HOUSE FINANCE COMMITTEE March 17, 2000 2:18 P.M. TAPE HFC 00 - 72, Side 1 TAPE HFC 00 - 72, Side 2 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 2:18 p.m. PRESENT Co-Chair Therriault Representative Foster Vice Chair Bunde Representative Grussendorf Representative Austerman Representative J. Davies Representative Phillips Representative G. Davis Representative Williams Co-Chair Mulder and Representative Moses were absent from the meeting. ALSO PRESENT Pete Fellman, Staff, Representative Harris; Mike Tibbles, Staff, Representative Therriault; Dan Easton, Director, Division of Facility Construction and Operation, Department of Environmental Conservation; Andy Warwick, Chairman, Board of Directors, Utilities Securities of Alaska; Carol Carroll, Director, Division of Support Services, Department of Natural Resources; Karen McCarthy, Staff, Representative Bunde. TESTIFIED VIA TELECONFERENCE Lt. David Hudson, Alaska State Troopers, Department of Public Safety; Debbie Ossiander, Anchorage School Board, Anchorage; Marcia Ward, Ward Farms, Delta Junction; Chester Johnson, Governmental Financial Associations, New York; Dianna Bennett, Finance Director, Anchorage Water and Wastewater Utility, Anchorage; Tom Boedecker, City Manager, Soldotna; George Gordon, Fairbanks. SUMMARY HB 204 "An Act relating to elk farming." CSHB 204 (RES) was REPORTED out of Committee with a "do pass" recommendation and with three fiscal notes: a fiscal impact note from the Department of Natural Resources; a fiscal impact note from the Department of Fish and Game, dated 3/8/00; and a zero fiscal note from the Department of Environmental Conservation, dated 3/8/00. HB 277 "An Act relating to payment of retirement benefits for subsequently reemployed retired members of the teachers' retirement system." HB 277 was appointed to a subcommittee consisting of Representative Bunde as chair and Representatives Davies and Davis. HB 304 "An Act relating to issuance and sale of revenue bonds to fund drinking water projects, to creation of an Alaska clean water administrative fund and an Alaska drinking water administrative fund, to fees to be charged in connection with loans made from the Alaska clean water fund and the Alaska drinking water fund, and to clarification of the character and permissible uses of the Alaska drinking water fund; amending Rule 3, Alaska Rules of Civil Procedure; and providing for an effective date." CSHB 304 (FIN) was REPORTED out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Environmental Conservation, dated 1/21/00; and zero fiscal note by the Department of Revenue, dated 1/21/00. HB 318 "An Act relating to property disposal by law enforcement agencies." CSHB 318 (JUD) was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Public Safety dated 3/1/00. HOUSE BILL NO. 277 "An Act relating to payment of retirement benefits for subsequently reemployed retired members of the teachers' retirement system." Co-Chair Therriault appointed HB 277 to a subcommittee: Representative Bunde, chair and Representatives Davies and Davis. He noted concerns regarding the actuarial impact of the legislation. He directed the subcommittee to look at the way that other states have addressed the issue. DEBBIE OSSIANDER, ANCHORAGE SCHOOL BOARD, ANCHORAGE testified via teleconference in support of HB 277. She observed that school districts are having difficulty recruiting teachers in specific critical need areas. HB 277 was HELD in subcommittee. HOUSE BILL NO. 204 "An Act relating to elk farming." PETE FELLMAN, STAFF, REPRESENTATIVE HARRIS spoke in support of HB 214. He explained that HB 204 is an effort to address the needs of domesticated elk farmers in the state. The Department of Fish and Game currently has the statutory authority to regulate domesticated and wild elk stock. The legislation would move the regulation of domesticated elk into the Department of Natural Resources, Division of Agriculture. The department, industry and the state veterinarian support the legislation. Vice Chair Bunde questioned the fiscal cost. Mr. Fellman observed that farmers pay a $250 dollar annual fee for fence inspections. The fiscal note covers $1.5 thousand dollars for additional inspections. Vice Chair Bunde maintained that the animals will escape and asked if the Department of Natural Resources considered the impact of escaped animals on other Alaskan resources. CAROL CARROLL, DIRECTOR, DIVISION OF SUPPORT SERVICES, DEPARTMENT OF NATURAL RESOURCES stated that the department will inspect fences and issue licenses. She did not have information on the impact of escaped animals. She pointed out that there are already elk in Alaska. Mr. Fellman emphasized that the animals are valuable and estimated that owners would keep track of them. He added that the animals would be tested for disease prior to their importation. Representative Phillips agreed that the farmers would not risk losing the animals and noted the value of the elk. Co-Chair Therriault