GENERAL SUBJECT(S): REVIEW OF DEPARTMENTS ACCOMPLISHMENTS ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) DEPARTMENT OF LAW ALASKA SCIENCE AND TECHNOLOGY FOUNDATION The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 21st Legislative Session, contact 465-2156. After the 21st Legislative Session they will be available through the Legislative Library at 465- 3808. Time Meeting Convened: 1:40 P.M. Tape(s): HFC 00 - 7, Side 1 HFC 00 - 7, Side 2 HFC 00 - 8, Side 1 PRESENT: X Representative G. Davis X Co-Chair Therriault X Representative Foster X Co-Chair Mulder X Representative Grussendorf X Vice Chair Bunde X Representative Moses X Representative Austerman X Representative Phillips X Representative J. Davies Representative Williams ALSO PRESENT: RANDY SIMMONS, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT (TELECONFERENCED; BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF LAW; DEAN GUANELI, CHIEF ASSISTANT ATTORNEY GENERAL, LEGAL SERVICES SECTION, DEPARTMENT OF LAW; KATHRYN DAUGHHETEE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF LAW; JAMES KENWORTHY, PHD, EXECUTIVE DIRECTOR, SCIENCE AND TECHNOLOGY FOUNDATION, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT, ANCHORAGE (TELECONFERENCED); MARK BENDERSKY, GROUP PROJECTS ADMINISTRATOR, ALASKA SCIENCE AND TECHNOLOGY FOUNDATION, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT. LOG SPEAKER DISCUSSION TAPE HFC 00 - 7 SIDE 1 000 CO-CHAIR MULDER Co-Chair Mulder convened the House Finance Committee meeting at 1:40 P.M. ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) 93 RANDY SIMMONS, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT (TELECONFERENCED) Spoke to the handout which was distributed to Committee members. [Copy on File]. He addressed the mission statement noting that the role of AIDEA in the State of Alaska is to encourage economic development and diversification in Alaska - thereby creating or retaining jobs in Alaska's economy by providing various means of financing and assistance to businesses in Alaska. 240 MR. SIMMONS Spoke to the goals of AIDEA. MR. SIMMONS 1. Provide business-financing assistance throughout Alaska through AIDEA's Credit programs by participating in or guaranteeing bank originated loans. 2. Continue to develop, operate and maintain AIDEA-owned development projects that support private sector investment and create or maintain jobs for Alaskans. 360 VICE CHAIR BUNDE Questioned AIDEA's credit rating and how that would effect the State's credibility. 388 MR. SIMMONS Stated that the State would not be affected by that credit rating. He referenced Page 4 of the handout which outlines AIDEA's programs. He noted that Page 5 outlines the strategies and recent accomplishments of AIDEA. AIDEA provided approximately $40 million dollars in financing with financial institutions to support and diversify Alaska's economy; participate or guarantee $5 million dollars in small rural loans and assist, participate or guarantee $3 million dollars in export- related financing. Additionally, the strategy is to create at least 350 new jobs for Alaskans by providing financial assistance to economic development projects that meet defined criteria for feasibility and financial success. 640 MR. SIMMONS Continued, the second strategy actually produced 180 new jobs in FY99. All tolled, new projects should total 850 new jobs within the State this year. The Ketchikan shipyard alone will facilitate 80 new direct jobs at that facility. 769 MR. SIMMONS Spoke to the mining expansion of the Red Dog mine which created 100 new jobs. 803 REPRESENTATIVE FOSTER Questioned if $80 million had been authorized two years ago. 820 MR. SIMMONS Reported that project had not yet been started. It was recognized that a better facility would be a deepwater port. He pointed out that AIDEA is researching other monies for that project. If successful, AIDEA will pay for the initial dredging. 884 MR. SIMMONS The next project is the Healy Clean Coal Project proving the technology and producing emissions substantially below permit requirements. 941 REPRESENTATIVE J. DAVIES Pointed out that it is claimed that it takes more people than projected to operate the plant. 973 MR. SIMMONS Commented that AIDEA has been operating the plant and that the quality of the coal has provided an inconclusive test. 1049 REPRESENTATIVE PHILLIPS Inquired if the plant would continue to operate with the current lawsuits. 1078 MR. SIMMONS Acknowledged that the agency has been informed that the plant should not operate during the time of the lawsuit. 1105 REPRESENTATIVE PHILLIPS Questioned if any other agencies had requested to operate it. 1123 MR. SIMMONS Explained that the price of power was increasing in the Railbelt areas and that the short-term answer is "no". He added that it is expected that this plant will be more costly to operate than the Railbelt power for approximately 9 years. 1185 CO-CHAIR THERRIAULT Asked what was scheduled to happen with the bond payback. 