SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE March 16, 1993 9:05 a.m. MEMBERS PRESENT Senator Randy Phillips, Chairman Senator Robin Taylor, Vice Chairman Senator Rick Halford Senator Al Adams Senator Fred Zharoff MEMBERS ABSENT None ALSO PRESENT Senator Loren Leman COMMITTEE CALENDAR SENATE BILL NO. 142 "An Act relating to the Alaska regional economic assistance program; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 142 - No previous action to record. WITNESS REGISTER Senator George Jacko State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Prime Sponsor of SB 142 Chris Gates, Director Division of Economic Development Department of Commerce & Economic Development P.O. Box 110804 Juneau, AK 99811-0804 POSITION STATEMENT: Offered information on SB 142 Dee Thomas Anchorage Economic Development Council 550 W. 7th Ave., Suite 1130 Anchorage, AK 99501 POSITION STATEMENT: Testified in support of SB 142 Joe Crosson Anchorage Economic Development Council 550 W. 7th Ave., Suite 1130 Anchorage, AK 99501 POSITION STATEMENT: Testified in support of SB 142 Marideth Sandler Southwest Municipal Conference 3300 Arctic Blvd., Suite 203 Anchorage, AK 99503 POSITION STATEMENT: Supports SB 142 Carl Berger Lower Kuskokwim Economic Development Council Box 219 Bethel, AK 99559 POSITION STATEMENT: Supports SB 142 David Baker Arctic Development Council Arctic Slope Region POSITION STATEMENT: Supports SB 142 Donna Tollman Copper Valley Economic Development Council P.O. Box 9 Glennallen, AK 99588 POSITION STATEMENT: Supports SB 142 ACTION NARRATIVE TAPE 93-14, SIDE A Number 001 The Senate Community & Regional Affairs Committee was called to order by Chairman Randy Phillips at 9:05 a.m. SENATOR RANDY PHILLIPS introduced SB 142 (REGIONAL ECONOMIC ASSISTANCE GRANTS) as the only order of business. Number 015 SENATOR GEORGE JACKO, prime sponsor of SB 142, said that the ARDOR program was established in statute in 1988 and currently includes 13 ARDORS funded under the Department of Commerce & Economic Development. He has introduced SB 142 upon request from two ARDOR's in his district. The current statute provides that each ARDOR receive funding of not more than $50,000 each year, and that money must be matched dollar for dollar with non-state funds. SB 142 would increase the amount that each ARDOR could receive from $50,000 up to $100,000. The bill would also authorize the department to establish in regulation the amount of local matching money required based, on the capacity of each ARDOR to generate funds from non-state sources. Senator Jacko said current funding for the ARDOR's is inadequate to ensure the fundamental level of operations. Raising matching funds is especially difficult for rural ARDOR's where the private sector is seriously underdeveloped. Senator Jacko directed attention to a proposed committee substitute which will add two additional points to the legislation. One will exempt board members from liability, which would prohibit them being sued by people unless there are acts of gross negligence. The second point will exempt the ARDOR's from the Procurement Code. Number 070 CHRIS GATES, Director, Division of Economic Development, Department of Commerce & Economic Development, said the funding is a major problem for the ARDOR's. The process of getting match monies for state and federal grants that are available is so difficult that there is very little extra time in which to actually perform economic development activities. Mr. Gates said this is a very effective program at the local level with over 200 local leaders involved. The boards of directors control what the ARDOR's are focusing on and what they don't focus on, and they are the ones to decide what works. Concluding, Mr. Gates referred to a list of the achievements of the different ARDOR's, and he said it can be pointed to as one of the most, if not the most, effective economic development tools in the State of Alaska. Number 125 SENATOR LEMAN said he was aware of the successes of the Anchorage ADOR, and he asked Mr. Gates if he could summarize some of the successes of some of the other ARDOR's. Mr. Gates spoke to the accomplishments of the Kenai ARDOR and the Glennallen ARDOR. Number 206 SENATOR HALFORD moved that CSSB 142(CRA) be adopted as a working document. Hearing no objection, the motion carried. SENATOR HALFORD observed that the legislation increasing an authorization that is dependent upon the appropriation level, and that is a decision that will be made by the Finance Committee. CHRIS GATES informed the committee that the regulations the division is planning to implement are going to be on a sliding scale match with the ARDOR's in the rural areas having less of a requirement for match than those ARDOR's in the railbelt area that have more access to match monies. There would be a three to one match in the rural areas; a two to one match in unorganized boroughs; and a one to one match on the second $50,000 to