SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE April 14, 1997 1:37 p.m. MEMBERS PRESENT Senator Jerry Mackie, Chairman Senator Gary Wilken, Vice Chairman Senator Dave Donley Senator Randy Phillips Senator Lyman Hoffman MEMBERS ABSENT All members present COMMITTEE CALENDAR SENATE BILL NO. 98 "An Act relating to the conveyance of certain isolated tracts of state land to boroughs and unified municipalities; and providing for an effective date." - MOVED CSSB 98(CRA) OUT OF COMMITTEE SENATE BILL NO. 161 "An Act relating to management of certain municipal assets by the Alaska Permanent Fund Corporation." - MOVED CSSB 161(CRA) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 98 - See Community & Regional Affairs minutes dated 3/19/97, 4/9/97. SB 161 - No previous action to record. WITNESS REGISTER Senator Bert Sharp State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Prime Sponsor of SB 161 Mayor James Hayes City of Fairbanks 800 Cushman St. Fairbanks, AK 99701 POSITION STATEMENT: Testified in support of SB 161 Harry Porter 3206 Riverview Drive Fairbanks, AK 99709 POSITION STATEMENT: Present to respond to questions on SB 161 Jim Kelly, Research & Liaison Officer Alaska Permanent Fund Corporation P.O. Box 25500 Juneau, AK 99802-5500 POSITION STATEMENT: Neutral on SB 161 Kevin Ritchie, Executive Director Alaska Municipal League 217 2nd St. Juneau, AK 99801 POSITION STATEMENT: No position on SB 161 Ms. Annette Kreitzer, Staff to Senator Loren Leman State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Reviewed CSSB 98(CRA) Ms. Jane Angvik, Director Division of Land Department of Natural Resources 3601 C St., Suite 1122 Anchorage, AK 99503-5947 POSITION STATEMENT: Testified in support of CSSB 98(CRA) Gary Gustafson, Director Heritage Land Bank Municipality of Anchorage P.O. Box 196650 Anchorage, AK 99519 POSITION STATEMENT: Testified in support of CSSB 98(CRA) with one exception Paul Costello, Director of Land Management Fairbanks North Star Borough P.O. Box 71267 Fairbanks, AK 99707 POSITION STATEMENT: Suggested changes to CSSB 98(CRA) Rick Elliott, Municipal Lands Trustee Section Supervisor Division of Municipal & Regional Assistance Department of Community & Regional Affairs 333 W. 4th Ave, Suite 220 Anchorage, AK 998501-2341 POSITION STATEMENT: Present to respond to questions on CSSB 98(CRA) ACTION NARRATIVE TAPE 97-16 , SIDE A Number 001 CHAIRMAN MACKIE called the Senate Community & Regional Affairs Committee meeting to order at 1:37 p.m., and noted all committee members were present. Number 020 SB 161 PERM. FUND CORP TO MANAGE MUNI ASSETS  CHAIRMAN MACKIE brought SB 161 before the committee as the first order of business and noted there was a draft committee substitute for its consideration. SENATOR BERT SHARP , prime sponsor of SB 161, explained the legislation authorizes the Alaska Permanent Fund Corporation to manage the assets of a municipal savings or investment account. He noted the parameter of a management agreement starts on page 1, line 9 through the remainder of the bill. These parameters were set by the corporation as conditions they could accommodate without compromising their mission. The legislation offers municipalities the option of investment management services within Alaska and one in which the average citizen has confidence. Senator Sharp noted that the bill carries a break-even fiscal note because the management costs are totally reimbursable to the Alaska Permanent Fund Corporation by the municipalities based on the billings rendered by the corporation and the agreements as set out by the parameters of the bill. He said the original bill put the payments into the general fund, however, the proposed committee substitute puts the payments into the earnings reserve account. Senator Sharp related that the legislation was introduced at the request of the City of Fairbanks, however, it would give any municipality the option of engaging the Alaska Permanent Fund Corporation to manage its assets. Number 075 SENATOR WILKEN moved the adoption of CSSB 161(CRA). Hearing no objection, it was so ordered. Number 095 SENATOR HOFFMAN referred to page 1, line 14, and asked how the asset value of $50 million was established. SENATOR SHARP replied that all of the terms that are in the bill were put in at the suggestion of the Alaska Permanent Fund Corporation. Number 106 CHAIRMAN MACKIE stated the committee would take testimony via the teleconference network. JIM HAYES , Mayor of the City of Fairbanks, said the ownership of the utilities by the city was an issue that had been around for some 20 years. The Fairbanks City Council decided the city should get out of the utility business and that a permanent fund should be established with the proceeds of the sale. In October 1996, the voters approved the sale of the utilities as well as a change to the city's charter to establish a permanent fund. Approval of the sale of the utilities by the Alaska Public Utilities Commission is expected sometime this summer. Once the sale has been approved and the funds have been transferred, the City of Fairbanks would like to be able to deposit those funds into the permanent fund by the end of this year. Number 175 SENATOR PHILLIPS asked who the city utilities are being sold to. MAYOR HAYES related that PTI is purchasing the telephone utility; a group of Fairbanks investors have formed a corporation to purchase the water and sewer utility; and the electric utility is being purchased by Golden Valley. HARRY PORTER of Fairbanks advised that he and Cindy Shelling were members of the City of Fairbanks' permanent fund committee and were available to respond to questions from the committee. Number 210 JIM KELLY , Research & Liaison Officer for the Alaska Permanent Fund Corporation, testifying in Juneau, stated the corporation has not taken a position on the legislation, but he pointed out that they have provided a fiscal note showing that it will cost money. Number 245 SENATOR WILKEN informed the committee that he has a conflict in that he is one of the 10 investors in Fairbanks Sewer & Water. He then moved to be excused from voting on SB 161. SENATOR DONLEY objected. CHAIRMAN MACKIE stated he didn't think there was a conflict in that this is money that the city has and wants to invest in the permanent fund. It doesn't have anything to do with the sale of the utility. Number 250 SENATOR WILKEN asked how the City of Fairbanks will be able to access this money once it is deposited with the permanent fund. MAYOR HAYES said it is his understanding that it will not be