HOUSE RESOURCES STANDING COMMITTEE May 7, 1999 1:59 p.m. MEMBERS PRESENT Representative Scott Ogan, Co-Chair Representative Jerry Sanders, Co-Chair Representative Beverly Masek, Vice Chair Representative John Harris Representative Carl Morgan Representative Ramona Barnes Representative Jim Whitaker Representative Reggie Joule Representative Mary Kapsner MEMBERS ABSENT All members present COMMITTEE CALENDAR * HOUSE BILL NO. 227 "An Act modifying the Department of Natural Resources' power to control and manage certain land within the Hatcher Pass Public Use Area and making that land available for selection by the Matanuska-Susitna Borough." - FAILED TO MOVE OUT OF COMMITTEE HOUSE CONCURRENT RESOLUTION NO. 2 Relating to the sovereignty of the State of Alaska and the sovereign right of the State of Alaska to manage the natural resources of Alaska. - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 227 SHORT TITLE: HATCHER PASS PUBLIC USE AREA SPONSOR(S): REPRESENTATIVES(S) OGAN Jrn-Date Jrn-Page Action 5/06/99 1201 (H) READ THE FIRST TIME - REFERRAL(S) 5/06/99 1201 (H) RESOURCES 5/07/99 (H) RES AT 1:00 PM CAPITOL 124 WITNESS REGISTER DAVID STANCLIFF, Legislative Assistant to Representative Scott Ogan Alaska State Legislature Capitol Building, Room 128 Juneau, Alaska 99801 Telephone: (907) 465-2338 POSITION STATEMENT: Presented HB 227 on behalf of sponsor. JANE ANGVIK, Director Division of Land Department of Natural Resources 3601 C Street, Suite 1122 Anchorage, Alaska 99503 Telephone: (907) 269-8503 POSITION STATEMENT: Testified in support of HB 227. RICK THOMPSON, Regional Manager Southcentral Region Office Division of Land Department of Natural Resources 3601 C Street, Suite 1122 Anchorage, Alaska 99503 Telephone: (907) 269-8559 POSITION STATEMENT: Answered questions regarding HB 227. MARTY RUTHERFORD, Deputy Commissioner Anchorage Office Department of Natural Resources 3601 C Street, Suite 1122 Anchorage, Alaska 99503 Telephone: (907) 269-8431 POSITION STATEMENT: Answered questions about fiscal note for HB 227. GREG ROMACK Hatcher Pass Development Corporation, Incorporated 740 Bonanza Anchorage, Alaska 99518 Telephone: (907) 562-2336 POSITION STATEMENT: Testified in support of HB 227. MIKE SCOTT, Manager Matanuska-Susitna Borough 350 East Dahlia Avenue Palmer, Alaska 99645 Telephone: (907) 272-1068 POSITION STATEMENT: Testified in support of HB 227. RON SWENSON, Director Community Development Matanuska-Susitna Borough 350 East Dahlia Avenue Palmer, Alaska 99645 Telephone: (907) 745-9868 POSITION STATEMENT: Answered questions on HB 227. JIM TURNER, Assembly Member Matanuska-Susitna Borough P.O. Box 1567 Palmer, Alaska 99645 Telephone: (907) 745-6161 POSITION STATEMENT: Testified in support of HB 227. KATHY WELLS P.O. Box 3331 Palmer, Alaska 99645 Telephone: (907) 373-6414 POSITION STATEMENT: Testified against HB 227. KEVIN KEELER 5460 East 112th Avenue Anchorage, Alaska 99516 Telephone: (907) 346-3475 POSITION STATEMENT: Testified against HB 227. NANCY MICHAELSON HC 5, Box 6916F Palmer, Alaska 99645 Telephone: (907) 745-6673 POSITION STATEMENT: Testified against HB 227. GARY MICHAELSON HCR 5, P.O. Box 6916-F Palmer, Alaska 99645 Telephone: (907) 745-6673 POSITION STATEMENT: Testified in opposition to HB 227. DARCIE SALMON, Mayor Matanuska-Susitna Borough 350 East Dahlia Avenue Palmer, Alaska 99645 Telephone: (907) 745-4801 POSITION STATEMENT: Testified in support of HB 227. DORI McDANNOLD Valley Alaska Center for the Environment HC03, P.O. Box 8012 Palmer, Alaska 99645 Telephone: (907) 745-4801 POSITION STATEMENT: Testified in opposition to HB 227. GARVAN BUCARIA P.O. Box 870298 Wasilla, Alaska 99687 Telephone: (907) 373-4974 POSITION STATEMENT: Testified on HB 227 and suggested a public hearing be held in the Mat-Su area. ACTION NARRATIVE TAPE 99-31, SIDE A Number 0001 CO-CHAIR SCOTT OGAN called the House Resources Standing Committee meeting to order at 1:59 p.m. Members present at the call to order were Representatives Ogan, Sanders, Masek, Morgan and Barnes. Representatives Joule, Harris, Whitaker and Kapsner joined the meeting at 2:01 p.m., 2:05 p.m., 2:09 p.m. and 2:18 p.m., respectively. HB 227 - HATCHER PASS PUBLIC USE AREA CO-CHAIR OGAN announced the committee would hear House Bill No. 227, "An Act modifying the Department of Natural Resources' power to control and manage certain land within the Hatcher Pass Public Use Area and making that land available for selection by the Matanuska-Susitna Borough." REPRESENTATIVE BARNES asked if the Commissioner of Natural Resources was there. CO-CHAIR OGAN answered no, that he had been asked to come but was not coming. Number 0199 DAVID STANCLIFF, Legislative Assistant to Representative Scott Ogan, Alaska State Legislature, presented HB 227, noting that the packet contains a memorandum that sets out some background information. He explained that the sections used to formulate HB 227 were taken from SB 140, basically Section 4 and Section 25. There is also a proposed committee substitute (CS) reflecting language that the Department of Natural Resources (DNR) and the Matanuska-Susitna (Mat-Su) Borough, after long negotiations, agreed upon to safeguard public uses of the resources in the area, and also to allow a small portion of land along the road to be transferred to the Mat-Su Borough, as it relates to the proposed Hatcher Pass development area. That land, just over 900 acres, is delineated in both the proposed CS and the original bill. Number 0327 CO-CHAIR SANDERS made a motion to adopt the proposed CS for HB 227, version 1-LS0949\D, Kurtz, 5/6/99, as a work draft. There being no objection, Version D was before the committee. Number 0401 [Underlined by hand on Version D were the following: Page 1, lines 9 - 12, beginning with "Furthermore"; page 3, lines 22 - 25, beginning with "subject"; and all of the language in subsection (b) on page 4, lines 2 - 11.] MR. STANCLIFF noted that the language which the borough and the DNR arrived at through consensus was hand-underlined in the committee copy of Version D. On page 1, preceding the hand- underlined language, is wording which Co-Chair Ogan believed necessary to reflect that the original record, established in setting up this area, had indicated that the land in the Hatcher Pass Public Use Area would be available for municipal selection. It was taken from Senate Finance Committee minutes in 1986, relating to a question by Senator Halford and a response by Mr. Ned Farquar, then Special Assistant to the Commissioner, who had indicated this land would be available for municipal selection. Since that time, however, there has been some re-evaluation of that particular position. Therefore, it was thought by all parties - the borough, the state and Co-Chair Ogan - that specific legislation authorizing such a transfer should be put forth; that is the proposed CS before the committee, Version D. MR. STANCLIFF reported that Section 1 is the findings of fact; Section 2 describes the area of the Hatcher Pass Public Use Area; and Section 3 lays out the requirements regarding this new area. On page 3, line 23, is an agreed-upon reference, AS 38.05.035 and AS 38.05.945, which makes it clear that the director has full authority in the decision-making process, and that the proper public notice for hearings regarding this transfer