1198 MR. SIMMONS Replied that the bonds will be paid off and that "who pays" will be decided through the lawsuit. 1214 MR. SIMMONS The last project is the Snettisham Hydroelectric project. That project was brought in under budget and slightly ahead of schedule. Four submarine cables for the project were successfully installed. The savings resulted in an electrical rate reduction. 1265 MR. SIMMONS Stated that the third strategy would increase efficiencies and provide a return to the general fund. 1289 MR. SIMMONS The strategy has provided a $18 million dividend to the General Fund for FY00, and declared an $18.5 million dollar dividend for FY01. Additionally, it created a partnership with banks and the private sector, amended regulations to eliminate archaic requirements in AIDEA's Credit programs. 1342 REPRESENTATIVE G. DAVIS Inquired where the Polaris Fund fit into this scheme. 1356 MR. SIMMONS Replied that that fund was created in 1993, which was a capitalization venture. As a result from mergers in investment capital, they picked up AOL and Preview Travel. Out of the $6 million dollar investment, the State still has about $500 thousand dollars remaining in that fund. 1434 REPRESENTATIVE G. DAVIS Understood that the fund was to be used for venture capitalist within the State. 1450 MR. SIMMONS Agreed that the fund did not accomplish what it was intended to do. 1462 REPRESENTATIVE G. DAVIS Clarified that he understood that at the time of the purchase, it was a good move for the State. 1479 REPRESENTATIVE J. DAVIES Asked who was the manager of that fund now. 1490 MR. SIMMONS Replied that the fund was managed by Jim Yarmon in Anchorage, however, was based outside the State. 1503 MR. SIMMONS Pointed out that AIDEA employees now run Alaska Energy Authority (AEA). AEA's mission is to operate and maintain existing state-owned power projects that tap Alaska's natural resources to achieve the lowest reasonable consumer power costs; and assist in the development of safe, reliable and effective energy systems throughout Alaska that are financially viable and environmentally sound. AEA consists of two sections, the large projects and the rural projects. 1565 MR. SIMMONS Spoke to the large projects referencing Page 9 of the handout. 1. maintained and administered AEA's $1 billion facilities, maximizing services and revenues and minimizing unscheduled outages. 2. Lake Tyee hydroelectric project. 3. Inspected and completed Terror Lake tunnel repairs. 4. Installed spill containment and updated procedures for the Four Dam Pool projects. 5. Continued to administer outstanding AEA long-term debt in excess of $300 million dollars and continued to administer special trust funds related to the facilities. 6. Refinanced Bradley Lake Hydroelectric long-term debt, providing approximately $3.3 million dollars in savings to the Railbelt utilities. 1675 CO-CHAIR MULDER Asked if a resolution was closer for the transference of the Four Dam Pool. 1691 MR. SIMMONS Acknowledged that there is an offer on paper for that facility. That community is offering $60 million dollars in cash on closing and would remove all the liabilities. He also noted that there is a private sector company that is willing to pay $80 million dollars cash. 1735 CO-CHAIR MULDER Asked who that company was. 1739 MR. SIMMONS Stated that the communities in that area have first option and that their offer is a viable offer. The private sector has only submitted a Letter of Interest. 1783 REPRESENTATIVE PHILLIPS Asked if that offer was from the Gravel Group. 1797 MR. SIMMONS Noted that it was not. It was put forward by a private group from down in the lower 48 and that they had hired Mr. Gravel to help with the deal. 1821 MR. SIMMONS Addressed the rural energy program and its' accomplishments. 1. Acquired a $10 million dollar grant from the Denali Commission to upgrade bulk fuel storage projects. 2. Completed bulk fuel storage projects and upgrades in 13 communities totaling $8.9 million. 3. Continued to design work on 22 bulk fuel projects totaling $23.6 million with a projected construction date of 2001. 1906 REPRESENTATIVE FOSTER Requested a list of those communities affected. 1919 REPRESENTATIVE AUSTERMAN Inquired how well was the circuit rider program working. 1937 REPRESENTATIVE AUSTERMAN Asked how the improvements would be measured. 1958 MR. SIMMONS Offered to provide that information at a later date to Committee members. He explained that there is a rural plan at this time which is assessing the rural energy segment of the plan which will guarantee that the money requested will go to the community with the highest need. That information will be continually upgraded. 2002 REPRESENTATIVE FOSTER Questioned if this would be a continuing priority. 2015 MR. SIMMONS Replied that for safety issues, the problems will be in the $200 million dollar range and that the rural power system upgrades are more difficult to determine. He acknowledged that there are safety problems in those areas. 