kodiak Island Borough 710 Mill Bay Road Kodiak, AK 99615 Telephone: (907) 486-9350 POSITION STATEMENT: Testified in support of HB 154 STEVE VAN SANT, State Assessor Department of Community and Regional Affairs 333 W. 4th Ave., Suite 319 Anchorage, AK 99501 Telephone: (907) 269-4500 POSITION STATEMENT: Answered questions regarding HB 154 ELIZABETH HOLT HC01, Box 6472 Palmer, AK 99645 Telephone: (907) 745-5577 POSITION STATEMENT: Testified against HB 154 LUCILLE FREY HC02, Box 7342 Palmer, AK 99645 Telephone: (907) 745-5577 POSITION STATEMENT: Testified in support of HB 154 RAY BRIGGS P.O. Box 3569 Palmer, AK 99645 Telephone: (907) 745-5654 POSITION STATEMENT: Provided Comments WESLEY E. NEWCOMB P.O. Box 1001 Sterling, AK 99672 Telephone: (907) 262-3135 POSITION STATEMENT: Testified in support of HB 154 PEGGY MULLEN 355 Lingonberry Soldotna, AK 99669 Telephone: (907) 262-9225 POSITION STATEMENT: Testified against HB 154 STEPHEN CONN, Executive Director Alaska Public Interest Research P.O. Box 101093 Anchorage, AK 99501 Telephone: (907) 278-3661 POSITION STATEMENT: Testified against HB 154 TOM PITMAN, Municipal Assessor Municipality of Anchorage 632 West 6th Avenue Anchorage, AK 99519 Telephone: (907) 343-6697 POSITION STATEMENT: Testified against HB 154 TONY TURRINI, Counsel Native Wildlife Federation 750 West 2nd Avenue Anchorage, AK 99515 Telephone: (907) 258-4800 POSITION STATEMENT: Testified against HB 154 JOHN ISAACS Alaska Chapter of the American Planning Association 308 G Street #315 Anchorage, AK 99517 Telephone: (907) 274-9719 POSITION STATEMENT: Commented on HB 154 BILL CUMMINGS, Assistant Attorney General Transportation Section Department of Law P.O. Box 110300 Juneau, AK 99811-0300 Telephone: (907) 465-3603 POSITION STATEMENT: Testified on HB 154 GERON BRUCE, Legislative Liaison Office of the Commissioner Alaska Department of Fish and Game P.O. Box 25526 Juneau, AK 99802-5526 Telephone: (907) 465-6143 POSITION STATEMENT: Testified on HB 154 STEVE NOEY, Real Estate Broker P.O. Box 110018 Anchorage, AK 99511 Telephone: (907) 346-2208 POSITION STATEMENT: Testified in support of HB 154 LISA BLACHER, Lobbyist Alaska Environmental Lobby, Inc. P.O. Box 22151 Juneau, AK 99802 Telephone: (907) 463-3366 POSITION STATEMENT: Testified against HB 154 PAM NEAL, Executive Director Alaska State Chamber of Commerce 217 Seward Street, No. 201 Juneau, AK 99801 Telephone: (907) 586-2323 POSITION STATEMENT: Testified on HB 154 PREVIOUS ACTION BILL: HB 154 SHORT TITLE: REGULATORY TAKING OF PRIVATE PROPERTY SPONSOR(S): REPRESENTATIVE(S) KOHRING,Rokeberg,Kott JRN-DATE JRN-PG ACTION 02/03/95 237 (H) READ THE FIRST TIME - REFERRAL(S) 02/03/95 237 (H) CRA, JUD, FIN 02/16/95 (H) CRA AT 01:00 PM CAPITOL 124 02/21/95 (H) CRA AT 01:00 PM CAPITOL 124 02/21/95 (H) MINUTE(CRA) 03/01/95 550 (H) COSPONSOR(S): ROKEBERG 03/09/95 (H) CRA AT 01:00 PM CAPITOL 124 03/09/95 (H) MINUTE(CRA) 03/16/95 (H) CRA AT 01:00 PM CAPITOL 124 03/24/95 919 (H) COSPONSOR(S): KOTT 03/25/95 (H) CRA AT 01:00 PM CAPITOL 124 ACTION NARRATIVE TAPE 95-11, SIDE A Number 000 CO-CHAIR IVAN called the House Community and Regional Affairs Committee to order at 1:06 p.m. He noted the members present at the call to order were Representatives Kim Elton, Alan Austerman, Al Vezey and Pete Kott. Members absent were Representatives Jerry Mackie and Irene Nicholia. The agenda called for general discussion on HB 154. He said witnesses were waiting on line to testify from Anchorage, Mat-Su, Kodiak, Kenai and Soldotna. He invited Representative Vic Kohring to introduce HB 154. HB 154 - REGULATORY TAKING OF PRIVATE PROPERTY Number 023 REPRESENTATIVE VIC KOHRING, Sponsor, said his bill impacted the effectiveness of regulations regarding private property and regulations that restrict the individual's use of private property. The bill states just compensation for the individual in the event of a regulatory taking. He addressed committee concerns from the prior two hearings on HB 154. The first concern questioned the anticipated increase in litigation if HB 154 became law. Representative Kohring stated this would not happen, as he talked with the Deputy Director of the National Association of Attorney Generals who said they had no knowledge of increased litigation resulting from other states passing similar legislation. The second concern was whether it was considered an unfunded mandate if the state were to impose a restriction and make a municipality pay the property owner in a regulatory taking. Representative Kohring said there wouldn't be an unfunded mandate because the state agency would be required to reimburse any municipality that compensated a property owner in a takings claim. Number 076 CO-CHAIR IVAN recognized the attendance of Representative Irene Nicholia. He asked if committee members had any questions or comments. Number 082 REPRESENTATIVE PETE KOTT asked if the state agency didn't have the funds to compensate a municipality, would it require a legislative appropriation. He stated there was a provision in HB 154 saying payment must be rendered in three months. Number 102 REPRESENTATIVE KOHRING said he wasn't aware of a state agency running out of available funds in terms of their operating budget proceeds. Number 112 REPRESENTATIVE KOTT asked what kind of effect it would have on an agency if it had to render payment within three months but had no money with which to compensate parties. He stated this scenario would require a legislative appropriation. Number 121 REPRESENTATIVE KOHRING agreed the appropriation would have to be the solution which would have negative effects on the operation of the state agency. Number 129 REPRESENTATIVE KOTT asked if HB 154 shouldn't address a provision that would cover the agency in the event a payment was due during the interim and funds weren't available. Number 137 REPRESENTATIVE AL VEZEY interpreted it to say if the agency couldn't pay the debt within the required time, it accrued interest according to state law. Number 148 REPRESENTATIVE KOHRING stated he wouldn't object to extending the amount of time required to pay back the debt. Number 159 CRAIG LYON, Legislative Aide to Representative Vic Kohring, said a state agency could do one of two things: They could pay the compensation or they could refuse to take the action and pay. He stated HB 154's intent was to act as a deterrent. Number 170 REPRESENTATIVE VEZEY said an obligation was incurred by the state agency and with not following through with payment of debt, the owed party suffered a loss of property. Routinely, this situation would be kept in check by the paying