should take place. A map in the packets shows this narrow strip along the Hatcher Pass road, which is necessary for the access for this project. The map shows the general idea of the development plan, which has been in the making for several years. MR. STANCLIFF explained that Section 3 sets some dates and times certain for land selection; it also states that any land not conveyed by the DNR shall remain available for conveyance to the Mat-Su Borough until all administrative and judicial appeals regarding the failure to convey the land have been exhausted. It keeps in place another option if there is not agreement, however. The lands are ultimately conveyed to the Mat-Su Borough following the exhaustion of the administrative and judicial appeals, and shall remain in the Hatcher Pass Public Use Area unless otherwise specified by law. Section 4 refers to this taking effect once the transaction has been agreed on, and says the DNR shall promptly notify the Revisor of Statutes of the conveyance once it occurs. Number 0750 REPRESENTATIVE BARNES asked if the Mat-Su Borough has selected this land as part of its municipal land grant. MR. STANCLIFF answered that he didn't know for sure, but that the borough manager could be asked. Number 0879 JANE ANGVIK, Director, Division of Land, Department of Natural Resources, testified via teleconference from Anchorage. She informed members that the DNR has worked closely with the Mat-Su Borough on the language of HB 227, and they are supportive of the bill. The selection of lands by a municipal government is a two-step process, she said. First, they exercise their right to select the land. Second, the DNR goes through a public review process to determine if it is in the state's best interest for lands to be passed from the state to a municipal government. The question today is: Should a portion of the Hatcher Pass Public Use Area, which was set aside by the legislature, be made available so that the Mat-Su Borough could select it? MS. ANGVIK indicated that currently, its being a public use area precludes it from selection by the borough. However the bill before them says that, notwithstanding the previous action of the legislature, this strip of land could be selected by the Mat-Su Borough as part of its municipal entitlement. The bill further says that, should they choose to select any portion of this land, the DNR would then go through a public decision- making process; if it is found to be in the best interest of the state, it could convey these lands to the Mat-Su Borough. Number 1012 REPRESENTATIVE BARNES asked what the status is of the Hatcher Pass ski area under the DNR. MS. ANGVIK said as she understands the history, the area was set aside as a legislatively designated area, to see whether it is possible to develop a ski area in Hatcher Pass. The boundary for that management area differs from this strip along the road, which was set aside as the public use area. There were numerous efforts to offer the land for lease, Ms. Angvik noted. Today, the Mat-Su Borough has management authority for the land, while the state retains both ownership of the land and oversight on the development plan for the ski area. Davis Construction Company is currently the lessee on the state holdings. REPRESENTATIVE BARNES asked Ms. Angvik whether it is a lease from the state or from the Mat-Su Borough to a private entity. Number 1170 MS. ANGVIK answered that the lease is owned by the state, and it is between the state of Alaska and Davis Construction. There is a memorandum of agreement between the state of Alaska and the Mat-Su Borough to allow the borough to manage the lease, but it requires the state's oversight. Although it has been assigned to the borough, the state still owns it. REPRESENTATIVE BARNES asked if any income from a ski resort developed on state land would be income to the state. MS. ANGVIK affirmed that. The way it is today, however, income generated from the lease will accrue to the Mat-Su Borough. Number 1237 REPRESENTATIVE BARNES asked whether that is the way it is today or the way it would be if this legislation passed. MS. ANGVIK responded that the legislation will not affect that question. Rather, it will affect the ability of the borough to own the land. The income is determined by the terms of the lease, and the state has already put the Mat-Su Borough in the position of managing the lease; therefore, the income generated from the lease will accrue to the Mat-Su Borough today, with or without this legislation. REPRESENTATIVE BARNES asked Ms. Angvik who negotiated this lease that allows the borough to have the income from state land. Number 1309 MS. ANGVIK replied that they went through a public notice process to assign the management of the lease to the Mat-Su Borough, approximately three months ago. REPRESENTATIVE BARNES asked if Ms. Angvik negotiated it herself. MS. ANGVIK said yes. REPRESENTATIVE BARNES asked Ms. Angvik why she would negotiate away state revenues and how she can do that. Number 1366 MS. ANGVIK answered that the intention of the memorandum of agreement between the state and the Mat-Su Borough was to enhance the opportunity for the development of the ski area to proceed. As a completely state-owned, state-operated project, it allows local government to try to accrue additional resources to help build the development. If the borough is the land manager with access to local resources, they could enhance the state land in a regional economic development effort. Number 1433 CO-CHAIR OGAN asked Ms. Angvik if this has been a cost savings to the state. He commented that this has been going on for years with another developer who didn't have the capitalization and support. MS. ANGVIK replied that it will save money in that they don't have to focus as much energy on the Hatcher Pass development as in the past. The real intention, however, was to provide the borough with a capacity to assist in the development of the project with other resources that are available to the borough but not to the state. Number 1497 REPRESENTATIVE BARNES asked, "Like what?" MS. ANGVIK stated her understanding that they have an economic development fund and economic development program, which comes from other sources that they were interested in exploring as an underpinning for the project; they would be in a better position to use those resources if they were the managers of the land. REPRESENTATIVE BARNES asked exactly how long this revenue sharing without statutory authority will continue before the funds revert to the state for state land. MS. ANGVIK answered that the memorandum of agreement assigns the state's interest in the lease to the Mat-Su Borough. There are 50 years left on the lease. Number 1588 CO-CHAIR SANDERS asked what statutory authority Ms. Angvik had used for this. Noting that he'd never heard of it, he further asked whether this is done all the time in Alaska. MS. ANGVIK replied that the state has authority now to lease its land, and to assign or dispose of the interest of its land, under Title 38. Through a public process - including an evaluation, a finding and a public notice - the state is able to both sell and lease its lands and holdings to other entities, including a borough. Number 1654 REPRESENTATIVE BARNES asked, "Under Title 38, do you also have the