pointed out that the Department of Fish and Game supports the legislation. In response to a question by Vice Chair Bunde, Mr. Fellman observed that the Department of Fish and Game currently regulates the animals. The intent is to transfer regulation to the Department of Natural Resources MARCIA WARD, WARD FARMS, DELTA JUNCTION testified via teleconference in support of HB 204. She gave a brief history of elk farming in Alaska. Ward Farms was begun on the Kenai Peninsula in 1990. The legislation places domestic elk farming in the Division of Agriculture, with other domestic farm stock. She assured the Committee that fences are adequate; the fences are eight feet high and made sturdy enough to withstand: buffalo, elk, or deer. She added that elk are territorial and maintained that an elk that escape would attempt to return. Elk cost from $4,500 to $10,000 dollars each and are more valuable than beef cattle or bison. Elks are tagged for identification. She pointed out that elk have passed health inspections and stressed that elk farmers are concerned that disease from wild Caribou stock could infect their elk. Elk farmers pay a $250 dollar fee every two years. She observed that they are the only livestock industry that pays a licensing fee. Representative Phillips spoke in support of the legislation. She emphasized that the elk industry is successful and is good for Alaska. Representative Austerman asked if there had been problems with bears. Ms. Ward noted that the elk are aggressive and have repelled bears. She stressed that the fence can withstand a tree falling on it and that there have been no problems with predators. Representative Austerman asked if wild Southeast elk could be certified for domestication. Ms. Ward responded that she did not think that the Department of Fish and Game would allow wild elk to be domesticated. She stated that veterinarians in the state could test them. She emphasized that elk farms would quarantine wild elk before exposing their domesticated herds. In response to a question by Representative J. Davies, Ms. Ward emphasized that it is easier to have all of the regulations under one department. Branding and health services are under the Department of Natural Resources, while licensing and inspections were under the Department of Fish and Game. Ms. Ward noted that there are nine elk farmers in the state and that the industry is growing. Representative Foster MOVED to report CSHB 204 (RES) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 204 (RES) was REPORTED out of Committee with a "do pass" recommendation and with three fiscal notes: a fiscal impact note from the Department of Natural Resources; a fiscal impact note from the Department of Fish and Game, dated 3/8/00; and a zero fiscal note from the Department of Environmental Conservation, dated 3/8/00. HOUSE BILL NO. 318 "An Act relating to property disposal by law enforcement agencies." Vice Chair Bunde spoke in support of the legislation. The legislation would allow a finder of lost property who responsibly delivers the property to the state to acquire title if the true owner were not located. He noted that the legislation was introduced as the result of an instance where a handgun was found. Vice Chair Bunde observed that the state does not have statutes to address found property. The intent is to encourage individuals to turn in found property. The legislation excludes: Property found within municipalities or boroughs; Prehistoric, archaeological, historical, Native or similar property; Property that is not legal to be possessed or people who may not posses certain property (sawed off shotguns); Companies, institutions, banks, state employees who find property in the course of their job; or Intangible property (stocks and bond). Representative Phillips questioned why cash was not covered. Vice Chair Bunde explained that cash is already covered under AS 34.35. KAREN MCCARTHY, STAFF, REPRESENTATIVE BUNDE provided information on HB 318. She clarified that AS 34.35 refers to safety deposit boxes, bonds, or securities. She observed there are already provisions for cash found on state land. Alaska Statute 34 only covers things that are already in banks or other financial institutions. In response to a question by Representative Phillips, Ms. McCarthy observed that other states have similar laws. The legislation is based on common law. Common law states that the finder has greater right to the property than any one else in the world except the true owner. Vice Chair Bunde pointed out that municipalities have their own regulations. The legislation covers items found on state property. Representative J. Davies questioned if state troopers have an obligation to advertise found property. Vice Chair Bunde responded that the troopers are not obligated to seek owners of lost property or the finder. The Department of Public Safety is concerned with alleviating the need for storage space. LT. DAVID HUDSON, ALASKA STATE