of interest. He mentioned several different operations, both on a state and private level, where debts are incurred and a debtor paid interest on overdue debts. Number 184 REPRESENTATIVE KOHRING said there was a provision in the bill regarding interest in the event there was an outstanding debt. Interest would accrue at 3.5 percent. Number 188 REPRESENTATIVE KOTT interpreted it to mean 3.5 percent would be accrued during the three month limit to pay the owed party. He wanted to know why the London Interbank offering rate was used instead of the Prime Rate. Number 201 MR. LYON responded the London Interbank rate was used because it was more stable than the Prime Rate. Number 208 REPRESENTATIVE KOTT said he understood the London Interbank offering rate was higher with an escalated interest rate. Number 213 MR. LYON stated it would be up to the committee to decide which rate to use. Number 219 REPRESENTATIVE KIM ELTON wanted to know, if a shop was closed down and qualified as taking, whether the municipality taxpayers or municipality was required to reimburse the property owner. Number 231 MR. LYON stated if an individual had purchased property and opened a business before a zoning came into effect, according to the terms listed in HB 154, the private property owner would have to be compensated in the event his business was closed. Number 241 REPRESENTATIVE ELTON asked if a liquor establishment, in a village that has chosen to go dry, would qualify under the takings provisions of HB 154. Number 246 MR. LYON stated he would assume it would, as would any legitimate business that has part of their economic viability or use taken away by government action. Number 251 CO-CHAIR IVAN asked if there were questions or comments from the committee. Number 254 REPRESENTATIVE IRENE NICHOLIA wondered why there wasn't a fiscal note from the Department of Law (DOL) and the Department of Transportation and Public Facilities (DOTPF). Number 262 MR. LYON stated there should be a fiscal note from the DOL with a lengthy analysis of the proposed cost to the department equaling three months of attorney time. Number 268 REPRESENTATIVE NICHOLIA asked if the department didn't submit an estimated cost in the actual dollar amount. Number 270 MR. LYON confirmed this and stated they had estimated three months of attorney time to draw up the regulations. He noted members had copies of Idaho and Washington State guidelines regarding regulatory takings which would be similar to what HB 154 suggests. Number 279 REPRESENTATIVE KOHRING said that by implementing the bill in July 1995 and requesting the guidelines to be ready by January 1996, gives the DOL six months to formulate the guidelines. If a taking should occur during these six months, it wouldn't actually be addressed until July 1996. Number 291 REPRESENTATIVE KOTT corrected the comments regarding attorney time in that it stated two months not three with the initial compilation. Number 297 REPRESENTATIVE KOHRING said the DOL was concerned there would be perpetuating costs involving the guidelines. The guidelines would uniformly apply to any taking and be comprehensive enough not to call for additional drawings. Number 310 REPRESENTATIVE ELTON asked if Representative Kohring had a chance to review a memo written by the State Forester. He thought the Division of Forestry (DOF) had an expectation of a loss of hundreds of millions of dollars. He believed it would be prudent to get a fiscal note from the Department of Natural Resources (DNR) to formalize an estimate. Number 322 MR. LYON stated the DOF was referring to legislation prohibiting the use of timber within a 66 foot buffer zone currently in place. Individuals who haven't bought property before buffer zones were installed currently don't have the value of the property, but those individuals who bought the land before buffer zoning, have lost value in their land. The memo mentioned hundreds of millions of dollars in value not utilized by the individual property owners. Number 343 REPRESENTATIVE ELTON stated much of the land involved were Native lands transferred prior to the Forest Practices Act. This Act was drafted by foresters, people in fishing communities and by other resource users to protect hundreds of millions of dollars in other resources. Number 353 REPRESENTATIVE KOHRING stated the basic intent of the regulations is to protect the well-being of the public. A restriction from an individual's property rights calls for just compensation. He believed HB 154 would have an impact on the burden of regulations within society, both on national and state levels. Number 376 CO-CHAIR IVAN recognized the attendance of Representative Norm Rokeberg. Number 380 REPRESENTATIVE NICHOLIA asked about a fiscal note from the DOTPF. Number 383 MR. LYON stated he hadn't specifically asked for a fiscal note from DOTPF. Number 388 REPRESENTATIVE VEZEY stated it was the policy of the Knowles Administration that the committee request fiscal notes, not the bill sponsor. The Administration is asking committees to request fiscal notes from them, and they would oversee the job of protracting them. Number 397 REPRESENTATIVE NICHOLIA asked if Tom Boutin would be available for questioning. Number 404 REPRESENTATIVE KOHRING said he wasn't aware of Mr. Boutin's attendance. Number 409 CO-CHAIR IVAN stated members from the Division of Forestry were present to answer questions. Number 419 JIM MCALLISTER, Regional Forester, Division of Forestry Coastal Region Office, Department of Natural Resources (DNR), said he would answer questions regarding forest practices issues. Number 422 REPRESENTATIVE NICHOLIA asked him to explain a section of the memo from Tom Boutin. Number 424 MR. MCALLISTER said the Forest Practices Act specified private Native owned lands have a 66 foot buffer left on all streams of a certain type. The Act had no defined amount of streams it would entail. He stated a single tree could be worth around $20,000 creating an estimate of hundreds of millions of dollars in value lost to the Native corporations with the established buffer zones. Number 440 REPRESENTATIVE NICHOLIA asked if HB 154 came into effect, the estimated millions would be the loss to Native corporations. Number 443 MR. MCALLISTER said buffers are in the definition of a taking. Fish and Wildlife had installed the buffers for fish habitat purposes. The buffers were placed with the representation and process of private landowners, fishing communities and regulatory agencies. Number 454 REPRESENTATIVE NICHOLIA asked if HB 154 would have an impact on the fishing industry. Number 