right to convey a revenue stream from a lease to a local government?" MS. ANGVIK responded, "It is our interpretation of Title 38 that the department has the ability to assign its interest in a lease, and ... our interest in a lease also included the revenue stream, as well ... as the management responsibility for the lands." Number 1671 REPRESENTATIVE BARNES requested that Ms. Angvik fax the legal opinion giving her the right to convey state revenue. She added that only the legislature has the right to appropriate. Number 1717 REPRESENTATIVE JOULE asked how much the income is from the lease. MS. ANGVIK deferred to Rick Thompson, who had worked on the development originally. She asked him to explain what the income stream is anticipated to be from the Hatcher Pass lease when the development actually occurs. She pointed out that no income derives from the lease until it is developed. Number 1768 RICK THOMPSON, Regional Manager, Southcentral Region Office, Division of Land, Department of Natural Resources, spoke via teleconference from Anchorage. He re-emphasized that there currently is no income generated from the lease, as the income stream begins when the development occurs onsite. The amount is $95,000 annually, he said. When the gross revenues get to a certain point, which he couldn't quote at the moment, the revenue ratchets upward. It is a 55-year lease, with a little more than 50 years left on it. Number 1807 REPRESENTATIVE JOULE asked if there are other examples of this kind of arrangement. MS. ANGVIK said she didn't know but would provide an answer after checking records of other leases assigned by the state. Number 1851 REPRESENTATIVE JOULE inquired about a fiscal note from the DNR. MS. ANGVIK replied that the cost would be for processing the application from the municipal government, a service that the DNR provides, and for conducting the public process and determination of another municipal entitlement; the DNR has the resources now to do that. The cost of surveys would be borne by the municipality, as all municipal governments have the responsibility to survey any lands provided to them through the municipal entitlement program. Number 1921 CO-CHAIR OGAN asked if that is something the DNR normally does, as part of its normal operating costs. MS. ANGVIK replied, "Yes, Mr. Chairman, we have people on staff who, as part of our operating budget, handle municipal entitlements. When a municipality has requested that we expedite the service, because they're desperate to have control of the piece of land, we have asked municipal governments to give us an expediting fee, which puts them to the front of the line." CO-CHAIR OGAN asked if that should cover the cost of transferring this, assuming the borough is willing to pay it. MS. ANGVIK first said yes, then said she didn't know. "If it's a regular, normal municipal entitlement, we have to ask to do that," she added. CO-CHAIR OGAN suggested saving that question for the borough manager. Number 1976 REPRESENTATIVE JOULE inquired, regarding other land entitlements or other boroughs in the state, if there have been expedition requests that were acted upon. He noted that several boroughs, including two in his district, have had outstanding entitlements for years. MS. ANGVIK replied that the legislature has authorized the DNR to accept receipts if a municipal government has requested expedited service; she believes they receive about $20-30,000 a year as expediting fees, and three full-time people work on municipal entitlements. There is no question that they are behind in processing applications, she said, although many boroughs are in the process of getting their entitlements. Number 2049 REPRESENTATIVE JOULE asked if one way to expedite entitlements is through a bill. MS. ANGVIK clarified that HB 227 doesn't do that. Rather, it says they can select it, and then they stand in line, like everybody else, while the DNR tries to process it. She stated, "It's a two-step process. Step number one is, 'May we select it?' Step number two is, 'Can we get in line with other municipal governments, in order to apply for the ownership of - or the transfer of - to a municipal government?'" She added that it is a decision-making process and public process in which the Northwest Arctic Borough and many other boroughs are currently involved. In reply to a question by Representative Barnes, Ms. Angvik said she had sent a fiscal note to Juneau. CO-CHAIR OGAN reported that he had zeroed out the fiscal note. REPRESENTATIVE BARNES responded that Co-Chair Ogan doesn't have the authority to do that, but if the committee chooses to zero it out, they can do so. She insisted on having a fiscal note. Number 2147 MARTY RUTHERFORD, Deputy Commissioner, Anchorage Office, Department of Natural Resources, testified via teleconference from Anchorage, adding, "We had indicated that we thought that there would be some costs associated with this conveyance. But we also have felt, all along, that it's appropriate for the borough be able to select this land, ... or to at least be allowed to select it, so that we could go through the public process to determine whether it's appropriate to convey it. But we also know that it got a late start this year, so we felt that we could probably handle the conveyance process with internal staff; and, therefore, when we were notified that ... the bill was at risk of not ... getting through this session, we agreed that we would accept a zero fiscal note, so that it wouldn't have to kill the bill until the next session." REPRESENTATIVE BARNES restated that if this bill will cost anything, the DNR must put before this committee the proper fiscal note. "And if this committee chooses to zero it out, they may do so," she added, "but you don't have that right. The law is clear on what happens with fiscal notes." CO-CHAIR OGAN responded that the point had been made that the Mat-Su Borough is willing to pick up the expense. He said he would like to have that testimony on the record by the borough. REPRESENTATIVE BARNES said that is fine, but they still may not make an agreement with Co-Chair Ogan about a zero fiscal note that they had already prepared, without first placing it before this committee and having a motion to adopt a zero fiscal note in lieu of the original one. Number 2251 CO-CHAIR SANDERS asked if there is a possibility that the state could give land to municipalities and villages to develop, instead of using revenue sharing and municipal assistance from the general fund. MS. ANGVIK replied that the municipal entitlement program is a distribution of state lands to local governments. As for whether it should substitute for cash municipal assistance, that is a policy decision by the legislature. This bill, like many others, is intended to provide municipal governments with the ability to generate their own revenues from lands, she added. It is clearly the intent that the settlement lands that municipal governments would be able to select could generate an income stream for them. Whether that happens depends on whether those lands are actually developed. Ms. Angvik stated, "The income stream from this particular lease, should this lease come into fulfillment, will flow to the Matanuska-Susitna Borough, because the state of Alaska has assigned its interest in the