TROOPERS, DEPARTMENT OF PUBLIC SAFETY stated that the legislation would benefit the Department of Public Safety by the change in section 1, which would allow disposal of property after one instead of two years. Representative J. Davies questioned if the department came into possession of a bicycle or snow machine if it would be check against items reported lost or stolen. Mr. Hudson observed that a computer check would be done to see if it had been reported. Found property would also be logged into the department's computerized system. The property would be disposed of after a year if it is not claimed. A cross-reference would be done before the disposition to see if the finder was interested in acquiring the property. Finders are not required to give their name or contact address. Representative Foster provided members with a newspaper article from 1900 (copy on file). It recounts a story of a person in Nome who found a $20 dollar bill and was advised by the Sheriff to keep the money. Vice Chair Bunde MOVED to report CSHB 318 (JUD) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 318 (JUD) was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Public Safety dated 3/1/00. HOUSE BILL NO. 304 "An Act relating to issuance and sale of revenue bonds to fund drinking water projects, to creation of an Alaska clean water administrative fund and an Alaska drinking water administrative fund, to fees to be charged in connection with loans made from the Alaska clean water fund and the Alaska drinking water fund, and to clarification of the character and permissible uses of the Alaska drinking water fund; amending Rule 3, Alaska Rules of Civil Procedure; and providing for an effective date." Co-Chair Therriault provided members with a proposed committee substitute 1-GH2031\G, Cook 3/17/00 (copy on file). MIKE TIBBLES, STAFF, REPRESENTATIVE THERRIAULT provided information on the proposed committee substitute. The title was amended to include "to the Alaska Clean Water Fund". This reflects changes in the legislation. References to AS 46.03.032 and AS 46.03.036 were added on page 1, lines 11 and 12: AS 46.03.032 refers to the Clean Water Fund, which is waste water and AS 46.03.06 refers to Alaska Drinking Water Fund (Safe Water). A technical change was made on page 2, line 18: "for each program" was deleted. This was no longer needed because both programs are added under subsection (a). Mr. Tibbles noted that "as appropriate" replaces "respectively" in a number of places in the bill. Section 18 is a new section; it amends the definition of "other qualified entity". This addresses the Clean Water Fund and brings in private entities approved under federal statute 33. U.S.C. 1383. There are no private entities currently approved under this section. The Drinking Water Fund was amended in 1996, to allow loans to private entities. The legislation makes both programs consistent. In response to a question by Representative Grussendorf, Mr. Tibbles explained that the intent is to cover privately owned economically regulated utilities. There are 600 privately owned utilities. Only 24 of them are economically regulated. The intent is to only cover the economically regulated privately owned utilities. Page 9, subsection 1(b) refers to the Alaska Drinking Water Fund and includes economically regulated organizations that are not exempt from regulation under AS 42.05.711(d). Language was added on page 10, line 3 - 6 to allow the Department of Environmental Conservation to establish different loan terms, charges and rates. This addresses concerns that higher risk entities would have a greater impact. (TAPE CHANGE, HFC 00 - 72, SIDE 2) Mr. Tibbles noted that language was also added on page 10, lines 17 and 18: "a loan may not be made to an organization that is not a municipality to refinance debt of that organization" There is also is a delayed effective date. Co-Chair Therriault noted that the ability to charge different rates was requested by the Commissioner of the Department of Natural Resources. DAN EASTON, DIRECTOR, DIVISION OF FACILITY CONSTRUCTION AND OPERATION, DEPARTMENT OF ENVIRONMENTAL CONSERVATION provided information on HB 304. He noted that the original intent of HB 304 was to give the department the same bonding authority for drinking water as the they currently have for waste water projects. There are two loan programs: the Clean Water Fund for wastewater projects and the Drinking Water Fund for drinking water projects. The department has bonding authority for the Clean Water Fund. The department did not have bonding authority for the Drinking Water Fund. Bonding authority allows the department to use bonding revenues to add more money to the Fund and make more money available for loans. Bonding mechanisms can be used to pay for the state match requirement. Mr. Easton explained that the legislation was also intended to provide a long-term mechanism to pay for the program's operational expenses. The program's operational