457 MR. MCALLISTER stated the current buffers established in 1990 would be considered a taking and the state could be liable to pay private property owners for the value within the buffers. Number 464 CO-CHAIR IVAN asked for questions from the committee. Number 466 REPRESENTATIVE VEZEY asked if there was an estimate of uncutable timber located on private land. Number 470 MR. MCALLISTER said he didn't have an estimate as it wasn't possible to have a detailed counting of the trees as well as the variety of streams. Number 476 REPRESENTATIVE VEZEY said the Forest Practices Act didn't deal with areas where harvesting wasn't considered but only in those where state law prohibited certain trees from being harvested. He believed an estimate could be deduced from these areas. Number 481 MR. MCALLISTER said the Division of Forestry identifies the streams meeting the criteria but thousands of miles of buffers were still left. Number 491 REPRESENTATIVE VEZEY stated this bill would only impact private landowners and not state or federal land. He wanted to know what percent of commercially valuable forest were privately owned. Number 498 MR. MCALLISTER said the buffers referred to private land, as federal land had its own buffer requirements. About half a million acres were being harvested in the Southeast region since 1990. Number 505 REPRESENTATIVE VEZEY asked how many buffer zones were in the private land areas. He also wanted to know what percent of the half a million acres was harvested. Number 509 MR. MCALLISTER didn't know what percent and he said some village corporations have harvested most of their property outside of the buffers. The majority of the buffer trees are still standing, however, and one village corporation has estimated their uncut trees equaling about $20 million in profit. Number 521 REPRESENTATIVE VEZEY asked if this was in response to HB 154. Number 522 MR. MCALLISTER said the estimate was in response to the value of the buffers and the village corporation estimate of what was left. Number 525 REPRESENTATIVE VEZEY asked if the $20 million profit was what was tied up in regulations. Number 527 CO-CHAIR IVAN invited testimony from witnesses on teleconference. Number 539 LARS EHRLANDER said he had faxed information for the committee the day before and wondered if the members had received it. He appreciated the committee's effort in working on HB 154. He has been involved for 12 years in a condemnation case which has been difficult for his family. He believed his case could be used as a worst case scenario. He stated he was glad this committee was working on legislation to ensure his situation didn't happen to anyone else. He was concerned about the ten year time limit to file a complaint or take action regarding a taking. He expressed concern about when the time limit began, when the government committed the wrong, or when the owner realized he had been hurt. Mr. Ehrlander's case started 12 years ago and is still ongoing and he's not even a hundred percent sure that he was hurt as he is awaiting the decision of the Supreme Court ruling. He said it would be difficult for him to remain within the ten year limit to file a complaint if he's not sure whether he was hurt. He had four approved city tax lots and one was taken due to a separation agreement the state didn't want to go through with. He wanted to see the immunity removed from state officials as he's noticed the government had more immunity than members in private industry. In his case, his property and working capital were taken but the fees to take it to court, he estimated, were over $120,000. Number 652 CO-CHAIR IVAN invited Mick Mans to testify. Number 655 MICK MANS said HB 154 would prevent government agencies from bankrupting individuals and companies from preventing sensible, economic development of Alaska. He said without the bill, all the current federal and state laws meant to protect property rights are meaningless. He thought HB 154 should be expanded to include mineral rights, grazing rights, logging rights, access rights, traffic rights, recreational rights and all rights meant to protect development of any kind. He believed the government would continue takings knowing the individual probably wouldn't be able to pay the lawsuit fees without HB 154. He referred to Section 1 in which no person shall be deprived of life, liberty and property for equal protection. He then referred to different amendments and the U.S. Constitution concerning private property and the individual's rights. He explained the big case he's been through with his mining operation and the battles with the Department of Fish and Game and the government to have mining rights to a certain section of land. He stated something should be done to end the government abuse of private individuals and companies with the intent to enjoy living in Alaska without having to worry about governmental takings without due process of law. TAPE 95-11, SIDE B Number 073 CO-CHAIR IVAN invited Bill Samples from Kodiak to testify. Number 084 BILL SAMPLES, Project Manager, Federal Government, said there must be a cost/benefit ratio between a government agency action and what it's going to cost and what it would take out of the private sector. He stated HB 154 parallels the constitutional law. He stated he wasn't sure how buffers created in 1990 could be subject to legislation created in 1995. He wanted to recognize regulation requiring there be environmental assessments done and that no property could be used for criminal activity. Number 136 CO-CHAIR IVAN asked if there were any questions or comments from the committee. He invited Pat Carlson to testify. Number 141 PAT CARLSON, Assessor, Kodiak Island Borough, was concerned about the implications of taxation and assessment adjustments required. This would be in direct conflict with existing state law which requires all property be annually assessed at one hundred percent market value. A property owner could acquire an appraisal from an outside agent that would become the assessment regardless of the opinion of the value. He's currently involved with land acquisitions in Kodiak in which he has appraisals from certified appraisers that are millions of dollars apart. He mentioned discussions concerning timber land where expansion of the buffers to one hundred feet could have tremendous impacts on Native corporations' timber harvesting on Afognak Island. He believed analysis needed to be done on the impact dealing, not only with government agencies but also with private citizens, in the fisheries industries. The state