HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 22, 2000 8:10 a.m. MEMBERS PRESENT Representative John Harris, Co-Chairman Representative Carl Morgan, Co-Chairman Representative Lisa Murkowski Representative Fred Dyson Representative Reggie Joule Representative Albert Kookesh MEMBERS ABSENT Representative Andrew Halcro COMMITTEE CALENDAR HOUSE BILL NO. 255 "An Act relating to villages; and providing for an effective date." - MOVED CSHB 255(CRA) OUT OF COMMITTEE HOUSE BILL NO. 334 "An Act relating to the establishment of and accounting for an administrative cost charge for the state's role in the community development quota program and to the appropriation of receipts from the charge; and providing for an effective date." - MOVED CSHB 334(CRA) OUT OF COMMITTEE HOUSE BILL NO. 342 "An Act relating to the financing authority, payment in lieu of tax agreements, and tax exemption for assets and projects of the Alaska Industrial Development and Export Authority; relating to renaming and contingently repealing the rural development initiative fund within the Department of Community and Economic Development, and establishing the rural development initiative fund within the Alaska Industrial Development and Export Authority; and providing for an effective date." - SCHEDULED BUT NOT HEARD PREVIOUS ACTION BILL: HB 255 SHORT TITLE: HOME RULE VILLAGES Jrn-Date Jrn-Page Action 1/10/00 1886 (H) PREFILE RELEASED 12/30/99 1/10/00 1886 (H) READ THE FIRST TIME - REFERRALS 1/10/00 1886 (H) CRA, FIN 1/10/00 1886 (H) REFERRED TO CRA 2/17/00 (H) CRA AT 8:00 AM CAPITOL 124 2/17/00 (H) Heard & Held 2/17/00 (H) MINUTE(CRA) 2/18/00 2239 (H) COSPONSOR(S): HARRIS 2/21/00 (H) CRA AT 10:30 AM CAPITOL 106 2/22/00 (H) CRA AT 8:00 AM CAPITOL 124 BILL: HB 334 SHORT TITLE: CHARGE FOR COMMUNITY DEVELOPMENT QUOTA Jrn-Date Jrn-Page Action 2/02/00 2071 (H) READ THE FIRST TIME - REFERRALS 2/02/00 2072 (H) CRA, L&C, FIN 2/02/00 2072 (H) FISCAL NOTE (DCED) 2/02/00 2072 (H) GOVERNOR'S TRANSMITTAL LETTER 2/02/00 2072 (H) REFERRED TO COMMUNITY & REGIONAL AFFAIR 2/15/00 (H) CRA AT 8:00 AM CAPITOL 124 2/15/00 (H) -- Meeting Canceled -- 2/22/00 (H) CRA AT 8:00 AM CAPITOL 124 WITNESS REGISTER JEFF BUSH, Deputy Commissioner Department of Community & Economic Development P.O. Box 110800 Juneau, Alaska 99811-0800 POSITION STATEMENT: Presented HB 334. JASON BOURDUKOFSKY (No address provided) POSITION STATEMENT: Testified, as a concerned citizen of Saint Paul, in opposition to HB 334. LARRY COTTER, Chief Executive Officer Aleutian Pribilof Island Community Development Association 234 Gold Street Juneau, Alaska 99801 POSITION STATEMENT: Discussed the inception of HB 334. DICK TREMAINE, Consultant Central Bering Seas Fishermans Association (No address provided) POSITION STATEMENT: Supported HB 334. ROBIN SAMUELSEN, President Bristol Bay Economic Development Corporation (No address provided) POSITION STATEMENT: Supported HB 334. ACTION NARRATIVE TAPE 00-10, SIDE A Number 0001 CO-CHAIRMAN HARRIS called the House Community and Regional Affairs Standing Committee meeting to order at 8:10 a.m. Members present at the call to order were Representatives Harris, Morgan, Murkowski, Dyson and Kookesh. Representative Joule arrived as the meeting was in progress. Representative Halcro was not in attendance. HB 255-HOME RULE VILLAGES CO-CHAIRMAN HARRIS announced that the first order of business would be HOUSE BILL NO. 255, "An Act relating to villages; and providing for an effective date." Number 0099 REPRESENTATIVE DYSON, speaking as the sponsor of HB 255, pointed out that the committee should have a report from the subcommittee on HB 255, which had a spirited discussion with regard to the name of this new category. The subcommittee determined that the most descriptive and user-friendly title would be a "home rule community." He informed the committee that Tamara Cook, Director, Legislative Legal and Research Services, had the opinion that a community is defined as fitting under the category of city. Therefore, the name would pass the constitutional test, although it will require some work. REPRESENTATIVE DYSON informed members that the Attorney General's representative did not have strong objections. Kevin Ritchie, Executive Director, Alaska Municipal League, felt that the phrase "home rule" was widely used, with a recognized meaning nationwide. Therefore, the subcommittee liked the term "home rule community" that was in the proposed committee substitute (CS), Version H [1-LS1000\H, Cook, 1/24/00], which was before the committee at the last hearing. Number 0295 REPRESENTATIVE KOOKESH recalled that the subcommittee had reviewed seven or eight possible names. The subcommittee had tried to fit in the word "city." However, people in rural Alaska do not want to be known as a city. The name "home rule community" was the name that seemed to satisfy the dislike of the word "city" by rural communities while recognizing that "city" is mentioned in the constitution. REPRESENTATIVE MURKOWSKI noted that