2062 CO-CHAIR MULDER Advised that the Denali Commission participation had been $43 million dollars. 2076 REPRESENTATIVE FOSTER Referenced the photo in the handout. 2089 REPRESENTATIVE AUSTERMAN Asked the measurement used to determine how efficient these programs are. 2107 MR. SIMMONS Agreed that information is important. 2118 REPRESENTATIVE PHILLIPS Reminded members that 10 years ago, the total amount needed to address these concerns was $250 million dollars. 2136 MR. SIMMONS Agreed that was the correct number at that time. 2156 REPRESENTATIVE FOSTER Asked what happened to the Mark Air hangar. 2167 MR. SIMMONS Replied that during the period of bankruptcy, AIDEA acquired back those facilities. They have been slowly sold off. There has been a loss of $2 million dollars from monies collected on those facilities. He added that only 2.69% of the AIDEA portfolio is in the delinquency rate. 2234 REPRESENTATIVE AUSTERMAN Advised that the Kodiak hangar facility was deteriorating and becoming dangerous. 2252 MR. SIMMONS Replied that AIDEA has been negotiating with the City of Kodiak to purchase that facility. It is worth less than it was, but it still has value. 2274 VICE CHAIR BUNDE Questioned the idea of the loss on the Kodiak facility. 2296 MR. SIMMONS Explained how the selling of securities are listed on the books. 2350 VICE CHAIR BUNDE Recommended using language "additional loss" as it would provide better clarity on these issues. 2360 MR. SIMMONS Reiterated that to date, AIDEA has taken a $2 million dollar loss on the Mark Air closure. TAPE HFC 00 - 7 SIDE 2 000 CO-CHAIR MULDER Invited AIDEA to work closely with the Subcommittee. DEPARTMENT OF LAW 071 BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF LAW Referenced the handout. [Copy on File]. Ms. Ritchie noted that the mission of the Department of Law was to protect the State's sovereignty; prosecute crime; represent and advise the State in all civil matters; and provide other legal services to State government. She added that the mission of the Civil Division of the Department of Law was to: 1. Protect the human, financial, and natural resources of the State by providing legal advice, prosecution and defense; and 2. The state's sovereignty and guarantees of statehood. 250 MS. RITCHIE She added that the Division protects the public interest through mediating public disputes. It is a challenge to balancing of the public's interests. 418 MS. RITCHIE Addressed the performance measures of the Department. She noted that SB 169 contained mission statements for the Department. She believed that the Criminal Judgements area will meet the established target of $3 million dollars. In child support division, the Department has been able to address about 800 cases. The backlog is being addressed and there is a better handle on the situation. 623 REPRESENTATIVE G. DAVIS Questioned how that measure was established. 661 CO-CHAIR MULDER Noted that these measures were established internally and that they would be worked on in the Subcommittee level. 699 MS. RITCHIE Added that those were criminal fines and that there are other ways to measure success. 730 MS. RITCHIE Stressed that this area contains a high volume of cases and that the Department is working more closely with the Division of Child Support Enforcement to avoid litigation so as to better address the situation. 832 CO-CHAIR MULDER Inquired what percentage of the whole was being addressed. 850 MS. RITCHIE Explained that completion means reaching a result. Initially, it was intended to mean 15% above the 688-target level. She acknowledged that the Department is attempting to reach 800. 896 REPRESENTATIVE J. DAVIES Asked what does resolve mean. 910 MS. RITCHIE Explained that it depends on the type of case. 1009 REPRESENTATIVE J. DAVIES Commented that is not a satisfactory measure and that there needs to be a completion number provided. 1037 CO-CHAIR MULDER Agreed that the goal will differ from the practical possibilities. He added that a percentage could show a more reasonable number. 1097 VICE CHAIR BUNDE Asked how many child support arrears had been submitted to the Department from the total number that exists. 1129 MS. RITCHIE Did not know that answer. 1161 VICE CHAIR BUNDE Asked the average length of a time it took to reach each settlement. 1229 MS. RITCHIE Spoke to the concern that Vice Chair Bunde voiced regarding the loss of the Katie John case and the loss of State sovereignty. She stated that it would be premature to say that case was lost. The Court has taken action in pending subsistence cases and understood that this is an appealable order. The judge has taken appropriate action. 1323 REPRESENTATIVE GRUSSENDORF Noted that the case referenced by Vice Chair Bunde was one of many cases and that the State has won most of them. 1356 MS. RITCHIE Replied that there are many issues being addressed through a series of cases. Judge Holland requested to deal with that case and that the Department is actively litigating. 