could, by default pay millions of dollars. He stated if the committee went back to the original language of the bill regarding taxation, which does not conflict with the market value estimate, and exclude language regarding appraisals, many conflicts could be avoided. The procedures already in place satisfy the needs of the citizens as to the value of their property. He suggested further analysis be done by the DOL when looking into the impacts of the various issues regarding changes made to mining laws or timber laws. Number 207 REPRESENTATIVE ELTON asked what would happen if a taking has been determined because a property owner wasn't allowed or no longer allowed to do something. He asked if Mr. Carlson would view the private property at the rate which included the value of the property plus the amount paid by the government to compensate the property owner in the event of a taking, or would he assess the property at the new value that reflects the government action that took away a property right. Number 226 MR. CARLSON said, as an assessor, he was required to annually reappraise the property at its market value. The government action affects the highest economic return of that property and decreases the value. The assessor would have to, under the law, reflect this in his assessment. In a physical taking of a property, the assessor would have to reflect that under the existing law. He said the appraisal issue is necessary and makes the assessment procedure complicated. Number 244 REPRESENTATIVE ELTON said, if he was a property owner and the government had compensated him for the loss of property, he believed the money given to him would be a reflection of the value of the property. He said this money should be taken into account with the base value of the property. Number 256 MR. CARLSON said under existing state law, he would not reflect the income to the property owner. The property would receive the compensated money and lower the assessed value because of the taking. Number 261 REPRESENTATIVE VEZEY said he understood that under current state law if there was a change in zoning, the uses prior to the change are allowed to continue as long as there aren't major changes that would cause it to go beyond a maintenance of the establishment. Number 270 MR. CARLSON said this was a correct understanding. He said he ran into evaluation problems and had to adjust it to fit into the existing annual analysis. Number 276 REPRESENTATIVE VEZEY asked if a community decided a certain establishment was no longer desirable, would rezoning change the fact that this proprietor could continue to do business. Number 283 MR. CARLSON said it was difficult to analyze. The assessor would look at the general retail value of the property and make adjustments if the property was required not to be used. Number 293 REPRESENTATIVE VEZEY stated he was just questioning Mr. Carlson's background in the commercial regulation of property. Number 298 REPRESENTATIVE ELTON said if there was a change in zoning, at the point the property is sold, the full value couldn't be collected because of additional restrictions. He said figuring out whether it would be a taking from the past owner or the next would be an interesting question. Number 307 REPRESENTATIVE VEZEY said the law was well established and property rights could be transferred where the grandfather rights clause ends in that this use terminates for whatever reason on the part of the owner. Number 314 CO-CHAIR IVAN invited Steve Van Sant to testify. Number 316 STEVE VAN SANT, State Assessor, Department of Community and Regional Affairs (DCRA), stated currently in Alaska the appeal procedure is set up. The bill by-passes the appeal procedure to give property owners the option to appeal before the Board of Equalization. This one asks that an independent appraisal from a real estate appraiser be accepted by the municipality in the evaluation mentioned earlier. He asked the legislature to look at the original bill that states any taking should be reflected in the assessed value and, if the landowner agrees, may appeal it. Number 338 CO-CHAIR IVAN invited Elizabeth Holt to testify. Number 340 ELIZABETH HOLT stated she opposed HB 154. She said she owned several pieces of lake front property and she didn't understand why she should be compensated due to regulations to protect water quality. She said this issue has bothered the Mat-Su Valley for years. Number 357 CO-CHAIR IVAN invited Lucille Frey to testify. Number 359 LUCILLE FREY stated she was a private landowner who lost property rights every time a regulation or ordinance was passed. She said HB 154 encourages more economic development for building. Her property has undergone government takings and she believed the private property owner needed protection. Number 372 CO-CHAIR IVAN invited Ray Briggs to testify. Number 375 RAY BRIGGS said he was involved in a federal lawsuit against the city of Palmer for contaminating property next to the airport which is next to his property. He asked what the private home owner had when a state agency will not enforce an in-state or federal regulation against individuals who break the regulations by creating a hazardous dump site into wetlands. He believed this would be an adverse condemnation. He bought property in 1989 from the federal government, Small Business Administration, who appraised the property at $295,000 but the Federal Bureau of Administration (FBA) withdrew their support. He believed this was because the FBA wanted to limit their liability for the cleanup. He wanted to know where the landowner went except to the federal court to sue the state or municipality for breaking the regulations. He said the city of Palmer wasn't fined for the contamination. He asked where the private landowner stood at this point. Number 414 CO-CHAIR IVAN asked Mr. Lyon to answer the question. Number 417 MR. LYON stated he wasn't sure how the question pertained to HB 154. Number 420 REPRESENTATIVE VEZEY stated the comments made by Mr. Briggs are covered under federal law and not under the scope of HB 154. Number 424 MR. BRIGGS asked if HB 154 dealt with inverse condemnation. Number 426 REPRESENTATIVE VEZEY said he interpreted HB 154 as addressing the issue of inverse condemnation by regulation. Number 431 MR. LYON said this was also his interpretation. Number 432 MR. BRIGGS said his property was appraised at $295,000 and the FBA doesn't want the property. He wanted to know what to do next now that his property was devalued to zero and if HB 154 could help him. Number 441 MR. LYON said there was a set