at the last committee meeting she had requested an opinion from Ms. Cook. With the input received from Ms. Cook at the subcommittee meeting and the memorandum attached to the subcommittee report, Representative Murkowski said she was satisfied. Number 0468 REPRESENTATIVE DYSON moved to report CSHB 255, version 1- LS1000\H, Cook, 1/24/00, out of committee with individual recommendations. There being no objection, it was so ordered and CSHB 255(CRA) was reported from the House Community and Regional Affairs Standing Committee. CO-CHAIRMAN HARRIS announced that the committee would take a brief at-ease. He passed the gavel to Co-Chairman Morgan. The committee was at-ease from 8:16 to 8:17 a.m. HB 334-CHARGE FOR COMMUNITY DEVELOPMENT QUOTA CO-CHAIRMAN MORGAN announced that the next order of business would be HOUSE BILL NO. 334, "An Act relating to the establishment of and accounting for an administrative cost charge for the state's role in the community development quota program and to the appropriation of receipts from the charge; and providing for an effective date." Number 0633 JEFF BUSH, Deputy Commissioner, Department of Community & Economic Development (DCED), commented that it is not often that he could come before the committee with legislation that virtually everyone supports. This legislation, HB 334, deals with the Community Development Quota program (CDQ) with which he has been affiliated for five years. He informed the committee that the CDQ program is a federal program that allocates percentages of the groundfish in the Bering Sea to communities located in Western Alaska. MR. BUSH explained that the program is implemented by a delegation from the federal government's National Marine Fisheries Service (NMFS) to the governor, who has delegated the responsibility to DCED and the Alaska Department of Fish & Game (ADF&G). Essentially, the departments monitor the activities of the communities that are receiving the allocations. He explained that the communities have joined together into what are referred to as CDQ groups, which are nonprofit corporations. There are six groups that range in size from 22 communities [down]. Those groups receive varying allocations from about 5 percent of the amount in the program up to 23 percent of the amount in the program. MR. BUSH commented that the CDQ program has been extremely successful over the years. The department has identified in excess of 1,000 jobs per year in Western Alaska that were generated through the CDQ program. The groups receive royalties when the allocated fish are sold; these royalties generate between $20 and $30 million per year to the groups. The royalties have allowed the groups to grow to the point at which they are also investing earnings. Therefore, the groups are making earnings in addition to the royalties and thus have a substantial net worth. This is a very successful program that is growing exponentially. MR. BUSH informed the committee that last summer the Administration worked with the groups to establish a system that would pay for the program at the state level. In recognition of budget cuts, the program or the state's ability to oversee the program could be jeopardized. Approximately $250,000 per year is used to operate the CDQ program; historically, that money has come from general fund (GF) dollars. The groups and the department tried to find a way to fund the state activities in the program through fees paid by the groups annually. The groups all agreed with this concept because of the importance for the groups to have efficient state oversight. For instance, the groups have to receive [state] approval when they propose significant changes to the existing business plan. Cuts at the state level would jeopardize the state's ability to react in a timely manner. Furthermore, the state has, over the years, realized that its ability to monitor has declined due to limited resources. However, that is not necessarily bad because it comes at a time when the groups are maturing and making more mature business decisions. Number 1059 MR. BUSH explained that HB 334 will take the $250,000 in GF and zero that out and fund the program through statutorily designated program receipts. Therefore, the program would become off budget. He noted that this bill is modeled after the regulatory cost charge. He explained that the legislature would decide on an annual basis how much in funds to appropriate to that program, then fees are assessed to equal the amount that has been appropriated. For example, half of the $250,000 allocation would be assessed equally to all the groups, which is slightly less than $21,000 per group. The other half of the allocation is based upon the allocation that each group receives. Therefore, the group that receives the largest allocation of fish would pay the most of that allocation. MR. BUSH pointed out that HB 334 also includes language that allows the groups to work among themselves, subject to [the department's/state's] approval of what the