1431 REPRESENTATIVE J. DAVIES The legislation has had a sterling record. He stressed that this is a tough issue. 1435 MS. RITCHIE Acknowledged that it would be helpful to have a context for the numbers and to significantly reduce the amount of time before action. There has been greater focusing on the meeting deadlines. The direct access to Child Support Enforcement Division computer system has helped the Department and that the internal case management systems has allowed better case management and review of the caseload. 1523 MS. RITCHIE Spoke to the accomplishments in other areas. She noted that the $180 thousand dollars of statutory designated program receipts for consumer protection has aided services and the development of a consumer complaint package. She added that a web page will be in place in the next week with links to other information sources. 1676 MS. RITCHIE Spoke to working with new car dealers for advisory approach to business practices. Ms. Ritchie stated that discount advertisements can be misleading and that the new and used car dealers will receive the advisory. 1757 REPRESENTATIVE G. DAVIS Observed that this would be a good approach. 1772 MS. RITCHIE Discussed the South East-Alaska propane anti-trust case. Consumers will receive a payment for overpayment reimbursements. Ms. Ritchie discussed other cases relating to the anti-trust case. She pointed out the Safeway purchase of Alaskan stores and how that was relative. 1894 MS. RITCHIE Spoke to gas price investigation. The Department has found that Alaska has the highest tax excluded from gas prices in the nation. This realization has lead to litigation against several oil companies. 1982 REPRESENTATIVE PHILLIPS Reminded members that the Department's intent to develop a web page, resulting from the BP/Arco merger. 2020 MS. RITCHIE Stated that was not so. The BP/Arco merger did not affect the web page. 2044 MS. RITCHIE Continued, with additional resources, the caseload per attorney has been brought to 50-70 cases in child support area. She acknowledged that coordination with other agencies has improved, and that the Department's emphasis is on getting backlogs through the system. 2108 MS. RITCHIE Spoke to the cases on Statehood defense located in Glacier Bay and the Tongass. 2124 DEAN GUANELI, CHIEF ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, DEPARTMENT OF LAW Explained that the Criminal Division does not have investigators. There are three stages of cases for that Division. The first type are those that come from the police. The mission of the Criminal Division is to: 1. Prosecute crime; 2. Uphold convictions through appellate and post-conviction proceedings and 3. Provide effective representation for state criminal justice agencies. 2250 MR. GUANELI Noted that the number of violent crime cases has decreased. However, one area which has not dropped is that of drug offenses. That area has increased and it does spill over into other areas of crime. He listed some of the accomplishments for the Criminal Division: 1. A program has been started by a nurse in Homer to addresses sexual assaults; 2. Applied for scholarships for specialized training; 3. Federal funding for the violence against women act; 4. Volunteer program started in the office which acts as a good public relations tool. TAPE HFC 00 - 8 SIDE 1 000 VICE CHAIR BUNDE Commented that publics measures success with a given timeline. He asked the benchmark for the average misdemeanor. 084 MR. GUANELI Agreed that observation should be looked at. He added that the public defense and finances determine when a case gets addressed. 143 VICE CHAIR BUNDE Asked about power point 165 REPRESENTATIVE G. DAVIS Noted that the more laws made, the more prisoners there will be. He commented that whatever the Legislature passes, causes more work on the prison system. 225 ALASKA SCIENCE AND TECHNOLOGY 297 MR. BENDERSKY, GROUP PROJECT MANAGER, ALASKA SCIENCE AND TECHNOLOGY FOUNDATION, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT Provided a handout to Committee members. [Copy on File]. He referenced the handout. The mission of the Alaska Science and Technology Foundation (ASTF) is to build an entrepreneurial Alaska economy through the development and application of science and technology. 417 MR. BENDERSKY Addressed the ASTF programs: 1. Small individual grants ($20,000/less) 2. Major individual grants (greater than $20,000) 3. Group project grants 4. Direct grants to teachers (up to $5000) 5. Small Business Innovation Research (SBIR) bridging grants (up to $50,000) He stated that these programs contribute to the mission by providing matching financing to projects, growing companies, and by growing infrastructure for an entrepreneurial economy. 