up process to remedy Mr. Briggs' situation. He stated he wasn't familiar with this area of law. Number 446 MR. BRIGGS asked if anyone could send him a copy of regulations he could go by. He had received a cost estimate from an attorney of $250,000 to $300,000 to take his case into court. Number 454 CO-CHAIR IVAN said representatives from state agencies weren't present to address Mr. Briggs' concern but he would follow up on it and get information back to Mr. Briggs. He invited Wesley Newcomb to testify. Number 463 WESLEY NEWCOMB stated he and a number of people he was representing were all in favor of HB 154. Number 469 CO-CHAIR IVAN invited Peggy Mullen to testify. Number 470 PEGGY MULLEN referred to page 7 regarding takings as describing anything including restraints on wetlands and restricted use of private property. She stated the bill didn't address the potential for excluding an economic resource such as the river salmon industry affecting commercial and sports fishermen and a borough's decision to restrict use of riverfront property. She said if she wanted to have a bulk fuel storage facility, for example, on her riverbank property, the city borough could come and say she couldn't as it could harmfully affect salmon. Number 528 CO-CHAIR IVAN said Bill Cummings from the DOL was present to address this issue. Number 532 REPRESENTATIVE KOTT said regulations could be considered necessary to avoid or correct a public nuisance. Number 536 REPRESENTATIVE VEZEY asked what percent of the 62-mile Kenai riverbank was private property. Number 540 MS. MULLEN responded that approximately 58 percent was private property. Number 541 REPRESENTATIVE VEZEY said Ms. Mullen's comments concerning bulk fuel storage close to a riverbank was included under different statutes. He said there was a several million dollar bond requirement to have such a storage facility. He didn't think this was a reasonable concern for Ms. Mullen to have. He asked what Ms. Mullen's property boundary was compared to the Kenai River. Number 553 MS. MULLEN said most of the bank lots were referred to as piano key lots because they run directly up to the bank and may only be 100 feet wide. She said the agencies available in Kenai aren't well versed enough to explain restrictions above ordinary tidewater. She said she was concerned about the bill being too one-sided in compensating private property owners instead of looking at how to benefit the whole community. Number 583 REPRESENTATIVE VEZEY said it was one thing for a government agency to appropriate land for public use, such as roads, but for the agency to request that private land be used for the public would anger many individuals. Number 592 MS. MULLEN said most riverbank landowners choose to live there because they love to fish and are angry at having anyone instruct them on how to use their property. Number 601 CO-CHAIR IVAN invited Steven Coon to testify. Number 604 STEPHEN CONN, Executive Director, Alaska Public Interest Research, stated HB 154 was an unmitigated disaster. He said it disempowers communities in the urban areas from dealing with these issues and it has tremendous effects on villages developing their zoning regimes. He said it puts a stake in local control. He said to look at the potential for outside businesses to come in and take from the state revenue. He thought the flexible language in the bill would create a playground for lawyers. He stated this bill would put an end to communities making their own decisions to the extent it would have an effect over the rights of the private property owner. Number 649 CO-CHAIR IVAN invited Tom Pitman to testify. Number 651 TOM PITMAN, Municipal Assessor, Municipality of Anchorage, agreed with the earlier concerns discussed by Pat Carlson. He thought HB 154 stifled an appropriate approach in property evaluation. He said he didn't understand the intent under AS 34.50.120 requiring an assessor's analysis of economic effects. Number 675 CO-CHAIR IVAN invited Tony Turrini to testify. Number 676 TONY TURRINI, Counsel, National Wildlife Federation, said he opposed HB 154. He said HB 154 would create a larger, more expensive and less efficient government. He said attorneys, who would litigate the many claims raised by this legislation, would benefit from this bill. He said any action taken by the government which affects real or private property is a taking creating unlimitless opportunities for claims. Under HB 154, an unscrupulous business could ask to be compensated for not complying with anti-trust regulations, for establishing a monopoly or engaging in price-fixing. He said Alaskan taxpayers would end up paying for the legislation. He said HB 154 would require state and municipal governments and agencies to engage in a time consuming, expensive analysis of potential risks, costs and alternatives. TAPE 95-12, SIDE A Number 017 CO-CHAIR IVAN invited John Isaacs to testify. Number 020 JOHN ISAACS, Alaska Chapter of the American Planning Association, has tried to come up with solutions for problems facing Alaskan communities, such as the restrictive Federal Wetlands Permitting Act. He said his association agrees with some concepts of the bill, such as the unreasonable and restrictive taking of property. He questioned whether HB 154 was the appropriate solution to the problems and with the vague, broad language in the bill. He thought those getting the worse end of the deal concerning takings claims would be communities and the general public. He recommended the committee not take action regarding HB 154 until the broad scope of language could be improved. Number 074 CO-CHAIR IVAN asked if there were any other witnesses on teleconference wishing to testify. Number 094 REPRESENTATIVE KOTT said HB 154 referred to civil liabilities. He was concerned about the provision regarding buffer zones protecting anadromous streams and wouldn't apply retroactively. He wondered if the legislature would be obligated to provide financial incentives to those individuals. Number 115 MR. MCALLISTER stated this was the DNR's concern. Number 120 REPRESENTATIVE KOTT asked if there was a representative from the DOL to answer questions. Number 121 CO-CHAIR IVAN invited Bill Cummings to testify. Number 127 BILL CUMMINGS, Assistant Attorney General, Transportation Section, Department of Law (DOL), expressed his pleasure at being present. Number 130 REPRESENTATIVE KOTT asked if the current holdings in the buffer zones would be affected and reimbursed. Number 136 MR. CUMMINGS stated there was a 95 to 100 percent probability that there would be compensation due