values of those allocations are. He acknowledged that there is some disagreement with regard to how much a ton of pollock is worth. It would be a very complicated calculation to determine the values, although the bill provides that the state shall do that if necessary. The bill also allows the state to accept a value determination that is made by the groups. In fact, he understood that the groups had already reached agreement with regard to what the fees or shares would be for the next fiscal year. MR. BUSH pointed out that under the Magnuson-Stevens [Fishery Conservation and Management] Act, NMFS is allowed to adopt regulations and charge a fee for the services provided to run this program through the federal and state governments. The fee collected on the state's behalf is paid to the state. If that sort of program were to start, NMFS has not done the regulatory process and discussions have indicated that would be at least two years away. However, if funds were ever received from the federal government, those funds would immediately go into the program and offset the amount that is allocated and paid by the group. MR. BUSH commented that the timing of HB 334 is significant due to the serious cuts the department faces. He pointed out that the current House cap is $2.4 million, and the department has been told that the Tourism Department is likely to be held harmless under any cap program. If that is the case, the department would face an approximately 40 percent cut to its GF operating budget; that is not counting the revenue sharing. With a 40 percent cut to the department's operating budget, the department faces cuts everywhere. The department will review cuts to virtually all the programs and some programs [in their entirety] entirely. He reiterated that the CDQ program is a very successful program and thus every effort would be made in order to not make significant cuts to this program. However, he was not sure the department could come up with $250,000 to operate the program in the coming years. Number 1414 MR. BUSH directed his comments to a proposed amendment, labeled Option I, in the bill packet. This amendment would allow any new communities added to the program to not be charged this administrative fee for the first three years of operation. The administration does not oppose the amendment. Mr. Bush said that [the department] does not have any position on the amendment. REPRESENTATIVE KOOKESH expressed concern that there be a ceiling on this amount, which he noticed was at $400,000. He did not want to see the state become a participant and make money in the CDQ program in order to attempt to offset other costs or cuts. He asked: Is there anything in this legislation that would ensure such would not happen? MR. BUSH related his understanding that the bill creates a fund that can only be used to run the CDQ program. The cap of $400,000 was inserted at the request of the groups. He noted that there has been some discussion of adding a secretary or an administrative clerk position to the program in the future. Addition of such a position would be a benefit to the program. He reiterated that it is subject to the legislature's appropriation of the amount, and therefore the department's operations can be reviewed on an annual basis in order to determine whether the funds are being used properly. He guaranteed the committee that the groups are very aware of how the department uses its funds. REPRESENTATIVE KOOKESH expressed concern with the $150,000 difference between the $250,000 and the $400,000 ceiling. He related his experience that normal bureaucracy would view this as $150,000 to play with. CO-CHAIRMAN HARRIS inquired as to what the $250,000 to manage the fund would cover. Number 1700 MR. BUSH informed the committee that the department has three staff members that run the CDQ program. There is a CDQ manager, who is the head of the program, a fisheries biologist from the ADF&G and a CDQ specialist. That three-person team essentially monitors the business activities of the [program] as well as makes recommendations on allocations. The three-person team probably is 80 percent of the cost of the program. The remainder of the cost of the program consists of equipment and travel. He noted that travel is significant because these groups are all located in Western Alaska. Mr. Bush pointed out that he and Dave Benton, the Deputy Commissioner of ADF&G, and Lamar Cotten, the former Deputy Commissioner of the Department of Community & Regional Affairs, have all been charged with overseeing the CDQ program. Although these three do not charge any of the employee costs, travel is charged. CO-CHAIRMAN HARRIS understood HB 334 to be passing the cost from the state GF to the CDQ program via a fee. MR. BUSH agreed with Co-Chairman Harris' understanding. REPRESENTATIVE MURKOWSKI pointed out that the bill includes a provision that says that the administrative charge can be adjusted if there is an inequitable result. She asked if the adjustment