a problem for the city to receive a certain amount every year that it may need for its operations. Number 295 SENATOR HOFFMAN asked if the state would have any liability for the investment of a municipality's funds. MR. KELLY replied that he didn't know if there was any liability there, but if they don't make income, they are not paying out any income. It is the trustees main function is to keep the money safe and to then produce income with it. There is no guarantee that the fund is going to produce income. However, he noted the corporation has a record where they have earned 11.6 percent over the last 13 years. He added that he would ask the corporation's attorney if there is any liability and what protection the state would have. Number 330 KEVIN RITCHIE , Executive Director, Alaska Municipal League, stated the League sees this as a one municipality issue, and that they do not have a position on the legislation. Number 334 SENATOR DONLEY moved CSSB 161(CRA) and the accompanying fiscal note be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. SB 98 CONVEY LAND TO MUNICIPALITIES/BOROUGHS  CHAIRMAN MACKIE brought SB 98 before the committee and directed attention to a new proposed C&RA committee substitute, which would replace the version adopted by the committee at the previous hearing on the legislation. ANNETTE KREITZER , staff to Senator Loren Leman, reviewed the changes made in the committee substitute. She said at a previous hearing on the legislation DNR expressed concern about the definition of "isolated tracts of land" so the committee substitute goes back to the "vacant, unappropriated, unreserved land" definition. On page 2, line Senator Wilken was concerned about the phrase "in proximity to" and the phrase has been changed to the word "near." There was concern by Senator Wilken and others about value of the tract to the state, which is initially taken care of on page 1, line 13, as well as in a new subsection (d) on page 2. The final change on page 2, line 6 was to address a concern of the Department of Transportation & Public Facilities that the conveyance does not adversely affect present or future interests of the state. Number 367 SENATOR DONLEY moved the adoption of CSSB 98(CRA), version "F". Hearing no objection, it was so ordered. Number 370 SENATOR PHILLIPS asked if the Municipality of Anchorage was in support of the changes made in the committee substitute. MS. KREITZER replied that municipalities are not happy with the language in the new subsection (d) which speaks to paying an amount that is fair, proper, and in the best interests of the public. Number 378 JANE ANGVIK , Director, Division of Lands, Department of Natural Resources, testifying from Anchorage, stated her division has looked over the proposed committee substitute, and they support it, although they do have some concern with the language on page 2, in subsection (d) which reads "the commissioner may require the municipality to pay an amount that is fair..." Number 390 GARY GUSTAFSON , Director, Heritage Land Bank, Municipality of Anchorage, stated the municipality is supportive of all but one of the changes in the committee substitute. There is concern with the new subsection (d) on page 2 because it would establish a new precedence for municipal entitlement transfers that up to this point has never occurred. He said he thinks the bill is targeting areas in the state where municipalities could be the better land manager, and it would be more cost effective for municipalities to manage lands in the state. Number 418 SENATOR WILKEN directed attention to subsection (d) on page 2, line 12, and commented that he thinks the word "may" should be replaced with "shall." He then asked Mr. Gustafson why the state shouldn't be reimbursed for the value of that land that is owned by the people. MR. GUSTAFSON responded the bill will amend AS 29.65, which is the Municipal Entitlement Act. Also, there are a lot of isolated tracts of state land in Alaska, some of which are going to be useful over time for municipalities. This bill allows municipalities, if they have a use for that state land, to step forward and make an application for it. The commissioner can then make a determination of whether it is in the best interests of the public, and if it isn't, then the state shouldn't convey it to the municipality, he said. Number 472 PAUL COSTELLO , Director of Land Management, Fairbanks North Star Borough, read into the record a prepared statement in support of the concept of conveying isolated tracts of state lands to municipalities, which will allow them to more economically develop borough lands, and in the process make former state land available for the public where it would otherwise not be available. However, the borough has two areas of concern about the legislation. The first is with the limiting of the selection of land to vacant, unappropriated, unreserved land, which effectively eliminates the borough from consideration under this legislation. There is very little state land within the borough's boundaries that is not already classified for one purpose of another. It is suggested that the legislation include by definition, within the VCC classification, lands which are classified for forestry or other resource development purposes. This would add to the borough land more developable tracts and would therefore compliment any proposed development. The borough's second concern is with the new subsection (d) and it encourages its deletion because paying fair market value and the survey costs for isolated tracts will, in most cases, make the participation of the borough in any land development uneconomical, and it effectively locks state land from any development in the near future. Number 495 CHAIRMAN MACKIE noted that RICK ELLIOTT of the Division of Regiona & Municipal Assistance, Department of Community & Regional Affairs, was present in Anchorage to respond to questions on SB 98. Number 500 There being no further testimony on CSSB 98(CRA), CHAIRMAN MACKIE asked for the pleasure of the committee. SENATOR WILKEN moved the following amendment to CSSB 98(CRA): Amendment No. 1 Page 2, line 12: Delete the word "may" and insert "shall" SENATOR DONLEY objected to adoption of the amendment. The roll was taken with the following result: Senators Phillips, Hoffman, Wilken and Mackie voted "Yea" and Senator Donley voted "Nay." The Chairman stated the amendment was adopted. SENATOR WILKEN moved CSSB 98(CRA), as amended, 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 adjourned at 2:12 p.m.