to the drafting of HB 154. Number 146 REPRESENTATIVE VEZEY stated with the current holdings, compensation would be offered, but upon the passage of HB 154, if the government put restrictions on property, it would be regarded as a taking. Number 154 REPRESENTATIVE KOHRING stated the intent of HB 154 was not to make it retroactive to any period of time but from its effective date. He said he would be willing to clarify this language in the bill. Number 164 REPRESENTATIVE VEZEY asked for a summary of property owners' rights under the grandfather statute. Number 167 MR. CUMMINGS said it was a common practice for example with zoning, where a municipality comes in and changes permissible uses. Generally, property owners are prohibited from expanding the use but could take steps to reasonably keep the building in usable condition, locking the owner under the passage of a new ordinance. Number 178 REPRESENTATIVE VEZEY asked what happened if a city or municipality decided to zone out a pornographic business. He wanted to know the options available for this business unwanted by a community. Number 187 MR. CUMMINGS replied that it depended upon the nature of the specific business. He said there was an amount of litigation in the Supreme Court concerning pornographic businesses, but there were certain restrictions that could be applied and, in others, couldn't. Number 201 REPRESENTATIVE VEZEY asked about liquor stores and the potential for a municipality to build a school within the designated 400 yard zone. He asked what would happen to the liquor store. Number 209 MR. CUMMINGS said the liquor store would be able to remain in its spot, as it was there first. Number 210 REPRESENTATIVE ELTON asked what would happen in a village that voted to go dry and closes a liquor establishment. Number 213 MR. CUMMINGS said under HB 154, the municipality or state ends up buying the liquor store stock and liquor license because it was a type of property. Number 222 REPRESENTATIVE VEZEY asked what happened next after an action of this sort. Number 224 MR. CUMMINGS said the liquor store would close down and the owner got the bad end of the deal. Number 227 REPRESENTATIVE VEZEY asked if there hadn't been court cases concerning this particular issue. Number 229 MR. CUMMINGS stated under current statutory authority, liquor is one of the more regulated commodities. He said a risk in owning a liquor license was a community could vote to go dry creating a loss in investment for the owner. Number 235 REPRESENTATIVE VEZEY said there was a provision in the regulations concerning the status of a liquor license in a community gone dry. He thought the provisions stated if liquor became legal again the prohibited liquor license and owner had grandfather rights. Number 244 MR. CUMMINGS said this provision could be in effect but one had to wait to exercise it, and by then it didn't have much value. He said there were a large number of villages that had been dry for a while and the liquor license owner had to wait until the village voted to go wet again. He wasn't sure what the license right and expectancy would be worth. Number 253 CO-CHAIR IVAN asked Mr. Cummings to respond to Mr. Briggs' earlier question concerning hazardous waste devaluing property. Number 260 MR. CUMMINGS replied under federal legislation, this claim could come against the municipality but he wasn't sure it would rise to the level of a taking under HB 154. Number 270 CO-CHAIR ALAN AUSTERMAN said many complaints from individuals via teleconference referred to simplistic things where a taking would be along water habitat areas, setbacks on properties, requiring water and sewer in lots and not being able to subdivide a property. He wanted to know who made this determination. He believed the language in HB 154 would result in numerous ongoing court cases with municipalities based upon public demands. Number 296 MR. CUMMINGS said routine police power rulings would be a taking under HB 154. Rulings included such things as the Forest Practices Act, set back requirements, subdivisions, sewer requirements and Division of Motor Vehicle codes regarding tinted windows. Number 311 REPRESENTATIVE ELTON referred to public testimony and agreed that HB 154 would create a large opportunity for certain suits. He asked what Mr. Cummings' expectation of municipalities was and whether they would be going to court more often in the future and if the DOL would be involved in more cases. Number 330 MR. CUMMINGS said he believed municipalities would be litigating more. He viewed HB 154 as a full employment act for lawyers regardless of which side they took. Number 340 CO-CHAIR AUSTERMAN asked for confirmation regarding the forest industry on Kodiak Island and whether the additional property intended to be developed would be regarded as a taking if a buffer zone setback was set up. Number 350 MR. CUMMINGS said it would be a taking either way. He stated, under the Alaska Native Claims Settlement Act (ANCSA), corporations got land without restrictions. Since then, the state has enforced the Forest Practices Act and imposed standards, creating a situation in which the Natives had property rights and the legislation has taken away their ability to fully exploit the resources of the property. Under HB 154, with this loss, the Natives are entitled compensation. Number 361 CO-CHAIR IVAN invited Geron Bruce to testify. Number 369 GERON BRUCE, Legislative Liaison, Office of the Commissioner, Alaska Department of Fish and Game (ADF&G), mentioned several concerns ADF&G had toward the committee substitute for HB 154. He stated under Title 16, protecting and maintaining fish and wildlife resources are the responsibility of the department. He asked the committee to consider most of these resources are migratory and could be on private property at one point and public lands at another. He said HB 154 would impair the ability of the department to protect these resources. He reviewed the historical basis of why Americans chose to take this approach in regarding their fish and wildlife resources as public. He said the ADF&G views HB 154 as undoing the balance between private property owners and recognition of the rights of fish and wildlife resources by elevating the rights of the private landowner above the public interest. He stated this would put the ADF&G in an impossible situation by being mandated by Title 16 to protect public fish and wildlife resources and by prohibiting the ADF&G from using its regulations to exercise the mandates. He gave examples of problems caused for the ADF&G upon the passage of HB 