could occur to the variable portion as well as the standard portion. MR. BUSH answered that he understood that only the variable portion could be adjusted. He informed the committee that with the collapse of the Opilio crab in Western Alaska, the Pribilof Islands' CDQ groups are suffering significantly. Under this bill, such a collapse could have led to an adjustment. REPRESENTATIVE MURKOWSKI suggested that it may be appropriate to state in the bill that its an adjustment for the variable portion of the administrative cost charge. She said that she read the language to be applicable to either the variable as well as the standard. MR. BUSH said that the department would not oppose that change as that was the intention originally. He commented that the Department of Law had difficulty in drafting this portion. He suggested that the easiest way to accomplish Representative Murkowski's concern would be to, on page 3, line 1, before "administrative cost charge," insert the following language: "adjust the variable portion of the". Number 2083 REPRESENTATIVE MURKOWSKI moved that the committee adopt the following amendment: Page 3, line 1, before "administrative" Insert "adjust the variable portion of the" There being no objection, it was so ordered and the amendment was adopted. Number 2166 JASON BOURDUKOFSKY, concerned citizen of Saint Paul, testified via teleconference from Saint Paul. Mr. Bourdukofsky opposed HB 334. The CDQ program was developed for the communities not to create another bureaucratic office in the state government. He asked if [the legislature] was going to waive the fishing license fee for the CDQ participants or will other groups beyond the CDQ groups be charged the administrative fee. Mr. Bourdukofsky said that this would be an inequitable tax on small groups, especially the CDQ groups. If HB 334 passes, he felt that a fairer method of collection should be found. Furthermore, he felt that the percentage of allocation should be [set the same for anyone]. He specified that he opposed the language on page 3, lines 10-13, which reads, "The legislature may appropriate money from the community development quota program account for expenditures by the department for necessary costs incurred by the department in implementing any assigned role under AS 44.33.020(11) or for any other public purpose." He interpreted "or for any other public purpose" to mean that the money could be used for purposes other than fishing. He reiterated his belief that HB 334 should apply to everyone. In conclusion, Mr. Bourdukofsky commented that the CDQ program is very effective and he hoped that an unfair tax is not placed on the CDQ group. Number 2338 REPRESENTATIVE KOOKESH referred to the language "or for any other public purpose." He inquired as to the meaning of the language and asked whether the language was necessary. MR. BUSH related his understanding that the cited language is required and is the standard language that exists for all of these programs. Without that language, it [the CDQ program] would run into constitutional problems as a dedicated fund. Theoretically, that language would allow the legislature to appropriate these funds for other purposes. Again, that is true for virtually all of the designated program receipts programs. He noted that historically, the legislature has refrained [from appropriating designated program receipts to other areas]. Mr. Bush said that the language is a requirement under the constitution. In response to Representative Joule, Mr. Bush agreed that this language is consistent with every other area that generates program receipts. REPRESENTATIVE KOOKESH asked what the $250,000 would be for the total percentage of income on a CDQ group. MR. BUSH informed the committee that the royalties that the CDQ program generates annually are between $20 and $30 million. However, that $30 million does not include all of the investment earnings that the groups are now making. He reiterated that the groups now earn additional funds through investments. The program allocates about $30 million per year. CO-CHAIRMAN HARRIS asked if this legislation would place a financial hardship on any of the six CDQ groups. MR. BUSH replied no. At the moment, all the groups agree that this is a fair and reasonable fee that represents a small percentage of a group's annual earnings. Number 2487 REPRESENTATIVE JOULE inquired as to whether HB 334 has any protections for bad years or a stint of lean years. MR. BUSH pointed out that the legislature still retains the ability to adjust the amount that will be allocated by reducing the amount appropriated to the program. From a chart, he pointed out that royalties earned in the CDQ program between 1992 and 1998 ranged from a low of $17 million to a high of $20 million. Since 1999 was a very good year, the royalties earned by the CDQ program are up close to $30 million. Therefore, he interpreted that to mean that although the fishing was not consistent, the royalty returns were relatively