the railbelt ARDOR's. Number 244 SENATOR TAYLOR noted that Section 1 relates to tort damages, and he asked if anyone has ever brought suit against any of the people listed in that section. CHRIS GATES said it relates to volunteers on boards of directors and volunteer business owners, but he not aware of an ARDOR ever being sued. Number 260 SENATOR RANDY PHILLIPS announced that the committee would begin taking testimony over the teleconference network. Number 265 DEE THOMAS, Anchorage Economic Development Council, testifying from Anchorage, said they have encountered some difficulties in trying to implement an economic development project because of the state purchasing regulations. They support amending the statute so that they can allow ARDOR's to contract directly with state agencies so that they don't incur delays and can move forward with the projects. Number 290 JOE CROSSON, Anchorage Economic Development Council, testifying from Anchorage, stated their support for the legislation. Addressing the liability issue, he said they get very involved with corporations, sometimes to the extent that they will enter into a development agreement and contracts. Many times those contracts and development agreements can be very involved, and with the limited liability, it will enhance their ability to go forward with large projects in dealing with large corporations and other agencies. Number 315 CARL BERGER, Director of the Lower Kuskokwim Economic Development Council, which is based in Bethel, testified from Anchorage. The Council provides services to Bethel and 24 villages on the Lower Kuskokwim and Bering Sea coast. Mr. Berger stated he was testifying in support of SB 141. One of the issues that they've had to deal with recently is the problem of funding for their program. In the past year or so, since their ARDOR was formed, they've had to use other funds from other programs in order to support some of the services they've provided through the ARDOR program. They received $47,460 from the legislature this year, but it is not adequate to provide for one person's work, some travel, and things that need to be accomplished for their successful delivery of services. Number 338 MARIDETH SANDLER, Executive Director of the Southwest Alaska Municipal Conference, testified from Anchorage in support of the proposed committee substitute. Each of the ARDOR's, including the Southwest Conference, is a nonprofit. She said $47,000 does not go real far in terms of trying to cover salaries, rents and secretarial support. She said most of the directors have to spend a fair amount of time fund raising, and it gets immensely frustrating when they have to spend so much time fund raising rather than doing programs, which is why they are there in the first place. Number 400 DAVID BAKER, Corporate Secretary and a director for the Arctic Development Council, testifying from Anchorage, stated their support for passage of the legislation. The primary reason they are in favor of it is because the smaller ARDOR's, which they feel are very effective, are having a very difficult time operating on the limited budgets they have. Number 435 SENATOR TAYLOR commented that he thought the money was to go into the project itself, not to go to support people who are promoting the project. CHRIS GATES clarified that they are proposing that the cap be raised from $50,000 to $100,000, and the use of those funds would stay in the same allowed uses that currently exist. The rural ARDOR's would get the first $50,0000 as a grant and then they would need only $16,000 to get the $50,000 from the state under a match plan. He added that the specific projects are put forward in a work program defined by the board of directors of the ARDOR, and that work program is hustled and worked on by the executive director and the staff. The grant money from the state helps pay the expenses of that staff and the office to accomplish their work program. Number 520 DONNA TOLLMAN, Copper Valley Economic Development Council, testifying from Glennallen, said they are in an unorganized borough and they have no corporate funding base from which to draw matching funds. She said the call for their services has been tremendous in loan packaging, assisting small businesses putting together their business plans, conducting workshops, etc. Their ARDOR has become very active in helping people through stumbling blocks to opening businesses. Number 547 There being no other witnesses wishing to testify on SB 141, SENATOR RANDY PHILLIPS asked for the pleasure of the committee. SENATOR HALFORD noted that the legislation increases the cap without appropriating any money. He suggested the bill should move to the Finance Committee so that they can work out the funding portion. SENATOR TAYLOR moved that CSSB 141 (CRA) be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. There being no further business to come before the committee, the meeting was adjourned at 9:50 a.m.