154. The bill would restrict the department's ability to protect important salmon rearing and spawning habitats due to requested mining proposals in Alaskan waters. He also elaborated on the Kenai River forest industry creating a loss of about 12 percent of the productive salmon producing habitat from habitat alterations. He believed HB 154 would undermine current proposals made by municipalities to protect the resources. Access was another concern of the ADF&G. A private landowner could have timber on his property he wished to harvest but is impeded by a salmon producing stream on his property. The owner would have to work with the ADF&G to get a permit to access the timber and wait until there was no danger of affecting the salmon population. This restriction on when it was safe to get the timber from across the stream could be misconstrued as a taking by the private property owner under HB 154. Mr. Bruce referred to Potters Marsh and a parcel of land leased to a private individual who wanted to develop a truck stop. The ADF&G denied this proposal and, had HB 154 been in effect, the individual could have claimed this as a taking and the department would have had to compensate the owner. The ADF&G believes the current permit system works well and have found only four former appeals for denial of permits. Mr. Bruce gave an estimate of applications for permits reviewed in Region 2 from July 1, 1991, to June 30, 1994, to prove how insignificant the appeals were. He said there were 2300 applications reviewed for Title 16 permits, 1335 permits were issued, 12 were denied, and the rest were deemed unnecessary. He again reiterated the ADF&G believed the current system worked well in providing a balance for private property owners to exercise their land rights and the public's interest in protecting the fish and wildlife resources important to Alaska. Number 538 CO-CHAIR IVAN asked if the committee had any questions or comments. He invited Steve Noey to testify. Number 544 STEVE NOEY, Real Estate Broker, said from the testimony already given, he believes regulatory takings are being done. He referred to a memorandum submitted by the DNR regarding stream buffers which says, by using the buffer program and AS 41.17, they have taken millions of dollars in value from Native corporations. He supported HB 154 which he believes takes care of problems pointed out by government agencies. He stated the private property owner should be justly compensated for his property as the Constitution states. Number 598 REPRESENTATIVE ELTON asked if a Native corporation should be made to pay for the loss of a common property resource. He questioned attaining the balance between the action of a private landowner and that of someone wishing to make a living on resources degraded by the private landowner. Number 608 MR. NOEY said he wasn't aware of any situations where a resource was completely annihilated, eliminating the livelihood of someone. He stated a resource on someone's private property belonged to that individual. Number 613 REPRESENTATIVE ELTON was concerned with the belief that government can pay, which really places this responsibility onto the taxpayers or Alaskans not receiving necessary services such as education or public safety. Number 616 MR. NOEY said this wasn't true because if the government didn't take, it didn't pay. He said the government had to act first and pay later. Number 617 REPRESENTATIVE ELTON said people have taken the salmon resources and not paid, but the government pays for the loss of timber resources. Number 619 CO-CHAIR IVAN asked the committee if they had any questions or comments. He invited Lisa Blacher to testify. Number 629 LISA BLACHER, Lobbyist, Alaska Environmental Lobby, Inc., stated she opposed HB 154. She referred to the bill sponsor and his use of Mr. Noey as an example for why HB 154 was important. She said Mr. Noey wanted to build an improper sewage disposal system on his subdivision in Kachemak Bay. She stated he still hadn't complied with the Department of Environmental Conservation's (DEC) waste disposal permitting guidelines and was denied the ability to proceed with his development. She read the DOL's trial brief, concerning Steve Noey v. DEC, stating DEC's engineers testified it would be appropriate to reject Mr. Noey's proposal because waste water would be discharged to the surface of the land impacting adjoining property and posing a public health hazard. Upon the passage of HB 154, Mr. Noey could be allowed exemption from DEC's permitting process or have the right to sue to make up for money lost. Ms. Blacher talked about Alaska's high rates of Hepatitis B and other infectious diseases and asked the committee if it wanted to weaken a regulation that monitors sewage. She said HB 154 would undermine municipal and local laws controlling zoning restrictions, labor laws and seafood handling resulting in endless litigation. She said information concerning the cost to other states that have enacted similar legislation has not been substantial because it was too early to see results. She noted the administrative costs have been tremendous, reaching into the millions. She asked the committee to consider the costliness of hiring legions of attorneys and attending to thousands of claims. Ms. Blacher said regulations would always be in place and anyone could file a claim saying the regulations affected them. The regulations are important in protecting public health and safety. However, if a regulation causes a hardship for anyone, the court system is in place to address these cases. She believed regulatory takings should be looked at on a case-by-case basis instead of creating a bill addressing these cases as a whole. TAPE 95-12, SIDE B Number 000 PAM NEAL, Executive Director, Alaska State Chamber of Commerce, said she supported HB 154 as it would sensitize government to private property rights. She said what is happening is regulatory action is more subtle than putting a parkway through a land area. Many groups are using the regulatory process to determine how private property will be used. Groups such as the timber industry and the mining industry are two suffering from this action. Federal regulations are a problem seen nationwide with no consideration of the loss to private property owners. She believed that private property rights are the highest concern within Alaska. She said upon the loss of any kind, someone is paying, be it the property owners or the government. Without some kind of protection, she believes the private property owner is paying too frequently for a