lease to the municipal government." Number 2354 MS. RUTHERFORD joined in, saying the municipal land entitlement program has always had several purposes, primarily conveyance of lands to municipalities for settlement purposes and as a basis for development, so they could generate funds. Importantly, the lease was assigned to the borough not simply to generate money but so the borough can assist in encouraging development of the Hatcher Pass area. Ms. Rutherford told members, "The state, particularly DNR, is pretty limited in what resources we can bring to bear, and what interest we can encourage. So, the borough had indicated an interest and a willingness to commit their resources towards the effort of developing the area, and since ... it's been stated that ... developing the Hatcher Pass area is in the state's best interest, it seemed to us to be an appropriate step to take, because we did not have enough resources to encourage that development all by ourselves." Number 2431 REPRESENTATIVE HARRIS followed up on Representative Barnes' question by asking about the legality of assigning the lease with Hatcher Pass Development Company to the Mat-Su Borough. Noting the lack of documentation indicating whether the Hatcher Pass Development Company is comfortable with this or endorses it, he inquired about that, as well. CO-CHAIR OGAN replied that they simply haven't gotten to it. Number 2491 REPRESENTATIVE BARNES referred to AS 24.08.035, relating to fiscal notes on bills. She again requested that Ms. Angvik provide the proper fiscal note, including all the items in AS 24.08.035. [Before the end of the meeting, a fiscal note prepared by Ms. Angvik, dated May 7, 1999, was provided, in the amount of $11,000.] Number 2516 REPRESENTATIVE WHITAKER asked who the lessor is. MS. ANGVIK specified that the lessor is the Mat-Su Borough, and the original lessee is Hatcher Pass Development Company. "The private interest that that represents is Davis Construction," she added. REPRESENTATIVE WHITAKER asked for confirmation that the recipient of funds inherent to the lease is the lessor, the Mat- Su Borough. He stated his understanding that the borough will receive those funds based on a lease that leases state land, which doesn't belong to the borough. He asked if that is the crux of the matter. MS. ANGVIK affirmed that the Mat-Su Borough is the lessor. She said the crux of it, if she understood the question, is that the state of Alaska owns this land and entered into a lease with Hatcher Pass Development Corporation for the development of the ski area. The state then assigned its interest to the Mat-Su Borough, in an effort to encourage further development of the lease areas. These events are not affected by the bill before the committee, however. Number 2679 GREG ROMACK, Hatcher Pass Development Corporation, Incorporated, testified via teleconference from Anchorage. He reported that the first phase of the resort development is estimated to cost about $13 million. They currently have a loan sponsored by the Alaska Industrial Development and Export Authority (AIDEA), as well as private equity, "to take us to about $9 million of the $13 million." They also have a couple of federal grants that they believe are in place. Mr. Romack noted that there is a gap of about $3 million for which they don't have financing, for infrastructure-type items, which they are working on from various sources. The first phase for the ski hill itself includes a base lodge facility; two chair lifts to the top; and all of the infrastructure such as snow-making facilities, maintenance buildings, parking lots and night lighting. MR. ROMACK concluded, "We are in favor of the bill that's in front of you. From our perspective, it doesn't change anything. The Hatcher Pass master plan covers the fact that there's no development along that corridor that can be seen from the road. This transfer will not impact that. We have no intentions of developing the corridor, and the lease does not allow for it. In the previous testimony, there was some question about the $93,000 that goes go the Mat-Su Valley and the Mat-Su Borough. And I'm not sure whether they're online, but I do know that one of their intents was to leverage that $93,000, to help us close the gap, because the heart of the matter is really that we're four miles away from the closest piece of infrastructure, and we're trying - through numerous plans - to cover those costs." Number 2778 REPRESENTATIVE BARNES asked Mr. Romack how much funding they have from AIDEA. MR. ROMACK replied that AIDEA has committed, in conjunction with the National Bank of Alaska (NBA), to a $6 million loan. REPRESENTATIVE BARNES expressed her understanding that there is $2 million in private-source money. MR. ROMACK affirmed that. REPRESENTATIVE BARNES noted that it is a $13 million project, suggesting that the income will be greater than $93,000 once it is a fully functioning facility. She suggested the $93,000 leverage would probably be used to float revenue bonds, defray revenue bonds or something of that nature. MR. ROMACK replied, "It is hard for me to speak for them, but I believe that is their intent." Number 2838 REPRESENTATIVE BARNES said the difference now is approximately between what would be floated in revenue bonds by local governments and AIDEA funding, and that private money invested would only be about $2 million. She asked if that is correct. MR. ROMACK affirmed that. CO-CHAIR OGAN stated, "Private money - they're on the hook for the money they borrow, as well. So, they're willing to put $2 million of their own money, to leverage the $6 million from AIDEA and NBA. That makes them responsible for $8 million." Number 2873 REPRESENTATIVE BARNES replied, "What's really on the hook here for the AIDEA money - and would be literally on the hook for the $93,000 worth of money that literally belongs to the state to leverage for revenue bonds - would be state land, at this point in time, that if they defaulted, we'd simply get back our state land." MR. ROMACK agreed that if they defaulted, they would be out of the picture. However, there would be a developed ski resort, which probably would have some value above the basic land lease. Number 2912 REPRESENTATIVE BARNES asked, for a fully developed and functioning ski resort on state land leased to the Mat-Su Borough, what the income estimate is to the Mat-Su Borough each year. MR. ROMACK answered, "Our financial projections, based on studies that have been previously done, is the revenue would start out at $93,000 off the lease, and it would ratchet up, over a ten-year period, to approximately $130,000 annually." He indicated they hadn't projected past ten years. TAPE 99-31, SIDE B Number 2938 [Numbers run backwards because of tape machine] REPRESENTATIVE BARNES asked, if the debts to AIDEA and to the developers were paid off, what the income to the Mat-Su Borough would be. CO-CHAIR OGAN said he would be happy to provide that information, but indicated he would like to pass the bill out that day. REPRESENTATIVE BARNES wondered how they were going to do that when they needed more information. CO-CHAIR OGAN called an at-ease at 2:47 p.m. and called the meeting back to order at 2:48 p.m. Number 2882 MIKE SCOTT, Manager, Matanuska-Susitna Borough, testified via teleconference. He