expenses have been paid with federal funding that will cease. When federal grants cease an alternative mechanism will be needed. House Bill 304 allows the department to divert money, paid back by communities, into another account that could be used for operating costs through the capital and operating budgets. The proposed committee substitute makes privately owned utilities eligible for loans for the Drinking Water Program. Federal law currently prohibits loans for sewage and wastewater projects to privately owned utilities. He emphasized that the proposed committee substitute would improve drinking water through financial improvements. Mr. Easton referred to the department's request for authorization to charge different rates on loans. He observed that if loans to private utilities cost more to make and are higher risk than the department can apportion interest rates so that higher risk and entities with higher costs pay more. Municipalities that are lower risk and cost less would not have to pay the burden of the privately owned utilities. He spoke in support of the delayed effective date. Co-Chair Therriault pointed out that only privately owned utilities are economically regulated. He quoted from a letter by the Regulatory Commission of Alaska: Generally, all economically regulated expenses are reviewed according to these criteria. Accordingly, any reduction in debt-service expense associated with allowed costs would generally be of benefit to the ratepayers of the utility. The ratepayers would benefit through rates lower than would otherwise be required to allow the utility to recover its debt-service expense. Co-Chair Therriault pointed out that the legislation allows privately owned companies to lower their customer rates. The benefit flows to the ratepayer. Representative J. Davies suggested that a reasonable portion could benefit the operators. He questioned if the legislation would cover private drinking water and sewage projects. Discussion ensued regarding the legislation's coverage of drinking water and wastewater projects. ANDY WARWICK, CHAIRMAN, BOARD OF DIRECTORS, UTILITIES SECURITIES OF ALASKA spoke in support of the legislation. He observed that the program replaces general fund monies with loan dollars and allows the program to expand. The proposed committee substitute makes the program available to public utilities regardless of whether they are municipal or investor owned, as long as the investor owned utilities are economically regulated. All benefits of the program would be passed on to the customers. Customers would be on a level playing field. He maintained that the legislation would improve the quality of life for all Alaskans. In response to a question by Representative J. Davies, Mr. Warwick stated that it is his understanding that federal law allows privately owned utilities to participate in drinking water but not the wastewater programs. The legislation, as it stands, follows the federal law; it does not allow participation in the wastewater portion. If private utilities become eligible under federal law than money from the federal government would allow participation. He observed that the intent is to participate in whatever is allowed under federal law. Money is coming from the federal government with the intent to benefit all utilities. Representative J. Davies expressed concern that the federal law could be written in a general way to permit a wide range of privately owned utilities to participate. He wanted state statutes to reflect the need that private utilities be economically regulated (to be eligible for the loan programs.) Mr. Warwick thought that the legislation addressed Representative J. Davies' concerns. Co-Chair Therriault observed that the legislation specifically addresses drinking water. He noted that an amendment would be needed to specifically add wastewater. Mr. Easton concluded that the restriction that private utilities must be economically regulated only applies to the drinking water loan program and agreed that an amendment would be needed to address wastewater. Representative J. Davies MOVED to ADOPT a conceptional amendment: add a condition that when sewage programs become available under federal statutes, that they be allowed, but that a further requirement be added that they would be regulated by the RCA and economically regulated in the manner parallel to the water funds. There being NO OBJECTION, it was so ordered. Representative Foster MOVED to ADOPT the proposed committee substitute work draft, 1-GH2031\G, Cook 3/17/00. There being NO OBJECTION, it was so ordered. Representative Foster MOVED to report CSHB 304 (FIN) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 304 (FIN) was REPORTED out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Environmental Conservation, dated 1/21/00; and zero fiscal note by the Department of Revenue, dated 1/21/00. Adjournment The meeting adjourned at 2:55 p.m. House Finance Committee 3 3/17/00