government regulation. Number 065 CO-CHAIR IVAN asked for questions from the committee. He asked Representative Kohring to follow up on the comments given by all the testifiers. Number 069 REPRESENTATIVE KOHRING said he appreciated the discussions given by the testifiers. He saw this as pitting the small landowner against a government trying to defend itself. He believed this bill was considered a threat by government agencies against their ability to continue opposing restrictions. He asked who was being defended, the private landowner or government. He thought HB 154 sufficiently addressed these concerns and stated the individual had constitutional rights. He said the bottom line was to compensate a private landowner whose property was devalued as it was his right. He requested the committee's consideration with HB 154. Number 135 CO-CHAIR AUSTERMAN interpreted HB 154 as not addressing the cases he referred to in previous comments. He believed if a community wished to zone to certain standards they had the right. If they created a zoning not agreeable by someone, this bill would enable the individual to file a takings claim. He said the good of a resource had to have some overall value to all Alaskan citizens. He stated he was uncomfortable with HB 154 as it was currently written unless his concerns could be addressed in the bill. He said it was one thing for an individual to buy property with the knowledge of set guidelines regarding the zoning of that property, but not allowing the owner to develop that property gives the individual the right to protest. Number 195 REPRESENTATIVE KOHRING said rezoning didn't necessarily mean there would be a devaluation of property as it could even increase the value of property. He remembered a case in Wasilla where property was reclassified as a commercial lot increasing that lot's value. Number 208 CO-CHAIR AUSTERMAN referred to page 7, Section 9, which redefines taking as other governmental actions that regulates or imposes a restraint on private property use for public benefit. This public benefit could be for rezoning an area but under HB 154, if an individual didn't want his property rezoned for public use, he could claim his property was devalued. He assumed public benefit would go so far as to say the community had rights. Number 222 REPRESENTATIVE KOHRING said the value wouldn't be arbitrarily determined by the property owner but by fee appraisal. It wouldn't be up to the private landowner to decide if his property had lost value, but by the appraiser. Number 231 REPRESENTATIVE VEZEY said rezoning has been claimed to be a taking. He didn't think this was common when a higher standard of property use was established, it usually raised the standard. He agreed there could be basis for argument if the standards were lowered. He stated zoning didn't stop existing land use. Number 252 REPRESENTATIVE KOTT said if a government couldn't afford to take property, it shouldn't. He was concerned with the anadromous streams, referring to Montague Island and the ongoing Koncor operation. If a buffer on each side of a stream was considered a taking, a decision needed to be made on whether to protect the spawning salmon or render payment for the taking. Rendering this payment would be an extensive financial proposition for the government. He said in striking a balance, the fishing resource would be more consistent with the Constitution, thereby demanding more protection, creating a need for a buffer and requiring payment, which would drain the state funds. Number 279 REPRESENTATIVE KOHRING stated he wasn't sure what kind of balance could be struck. Number 282 REPRESENTATIVE KOTT referred to Mr. Cummings' comment regarding a 100 percent probability stating takings and previous takings would fall into this category. Number 293 REPRESENTATIVE ELTON was concerned there was too much focus on the buffer issue. He believed the government would have to pay twice in some cases. He was disturbed by the general notion that government can pay. He used the example of a small village choosing to go dry by vote and the government placing a value of $150,000 on the liquor business, there would be a government cost. This cost would be born by individual Alaskans living within the village, making it a significant disincentive to go dry. If a village chooses not to go dry, the future costs would be high as the government has to cover education, public safety, health and social services and other public services. Number 331 REPRESENTATIVE KOHRING said it boiled down to the fundamental question of who is going to pay, the government or the individual property owner. Upon an unconstitutional taking of private property, everyone, constitutionally, has the right to just compensation. Number 343 CO-CHAIR IVAN appreciated the committee's interest in addressing HB 154. He stated the various state agencies had problems with the current HB 154, but he understood the purpose and intent of the bill. He requested the bill be further addressed in a subcommittee which would include the bill sponsor and representatives from the state agencies having difficulty in accepting HB 154. He hoped these individuals would work together to come up with a workable piece of legislation to bring before the committee for further consideration. He delegated Representative Austerman as Chair of the subcommittee and invited Representatives Elton and Kott to be on the subcommittee. Number 395 REPRESENTATIVE KOHRING expressed his appreciation at the willingness of the committee to continue working with him on his bill. He thanked the committee members and all those present and stated he respected everyone's opinions regarding HB 154. He hoped a compromise could be reached on which everyone could agree. Number 402 REPRESENTATIVE KOTT also expressed his appreciation of the bill sponsor taking on this difficult issue. He made a suggestion to the subcommittee chair there be more focus on the elementary issues the Community and Regional Affairs Committee was charged to review. He thought many of the legal issues addressed by testifiers would be better addressed in the next committee of referral, the Judiciary Committee. He hoped CRA wouldn't digress from its responsibilities. Number 413 CO-CHAIR IVAN said his point was well taken. Number 414 CO-CHAIR AUSTERMAN said it wasn't his intent to bury the bill and he expressed his willingness to further discuss HB 154. He was concerned HB 154 didn't breach the issue of too much regulation. ADJOURNMENT CO-CHAIR IVAN adjourned the House Community and Regional Affairs Committee at 3:45 p.m.