said the bill would give the borough the right to select the remaining 939 acres in the lease area. They have already submitted their request to select the balance of the lease area. The borough would still have to go through the Title 38 process once they are granted the opportunity to go through the process of selection and then conveyance. In 1986, the legislature did contemplate that these lands could be selected, and rightfully so, under the municipal entitlement program. MR. SCOTT listed the people available to testify: Ron Swenson, Director, Mat-Su Community Development; Darcie Salmon, Mat-Su Mayor; Jim Turner, Mat-Su Assemblyman; and there may be other assembly members at the Legislative Information Office (LIO) available to testify. Also they have Kelly Huber, President, Mat-Su RC&D, Ted Smith, Title Land Director and retired parks director for the state of Alaska; Al Jorgensen; Janet Kinkaid (ph), Valley Hotel and Vice President of the Mat-Su Visitor's Convention Bureau; Edna DeVries, former state Senator; and Sarah Palin, Mayor of Wasilla, all of whom support this legislation. This is also an opportunity for the borough to be more self- sufficient, Mr. Scott stated, to create 126 jobs and do something to help their economy as they see layoffs from the oil industry. Number 2795 CO-CHAIR OGAN noted that the original fiscal note was $15,000. He asked Mr. Scott if the borough is willing to step up to the plate to cover the cost of the transfer. MR. SCOTT answered that they will stipulate to costs rightfully borne by them. The DNR recognized, prior to the borough's selection of the other acreage, that it may have been difficult to assist in getting this development together, because there is absolutely no infrastructure to help support a development like this up at Hatcher Pass. The borough is not only stepping up to the plate in the that area but in the bigger picture, in making this development happen not only for the valley, but also for the economy of the state. Number 2731 REPRESENTATIVE JOULE asked how much of the entitlement for the Mat-Su Borough they have not received from the state. MR. SCOTT deferred to Ron Swenson. Number 2685 RON SWENSON, Director, Community Development, Matanuska-Susitna Borough, testified via teleconference from the Mat-Su LIO. He said the Mat-Su Borough currently has an outstanding entitlement of about 10,000 acres. REPRESENTATIVE JOULE asked Mr. Swenson how many acres this transfer would add. MR. SWENSON said about 3,000 to 3,500 acres. MR. SCOTT added that it would be for the entire lease area, including the 939 acres of public use area. Number 2653 REPRESENTATIVE JOULE asked whether, for the entitlement coming, this would, then, take the amount and make it that much less. MR. SCOTT affirmed that. REPRESENTATIVE JOULE asked if through this legislation they are conveying what the state owes in entitlement to a municipality. Number 2621 MR. SCOTT answered no, this legislation does not convey it; it simply allows the borough the opportunity to select it under its municipal entitlement. Then the conveyance must still adhere to the Title 38 process, which would follow this threshold that they would need to cross in order to engage in that process. There is a two-stage process. Number 2600 REPRESENTATIVE JOULE asked if they would simply be selecting it and then authorizing its usage. MR. SCOTT indicated that is true provided the state of Alaska, in its Title 38 process, deems it in the best interest for the state. They have endeavored to do that in a memorandum of agreement signed jointly with the borough, he said, and the borough has stipulated that they would follow the Hatcher Pass Management Plan, as amended. REPRESENTATIVE BARNES asked Mr. Scott what the Mat-Su Borough plans to do with $900,000 appropriated out of the general fund to the Mat-Su Borough for construction of public infrastructure of Hatcher Pass. MR. SCOTT answered that they had briefed the House Special Committee on Economic Development and Tourism about a month ago, saying the $900,000 would be part of a total of about $5 million in public financing for items like water, sewer, parking and utilities. Number 2529 REPRESENTATIVE BARNES asked if this $900,000 is just a down payment on $5 million. MR. SCOTT said they contemplate that this is their only legislative appropriation request. He indicated that a stipulation in the memorandum of agreement says the borough would invest in a revenue stream, invest the funds into the project, and use the revenue stream off of this lease in order to generate some revenue. There are federal grants available to the local governments that they are putting together in a total package. They don't anticipate requesting any other special appropriation from the legislature, he concluded. Number 2481 REPRESENTATIVE BARNES said her understanding is that they hope to use the $96,000 to float revenue bonds, with which they hope to leverage the federal government for additional funds, and all they would be asking from the state now is the $900,000. She asked: If at some future time they aren't able to get the grants from the federal government, would the borough be back before the legislature asking for those additional funds? Number 2452 MR. SCOTT answered that he would not anticipate that, given the time frame of phase one. They would hope to start this fall. Coming back to request more money is not their intention at this point. Number 2404 MR. SCOTT clarified that when he was referring to phase one - the $13.3 million that Mr. Romack referred to - the state has, through the federal funds in the state transportation approval plan program, the funds to pave the road from Milepost 7 to Milepost 14, and to do some scenic overlooks, for example, which are not directly related to the development of the project. REPRESENTATIVE BARNES asked how much of that above the $900,000 is for the road. MR. SCOTT specified that the amount for the road is about $2 million, which is federal funds, and the borough has contributed $250,000 in matching funds. He indicated the state Division of Parks and Outdoor Recreation plans to take it up to Independence Mine for a variety of scenic waysides. CO-CHAIR OGAN noted that this has been on the Statewide Transportation Improvement Program (STIP) for a number of years. MR. SCOTT agreed. The development will benefit from that, he said, but so will the Independence Mine and the other activity outside of the ski area that people use on a regular basis. CO-CHAIR OGAN noted for the record that that area is heavily used now as a recreation area. Number 2274 REPRESENTATIVE BARNES commented that to get federal money they have to put state money with it. She asked how much state money is required and where that project is on the STIP now. CO-CHAIR OGAN said he believes that project on the STIP is going to be done this year. REPRESENTATIVE BARNES asked how much state money is in the budget this year. CO-CHAIR OGAN said he wasn't sure. REPRESENTATIVE BARNES asked him to get that information. MR. SCOTT noted that it isn't directly related to this project. This is just one piece in the overall Hatcher Pass area, he said; the borough stepped up and contributed, and many other areas and businesses outside of that area benefit from that road. Number 2198 JIM TURNER, Assembly