consistent. Furthermore, the investment returns of the groups are growing very fast. REPRESENTATIVE KOOKESH said that although he appreciated Mr. Bourdukofsky's position, the state is required to participate in this program. Since 1992 the state has not charged any costs to the CDQ program; however, with the current fiscal situation there may be no one to monitor this program without charging [a fee]. Representative Kookesh also pointed out that none of the six CDQ groups have come forward in opposition of HB 334, which he interpreted as the groups recognizing the need to pay their fair share. He commented that $250,000 out of $20 to $30 million is not much. Representative Kookesh believes that HB 334 is a fair bill that should move forward. REPRESENTATIVE JOULE informed the committee that a dive fishery started not long ago. That group had to pay that [administrative cost charge] from the beginning. REPRESENTATIVE DYSON further informed the committee that the dive fishery came to the ADF&G, which said that it did not have the resources to research and administer the fishery. Therefore, the dive fishermen asked the department to charge them for that work. Number 2659 LARRY COTTER, Chief Executive Officer, Aleutian Pribilof Island Community Development Association (APICDA), informed the committee that APICDA is one of the six CDQ groups. The charge of the CDQ program is to develop stable local economies in the villages that the groups represent. Since the fund emanates from a public resource there are oversight provisions which apply to how the groups operate their businesses and manage their investments. The groups operate in a highly regulated area, and therefore it is necessary to plan in advance. To the extent there is a deviation from the plan, permission has to be obtained from the state and ultimately the federal government. That process can be lengthy, which can create difficulties for the groups to operate in the private sector. Therefore, Mr. Cotter emphasized the importance of the state, as an oversight entity, having adequate personnel to perform its role as expeditiously as possible. The department is not going to be able to perform its role expeditiously without adequate personnel and funding. MR. COTTER explained to the committee that when the Magnuson- Stevens Act was reauthorized a provision was inserted in the bill which allowed a tax to be levied on CDQs to pay the cost of government oversight by both the state and federal governments. The CDQs supported that provision, but that has not gone into effect yet. The CDQs voluntarily moved forward to develop HB 334 and its own formula, to which the state agreed. He pointed out that the department has agreed that it will meet with the CDQs on an annual basis and review the department's current budget relative to its current expenditures as well as the next year's budget. The CDQs suggested the upper cap of $400,000 because there may be times when the department needs to send people out to the villages in order to see the situation first hand. Mr. Cotter said that it is far more important for the state to have the ability to do that [travel to the villages] than to save the $5,000 to $10,000 that it would cost. Mr. Cotter also expressed the need for the program to have a secretary in order to achieve efficiencies that would result in the time responsiveness necessary for the groups to do business. Number 2849 DICK TREMAINE, Consultant, Central Bering Seas Fishermans Association, testified via teleconference from Anchorage. He informed the committee that he has worked with the CDQ program since its inception, even prior to its inception. The CDQ program began in 1992. Mr. Tremaine noted that he helped set up the framework that provided the state oversight under federal auspices. Since 1994 he has been a consultant for the Central Bering Seas Fishermans Association. During that period of time, the CDQ program has gone through a number of changes, all of which have involved the staffing levels of the state. TAPE 00-10, SIDE B MR. TREMAINE echoed Mr. Bourdukofsky's comment that the CDQ program and the money are to be used to benefit the community. One way to do that is to make sure that there is adequate oversight in terms of audits, management reviews and well- thought-out plans, which is the role of the state. This legislation requests a user fee, which is very popular across the country because user fees are reasonable. He said that with HB 334, the CDQ groups are looking at about a 1 percent overall fee. He noted that Central Bering Sea is, by far, the smallest of the CDQ groups. In the case of the Central Bering Sea CDQ group, the fee will amount to about 3 percent of its revenues. Even at that level it is a reasonable fee. As mentioned earlier, all six of the CDQ groups discussed with the state how much they would pay. The CDQ groups suggested that the state charge them $300,000 and hire a secretary because the state is understaffed and the response time has been