534 MR. BENDERSKY Touched upon the accomplishment of the grantees: 1. Fishing and aquaculture 2. Mining 3. Petroleum Products 4. Forests and Forest Products 5. Agricultural Products 6. Public Health and Safety 654 MR. BENDERSKY Spoke to the first accomplishment which has developed longer salmon shelf life with sodium chlorite-implementation planned by Alaska Seafood International and processors. Also, demonstrated longer salmon shelf life with ozone- working with processors and Department of Environmental Conservation for permits. ASTF has demonstrated salmon pin-bone removal machines and sold 150 thousand pounds of boneless fillets. Demonstrated fisheries sonar capable of improved detection and species and size determination. Demonstrated high survival rate of oyster seed at Kachemak Bay nursery and the development of technology to produce feedstocks for scallops, geoducks, and cockles. 774 MR. BENDERSKY Spoke to the second accomplishment: the Aeromap demonstrated desktop tool to interpret data; Anchorage glass recycling center; and the developing improved scientific basis for interpreting total dissolved solids water quality standards. 881 REPRESENTATIVE G. DAVIS Asked about the SPAT. 886 JAMIE KENWORTHY, EXECUTIVE DIRECTOR, ALASKA SCIENCE AND TECHNOLOGY FOUNDATION, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT (TELECONFERENCE) Explained the way the production seed was grown for farm planting which then cuts the mortality rate. 937 REPRESENTATIVE PHILLIPS Commented that the State can grow their own seed now. 951 DR. KENWORTHY Agreed. 960 MR. BENDERSKY Spoke to the third accomplishment of petroleum products: Demonstrated in Valdez new chemical process to desulfurize diesel fuel to meet stricter EPA standards. 995 REPRESENTATIVE PHILLIPS Asked where the graders were located. 1008 DR. KENWORTHY Replied that they were located in Eagle River. There was 700 million board feet imported into Alaska last year. 1058 DR. KENWORTHY Spoke to the places where the spruce beetle project would happen in the State. 1088 REPRESENTATIVE PHILLIPS Asked why the project was scheduled for Kenai. She noted that 90% of the trees there were dead from that disease. 1111 MR. BENDERSKY Addressed the accomplishment of the agricultural products. Alaska Fresh Cut products now selling in Alaska supermarkets and increasing demand for mat-Su products; Demonstrated chipability of Alaskan potatoes for potential Alaskan potato chip manufacturing. 1199 MR. BENDERSKY Spoke to the accomplishments to the public health and safety component: Put live video camera pictures of rural airstrips on Internet for weather observation/safety; Received EPA approval of bear repellent, now on the market; Demonstrated a biotechnology based test for immediate detection of paralytic shellfish poisoning. 1336 DR. KENWORTHY Spoke of the requirement for the test kits to become commercial. 1356 REPRESENTATIVE J. DAVIES Asked who would be the intended customers for this product. 1371 DR. KENWORTHY Replied that processors or local residents could purchase it. He acknowledged that it would be a simple test kit tool. 1408 REPRESENTATIVE GRUSSENDORF Believed that the sports clam digger could use it, but he could not imagine how it would be used commercially. 1434 MR. BENDERSKY Spoke to other accomplishment of the agency. 1. Alaska Growth Capital program 2. Completed construction financing of Kodiak Launch Facility 3. Net Day 4. Assisted Seward, Homer and Kenai science museums to deliver science resources via the internet 5. Direct grants to additional 56 Science and Math Teachers. 1507 MR. BENDERSKY Explained the strategies and priorities that will be different for FY2001. 1532 MR. BENDERSKY Did not believe that there was duplication between agencies. He stated that in the short term, there are no other viable options. ASTF has made some investments in BIDCO and Alaska InvestNet so as to increase the capability of the private sector to do early-stage pre- bankable technology and resource processing deals. 1611 REPRESENTATIVE GRUSSENDORF Referenced the 1995 survey which resulted with only, a 55% response. 1637 MR. BENDERSKY Indicated that the agency does have a "good idea" of what the other 45% had accomplished. 1661 REPRESENTATIVE GRUSSENDORF Suggested that there should be another category for legislative interest. 1676 MR. BENDERSKY Recommended that perhaps there should be more outreach. 1688 REPRESENTATIVE G. DAVIS He asked if ARDORS was attempting to assist in some of the expansion. 1715 DR. KENWORTHY Explained that there are a number of firms which provide support. ASTFA has a specific interest and referral on products. There is a website that helps to give applicants guidelines to determine which resources they should take advantage of which helps to effectively serve people. 1783 REPRESENTATIVE G. DAVIS Asked if there was a participation of the bone-extension project. 1800 DR. KENWORTHY Stated that project failed commercially because of the degree it was capitalized. 1824 CO-CHAIR MULDER Voiced appreciation to the agency for the work that they had accomplished. 1911 CO-CHAIR MULDER ADJOURNMENT The meeting adjourned at 3:50 P.M. HOUSE FINANCE COMMITTEE LOG NOTES January 14, 2000 H.F.C. 14 1/14/00