Member, Matanuska-Susitna Borough, testified via teleconference from the Mat-Su LIO. He indicated this project and the economic development of Hatcher Pass are top priorities. The basic infrastructure would support the ski project itself, and it would help support development of a visitor attraction at Independence Mine State Historic Park. They agree that the combination of these developments could lead to a new major tourism development in Southcentral Alaska for people going north, he said. As part of the strategic plan, the borough has determined what support there is for projects like this. Throughout the years the ski area development has enjoyed widespread support in the Mat-Su Borough, and it is evident today. MR. TURNER commented that this legislation merely authorizes the state to transfer the land to the borough if they request it. He has been involved in this process since it started in the early 1980s. The Hatcher Pass Management Plan envisioned, authorized and governed, to a great extent, what has happened in the process of developing the ski area. The special public use district was overlaid somewhat into the public process. Through the memorandum of agreement with the state - and through the intentions the borough has expressed in their willingness to include the language in this bill - they will continue to see that the Hatcher Pass Management Plan still applies and will be in effect on this piece of property, Mr. Turner said. The fact that this land will be transferred to the borough from the state will not change the ability of the state or the DNR to enforce the conditions through civil action or through complaint-driven action of the Hatcher Pass Management Plan. Number 2005 KATHY WELLS testified via teleconference from the Mat-Su LIO in opposition to SB 227, noting that she was an original participant in the Hatcher Pass Management Plan. She is strongly opposed to this bill because it will "de-designate" public use area lands. The DNR has said this public use area land is not normally available for entitlement selections by local governments, she said, asking the reason for doing it now. Specifically, the 939 acres along the Little Susitna River road corridor were set aside as public use area lands, she told members, for protection and use by all the public, not just the Mat-Su Borough. The DNR and the Mat-Su Borough have been discussing this land conveyance without public process, which is why they are hearing from people. MS. WELLS noted that the DNR has said there will be a public process after the conveyance. She asked: Why not have it before the conveyance? She further asked what that process will be. Ms. Wells said the Mat-Su Borough has stated that they will adopt provisions from the Hatcher Pass Management Plan. There is no guarantee of that, however, as it is not in the language of HB 227 right now. These provisions will need to be documented and be placed in HB 227, as well as in the land patent transfer. MS. WELLS pointed out that provisions currently in place are being enforced and managed by the Division of Parks and Outdoor Recreation. However, the division was unaware of this transfer of public use area lands. When these lands are conveyed to the borough, the division will no longer be able to enforce these provisions, she said. She asked: After the Mat-Su Borough has given these lands, who will enforce the Hatcher Pass Management Plan? MS. WELLS said the DNR has stated that if the provisions are not met, they can take the public use area lands back again. She asked who will do this, how it will be done, how long it will take, and if they can do this after the borough has the land patent. The state legislature is considered the public process at this point, she noted, and it is difficult for the public to take part in this. She believes that the DNR has violated the public's trust by conveying these lands without public process. She reminded members that the Mat-Su Borough can go forth with the development of a ski area, as designated within the Hatcher Pass Management Plan, without taking ownership of a valuable resource of the state, owned by all Alaskans. Number 1859 KEVIN KEELER testified via teleconference from Anchorage. He is a valley landowner, with two and a quarter acres and a cabin one-half mile from the proposed transfer boundary. He is very opposed to HB 227 because it is part of a much larger 4,600-acre transfer of land to the Mat-Su Borough from the state, which has virtually had no public notice or involvement. One document issued by the DNR, a preliminary finding of the transfer of lease, states that the purpose of this land is that the Mat-Su Borough will have adequate collateral to obtain revenue bonds to fund the construction of the ski area. This means that the Mat- Su Borough could obtain title to these lands and invest some of it, Mr. Keeler said, perhaps in the development of the ski area. If the ski area goes belly up, however, they will have to turn that land over to whomever they got the money from for the development. MR. KEELER indicated it is totally inappropriate for public lands - both within the public use area and on the south, close to Government Peak - to be transferred from state lands. Regarding the transfer of lease, there was one tiny legal notice in the back of a newspaper, he pointed out, and no one responded to it. Basically, no one knew about it at all, including the Division of Parks and Outdoor Recreation, which was cut out of that process. To his knowledge, originally the understanding was that the DNR would receive funds from ski area revenues for recreation facility maintenance along the road, enforcement and so forth. Since they have been cut out of that lease by the Division of Land, however, they are no longer able to receive any of those future funding streams. In effect, there was an impact on the state's revenue streams by cutting the Division of Parks and Outdoor Recreation out of the transfer of the lease agreement. MR. KEELER referred to documents indicating the Mat-Su Borough and the DNR didn't want any of the conservation conditions to travel with the title of the land. He said only 150 acres out of the 4,600 proposed for transfer would be developed for resort homes, roads garages and common areas. There is supposed to be a "moose greenbelt" leading from tract A to tract B, from the 2,000 foot level, a quarter-mile downhill, he pointed out; this is co-located with the transfer of public use lands that the Mat-Su Borough is trying to have "undesignated" with HB 227. He doesn't believe it is appropriate to go forward because the lease with the borough can revert to the state after three years, if the ski area is not successful. He suggested that HB 227 be tabled. Number 1671 NANCY MICHAELSON testified via teleconference from Anchorage, noting that she resides at the base of Hatcher Pass. She said the area of Hatcher Pass being contemplated has done a lot for her, so she is there to speak up for it. She strongly opposes HB 227. Ski resort development aside, it is not necessary or desirable to prostitute the acreage along the road to Mat-Su Borough economic development, she said. The right thing to do is to protect the integrity and atmosphere of the Hatcher Pass area as much as possible around the ski resort