slow. Although the state has restaffed slightly, he agreed with Mr. Cotter that the state still probably needs a secretary. MR. TREMAINE echoed earlier comments that the CDQ groups have evolved tremendously and now a number of the groups have well over $10 million in the bank. Five of the companies invested in factory trawler companies; some of those companies have very significant investments. Within the past month, both the Coastal Villages Region Fund and the Central Bering Sea groups have invested in American Seafoods. These groups are approaching being a major player. Therefore, the state's abilities and expertise in overseeing the CDQ program, at its current state, has changed. Mr. Tremaine, personally, recommended that the state undergo management review in order to better align the state's staffing and procedures with actual need. He agreed with the state's recommendation that the CDQ groups need management review. He acknowledged that there has been fear on St. Paul that these fees will come out of halibut fisherman's pockets; however, he did not believe that would happen. St. Paul has other concerns such as the crash of the Opilio fishery. St. Paul will have to raise some money out of the halibut fishery through processing fees. Mr. Tremaine recognized that at some point there will be federal fees on top of these fees. Nevertheless, Mr. Tremaine supported this legislation. Number 2689 ROBIN SAMUELSEN, President, Bristol Bay Economic Development Corporation (BBEDC), testified via teleconference from Dillingham. Mr. Samuelsen supported HB 334. The CDQ groups have recognized the budget shortfalls and stepped up to the plate. The CDQ groups recognize this as a cost of doing business. He supported Mr. Cotter's comments with regard to the need for state oversight, which is important to keep the program together. With regard to the amendment that would provide new communities a three-year honeymoon in which they would not pay the fee, the BBEDC is opposed to the amendment. If communities are added that would increase the burden on everyone, including the oversight required. He informed the committee that Bristol Bay was recently given three new communities and the fees for those communities will be paid. Any new communities should adhere to the funding formula the six groups have developed. In conclusion, Mr. Samuelsen thanked the committee for hearing HB 334 and the state regulators for making the CDQ program a success in Western Alaska. CO-CHAIRMAN MORGAN closed public testimony. Number 2536 REPRESENTATIVE JOULE moved that the committee adopt the following amendment: Page 3, line 5 Insert "(f) The department shall not assess nor collect administrative cost charges under this section from CDQ groups, representing communities not eligible for the CDQ program as of the effective date established in section 6 of this act, for a period of three years from the actual award of fishery quota to that newly formed CDQ group." Renumber the subsequent sections. CO-CHAIRMAN HARRIS objected for purposes of discussion. REPRESENTATIVE JOULE informed the committee that if new CDQ groups enter the program, they have to do so at the federal level. Should that occur, this amendment allows the new groups to have time to enter the program and understand the business. The amendment would forego the administrative cost charge for three years. He pointed out that the new communities would not have the advantage of being at the same place as those groups that have been around and developed for eight or nine years. REPRESENTATIVE MURKOWSKI asked whether it would be reasonable for a new group to be assessed the standard charges, but not be assessed the variable charges for the three year period. MR. COTTER noted that he saw the amendment this morning. He understood that the amendment would provide a three year honeymoon for a new CDQ group that covered villages not currently part of the program. REPRESENTATIVE JOULE inquired as to how long it took the current CDQ groups to reach the point at which they were able to pay a fee. MR. COTTER replied that it took them about one month. He informed the committee that [the CDQ program] receives an allocation for a variety of species of which pollock is the most important. He explained that what the CDQ groups do is lease the right to catch and process that fish to private sector companies, some of which the groups own all or part of. In exchange the groups receive a royalty. Pollock royalties average $250 per ton. If there were seven CDQ groups, each group would receive 13,000 to 14,000 tons. That illustrates how the money can be generated very quickly. Therefore, if you are discussing a $50,000 to $60,000 administrative charge per group, there will be enough money generated from royalties to cover that. Mr. Cotter felt that every group should pay. Number 2241 REPRESENTATIVE KOOKESH commented that the CDQ quotas are sellable the day those are received. Representative Kookesh did not believe that this amendment helps