development. She pointed out that under Section 1, Findings of Fact, the second sentence talks about the land contained within the development lease, and that it was authorized for development purposes in the management plan. That development authorization was approved in the context of its being a state public use plan, she said. That is different from what this would be, and she trusts that the committee can make that distinction. MS. MICHAELSON urged the committee not to pass this bill, which promises the blight of Mat-Su Borough's sprawl in her back yard, including condominiums, roads, mini-malls and fast-food joints. To have that in an area where her family sits to watch the harlequin ducks bob up and down on the Little Susitna River, and where they frequently have picnics, is scary to her. She pointed out that what is good for borough bureaucracy, and the tax-paying residents financially, is not what is best for the public of Alaska. This bill removes public use lands from the public, and in this case, it is not in the public's best interest. Number 1521 GARY MICHAELSON testified in opposition to HB 227 via teleconference from Palmer, noting that he is a resident of the Mat-Su area. He mentioned Mr. Turner's statement that the title doesn't make any modifications, and that they're going to stick with the land use plan. However, he said, this is an Act modifying DNR's power to control and manage that land. Mr. Michaelson further stated: If you've been to Hatcher Pass, it's a very small area and it needs to be managed in a cohesive way - it's not just one little valley here, one little valley there. It's a very, very compact area. And the other point is, it needs to be cohesively by one body - whether we like DNR or not. This is really what needs to be done. The other aspect is, this selected land that is outlined here, this is a key corridor place. Sure, this would make it easier for the borough to manage this land - their lease land - but it would also transfer the power of management of that land, that key corridor area, to them. It is not only important to the valley as a whole, but also to the quality of the Hatcher Pass/Little Susitna River; this is a key area, a buffer area, between the development area of the ski area and the river. If we lose control, as it says in the title of this bill - if the DNR, the state of Alaska loses control of this buffer corridor between development and the Little Susitna River - we all know how important those (indisc.) areas - fishery recreation, water supply downstream - we lose that, then we've lost integrity of the area. We might as well divide it all up and parcel it out, and I don't think that's what the state of Alaska's best interest is. And I don't think that the borough at this point ... intends to do this, but as we see what's happened in other areas, ... development pressures come, ... and the people are very land-based and real estate-based in the valley. And I don't think this is necessarily in the best interest for our public land. Number 1315 DARCIE SALMON, Mayor, Matanuska-Susitna Borough, testified in support of HB 227 via teleconference from Palmer. He stated: It's curious to me that for many years this project has been before the public eye; and when a group called "Mat-Suey" had it, there was no real intent to develop that property. Clearly, they were in line waiting for the Olympics to come, and when they did not come, "Mat-Suey" left with that. The next individual to step in was a man named Fred Rogers (ph); he, again, was not financially capable of taking this project forward but had ... the control of that lease for a considerable period of time. And it took the Mat-Su Borough a considerable period of time to wrest control of that. And finally, today, we have this lease in the hands of a very capable developer, with a well-documented track record, willing to go forward. The lenders are in place. We've got grants that are being worked on as we speak. It's the only capital project that actually, at this point, puts people to work in the state of Alaska - not only the 154 to build it, but the 126 to maintain and run it after the fact. ... While nothing was being done, nothing was being said. ... Clearly, the opponents suggest that the one form of government, that being the state, seems to care more about this land than another form of government, which would be the borough, and that the one would be a better steward of the land than the other. I suggest to you that - being that it is in boroughs' district, and the state as vast as it is - that I'm sure the state cares deeply about this land and about the people who live there, but not more than the borough ... and the care and concern at a local level. [It] is my firm belief, philosophically, that at a local level we're in a better place and a better way to understand what's happening on a consistent, daily basis. And the transfer of this 939 acres is an integral piece to the long-term development of the entire project, which gives control to a singular entity, and in that respect backs up the bureaucratic red tape and delays - which we have, Lord knows, already suffered years and years and years of, as a result of individuals who had control of these lands and had no intent to do anything with them. The benefit of this property and the benefit of this project is clearly for the Mat-Su Borough, but not only for the people of this borough. This is the one project which actually and truly benefits the state of Alaska, in a way which brings tourism and recognition at an international level, as well as to the state level; and it would be a great benefit to the borough and the expanded future enjoyment of the entire constituency of the state of Alaska once it's up and running, and eventually to the international world marketplace. I wholeheartedly urge your acceptance and willingness to push this bill forward and grant the Mat-Su Borough the ability to choose this land. And then, of course, we will follow every intent of the Hatcher Pass development codes, and whatever DNR and the state sets before us. But we need this to move our project forward, and I urge your willingness to do so. Number 1072 DORI McDANNOLD, Valley Alaska Center for the Environment, testified in opposition to HB 227, via teleconference from Palmer: I'm here because I have a lot of concerns, ... and I would like to reiterate the points specifically made by Kevin Keeler and Kathy Wells. ... Some of the concerns I have, have to do with the public process. I believe that it's absolutely backwards: consider "de-designating" lands, and then through legislative action, and then taking a public process at DNR to see if that's appropriate. That just seems absolutely backward to me. The other concern I have is that, with what's standing right now, I don't believe that the bill is written strongly enough, and I would like to request legal consultation at the state, for certain that this bill states very legally and correctly that if the lands ... were to be transferred to the Mat-Su Borough, that in fact there would be written on the patent, clear and clean, that they would be following the Hatcher Pass Management Plan. I don't feel comfortable saying that this bill does this, and I would like to see that, if this were to go forward, that an amendment for the title be put in place and that it actually states ... that the borough would be legally bound, both under title and under patent, to the Hatcher Pass Management Plan, as amended. ... I believe that there is no sufficient reason that I have heard of yet that would warrant the "de- designation" of this land and transfer of title. The borough says they would like to have it for control, and there has been no good reason to me to take lands from a public use area, where it is well-managed under a plan, and transfer it to the borough. ... As they stated, it's an integral part, but it's not clear to me why it's so integral, that it's in the borough's hands. They say that for financial reasons it may make it easier, which I understand, but I still don't think that that warrants the transfer. CO-CHAIR OGAN asked Ms. McDannold to summarize her statements because there one more person was scheduled to testify. MS. McDANNOLD concluded, "I continue to oppose this bill [HB] 227. I think that the borough should not be able to select it at this point in time, and that there are a lot of concerns with that transfer regarding the borough's ability to enforce; the borough shows no ability to enforce other plans that exist within the borough, and for that reason alone that makes this bill null and void." Number 814 GARVAN BUCARIA testified via teleconference from Palmer. He stated: I particularly commend Representative Barnes for inquiry as to economics of this proposed development. I would like to see a schematic display of the funding, indebtedness and payback projections prior to approval of this bill. I, at this point, feel that a public hearing would be in order to provide an opportunity for the public at large to hear the details as background for more participation. This is a a very important area ... in the Matanuska-Susitna Borough, and from what my experience is, I do not see the economic ability of the borough to enforce conservation concerns that may result, especially as a development enlarges. I seriously worry that there is a potential - should there be a failure of the contractor down the line or failure of the owner down the line - for the holders of indebtedness to take over ownership of this currently owned state land. That option should be abrogated by any legal means in the development of the contract of the lease. The area represents the upper headwaters of the Little Susitna River drainage, recognized as an important anadramous fish stream. The potential for contamination of the headwaters of this system seem very great, especially with overdevelopment. There is the question also as to volume and availability of water supplies in this mountainous region. We must ensure that the quality of the water and volume of the water feeding the Little Susitna [River] is not lost. It seems logical that it's healthy to have a major buffer between the ski area and the proposed access area and the stream. In summary, I remain open-minded relative to this option, but I am very fearful that the loss of public recreation area and the control and long-term status of this land may be threatened without careful scrutiny and condition. CO-CHAIR OGAN said he would entertain a motion to move HB 227. He acknowledged receipt during the meeting of the DNR's fiscal note prepared that day. Number 0557 REPRESENTATIVE BARNES objected. She said she does not believe the fiscal note is accurate because it does not reflect the loss of state revenues. She reiterated that the Mat-Su Borough would garner at least $93,000 a year to back up revenue bonds, and the fiscal note should reflect that. CO-CHAIR OGAN pointed out that there wasn't yet a motion. REPRESENTATIVE WHITAKER asked what the public process has been to the development and proposals in general. Number 0469 CO-CHAIR OGAN noted that the proposal has been on the table for a number of years, and that this is the third attempt. He assured Representative Whitaker that there is broad public support for this project. He said the process doesn't convey land; it simply allows the DNR to go through a public process. He concluded, "We amended the bill to make sure that that public process is addressed in the bill, so that there would be opportunity ... for the public to testify .... This is a public process." REPRESENTATIVE WHITAKER asked about other committees of referral. CO-CHAIR OGAN replied that he intends to make a motion that the committee zero-out the fiscal note, because the Mat-Su Borough has testified that they will pay the costs. He pointed out that if HB 227 receives a positive fiscal note, it will be referred to the House Finance Committee. REPRESENTATIVE WHITAKER said Representative Barnes has a legitimate concern with regard to the fiscal note. He indicated the desire to ensure that the question is answered in a reasonable manner. CO-CHAIR OGAN said he would be happy to meet with Representative Barnes. Number 0231 REPRESENTATIVE BARNES responded that she doesn't think Co-Chair Ogan can convince her that HB 227 does not have a fiscal impact on the state and that this is not an improper fiscal note. It doesn't show the loss to the state, she said, and it must do so, clearly, from the statute. She said she has been here all these years, and the only public process this has gone through relates directly to the procedures under DNR; it has absolutely nothing to do with transfer of land to the Mat-Su Borough, in any shape, form or fashion. Other than the little bit of testimony today, there is absolutely no public process as it relates to the transfer of this land, she concluded. Number 0110 REPRESENTATIVE WHITAKER said for purposes of debate, he would move to report HB 227 {Version D, 1-LS0949\D, Kurtz, 5/6/99], out of committee with individual recommendations and the accompanying fiscal notes. Number 0085 REPRESENTATIVE BARNES objected. CO-CHAIR OGAN asked Representative Whitaker if he had additional comments. Number 0079 REPRESENTATIVE WHITAKER indicated he is an advocate of this particular project. He noted the apparent need for it and that it has been discussed for many years. However, he has real concerns with the process. He said he understands the concern about moving HB 227 quickly, as well as the concerns of those who are trying to develop this property throughout the Mat-Su Borough. TAPE 99-32, SIDE A Number 0001 REPRESENTATIVE HARRIS inquired about the urgency of this. CO-CHAIR OGAN pointed out that other than homes and retail businesses, the Matanuska-Susitna area has no private-sector industrial development; they need to expand their tax base and economy. REPRESENTATIVE HARRIS suggested waiting to get some answers before voting. CO-CHAIR OGAN responded, "If we wait, it's simply not going to happen this year. And they're ready to go on the ground next fall." Number 0347 CO-CHAIR OGAN requested a roll call vote. Voting to move the proposed committee substitute for HB 227, Version D [1-LS0949\D, Kurtz, 5/6/99], from committee were Representatives Whitaker, Harris, Masek and Ogan. Voting against it were Representatives Joule, Morgan, Kapsner, Barnes and Sanders. Therefore, HB 227 failed to move out of committee by a vote of 4-5. ADJOURNMENT There being no further business before the committee, the House Resources Standing Committee was adjourned at 3:44 p.m.