anyone. He inquired as to the realistic future of a new group being formed. MR. COTTER answered that everything is possible with U.S. Senator Stevens in Washington, D.C. However, he indicated that it remains to be seen whether the formation of a new group is realistic. Mr. Cotter commented, "Frankly, I believe the [CDQ] program would be great everywhere." REPRESENTATIVE KOOKESH said that he believes that if a new group enters, that group would understand that one of the fixed charges is the state's [charge]. REPRESENTATIVE JOULE asked if Representative Murkowski's suggestion made more sense. MR. COTTER related his belief that the potential amount of money represented by a fee, one-seventh of $400,000 (if that is what it is), is not a significant amount of money in comparison to the revenues that would be generated by royalties. The larger question is whether a new group would be formed. If a group were to form, he felt that it would gladly pay the entire fee. CO-CHAIRMAN HARRIS interpreted this amendment to have been presented as a fairness issue in order to allow any new group to build up its equity. He asked if the intention of the amendment was to offer new groups equal footing early on. REPRESENTATIVE JOULE replied yes. CO-CHAIRMAN HARRIS surmised that new groups would have the ability to generate enough revenue to sustain them and would not be placed at a disadvantage [with this fee]. MR. COTTER said that he believed that when a new group comes on line, its first activity would be to save money. Therefore, the new group would take its allocation and generate as much royalty revenue as possible. After the group begins to have money in year two or so, then the group would move to the business side of things. Mr. Cotter suspected that the royalties generated by the new group in its first year should be in excess of (indisc.) million dollars and thus would have more than adequate finances to pay the administrative cost charge. CO-CHAIRMAN HARRIS commented that from the testimony he surmised that this amendment may be problematic. He further commented that he would like to see HB 334 move forward. Co-Chairman Harris maintained his objection. Number 1931 REPRESENTATIVE JOULE withdrew his amendment. REPRESENTATIVE MURKOWSKI noted that the committee packet contains a letter from the Norton Sound Economic Development Corporation (NSEDC). The NSEDC suggests "that the bill be amended to require periodic legislative reauthorization of the bill, such as every three years." This is the only negative comment on HB 334. Does anyone know why NSEDC made that suggestion? MR. TREMAINE said he believes that all the CDQ groups have discussed this concept. At one point, there was discussion with regard to whether HB 334 should be reviewed every year, or should sunset and have to be renewed. The concept was that the fees could "get out of hand." There was also fear that the fees could be put to other uses and thus become disproportionately burdensome for the CDQ groups. Furthermore, the role of the state has changed and will change in the future as the program continues. He believes that the NSEDC does not want to perpetuate a fee program without some means of having it reviewed. REPRESENTATIVE MURKOWSKI questioned the lack of a sunset in the legislation. MR. TREMAINE restated that the CDQ groups did discuss the possibility of a sunset, but decided not to suggest it at this time for a number of reasons. Number 1750 MR. SAMUELSEN reiterated that with the Magnuson-Stevens reauthorization, there will be a 3 percent fee that the groups will face. Hopefully, that 3 percent will satisfy both the state and federal government's appetite for state oversight dollars. He commented, "BBEDC is not in support of that last statement. I think that the Magnuson-Stevens 3 percent will override what we're doing here." However, if there is a shortfall in state budget dollars, it is very important that the state oversight committee has the state dollars to continue oversight because business continues. He further commented that this fee is about the groups being able to do business alone. MR. BUSH agreed that this legislative review had been discussed and the NSEDC is the only group that still advocates the sunset. CO-CHAIRMAN HARRIS commented that he would not want to see a sunset in HB 334 because the makeup of this body in the future is not known. By moving the program from GF to program receipts, the people who benefit from the program are paying for the program. He believes this [HB 334] is a way to support some of the programs going on in rural Alaska. Number 1530 REPRESENTATIVE DYSON moved to report HB 334, as amended, out of committee with individual recommendations. There being no objection, it was so ordered and CSHB 334(CRA) was reported from the House Community and Regional Affairs Standing Committee. ADJOURNMENT There being no further business before the committee, the House Community and Regional Affairs Standing Committee meeting was adjourned at 9:25 a.m.