MINUTES SENATE FINANCE COMMITTEE February 18, 1997 9:04 A.M. TAPES SFC-97, # 39, Side 1 (000-590), Side 2 (590-315) CALL TO ORDER Senator Bert Sharp, Co-chair, convened the meeting at approximately 9:04 A.M. PRESENT In addition to Co-chair Sharp, Co-chair Pearce, Senators Donley, Torgerson, Phillips and Adams were present when the meeting was convened. Senator Parnell arrived as the meeting was in progress. Also Attending: GERON BRUCE, Legislative Liaison, Department of Fish and Game; KAREN BRAND, Aide to Senator Donley; SENATOR ROBIN TAYLOR, Sponsor of SB 82; DUGAN PETTY, Director, Division of General Services, Department of Administration; and aides to committee members. SUMMARY INFORMATION SB 7 HUNTING SPORT FISH TRAPPING FEES/LICENSES Senator Donley, sponsor, testified on behalf of the bill. Geron Bruce addressed the department's concerns with certain provisions of SB 7 and answered questions of the committee members. Karen Brand addressed questions. Senator Donley MOVED for ADOPTION of a draft CS. Senator Adams objected for the purpose of questions. Without further objection, CSSB 7 (FIN) was ADOPTED. Senator Donley MOVED for adoption of Amendment #1. By unanimous vote, Amendment #1 was ADOPTED. CSSB 7 (FIN) was HELD in committee. SB 82 LEGIS. APPROVAL FOR STATE PROP. DISPOSALS Senator Taylor, sponsor, testified on behalf of the bill. Dugan Petty spoke of the department's concerns with portions of the bill and answered questions posed by members. Senator Donley MOVED Amendment #1. There being no objection, Amendment #1 was ADOPTED. Senator Donley MOVED Amendment #2. There being no objection, Amendment #2 was ADOPTED. Senator Torgerson MOVED Amendment #3. There being no objection, Amendment #3 was ADOPTED. Senator Adams MOVED Amendment #4. There being no objection, Amendment #4 was ADOPTED. Co-chair Pearce MOVED for passage of CSSB 82 (FIN) with individual recommendations. Without objection, CSSB 82 (FIN) was REPORTED OUT of committee with individual recommendations and a zero fiscal note from the Department of Administration. SENATE BILL NO. 7 "An Act reducing certain resident sport fishing, hunting, and trapping license fees, increasing certain nonresident sport fishing license and tag fees, and relating to nonresident sport fishing, hunting, and trapping licenses; and providing for an effective date." Senator Donley, sponsor of SB 7, testified that the legislation began as a response to a problem of non- residents traveling to the state, staying for the summer season, buying a sport fish license and using it for essentially commercial purposes by catching all the sport fish they can, canning, exporting and selling them. It is perceived as a significant problem by the Fish and Wildlife Protection agency, although it is not widespread. Current non-resident fees are low and it is appropriate to raise them. The last couple years the Department of Fish and Game opposed raising non-resident fees because they were in litigation over commercial fees, but they were deemed appropriate and the state prevailed. Those fees are set at three to four times what residents pay. Senator Donley disagreed with the state's position because constitutionally non-resident fees for non-commercial purposes are very different than commercial fees. Commercial fees fall under the U. S. Constitution's commerce clause that limits the differential between resident and non-resident commercial fees as being no more than four- or five-to-one. For sport fish, or non-commercial, a ratio of ten-to-one is not unheard of because the commerce clause is not applicable. Accordingly, with the court case behind, it seemed a good time to boost fees. Senator Donley continued to describe the bill. In addition to raising fees, it also revokes the one year non-resident license for sport fish. The longest period a non-resident could buy a license for would be fourteen days. The intent was that people who came up and fished all summer would have to buy a series of fourteen-day licenses to be legal and it would serve as a red flag to the Fish and Wildlife agency to indicate possible abuse. It still allows flexibility for people to buy licenses when they need them. A one day, $10 license with an additional $10 for king salmon is still available and remains unchanged. The bill addresses primarily the longer duration license fees. He noted that CSSB 7(RES) reduces the resident fees for hunting, fishing and trapping combination licenses by $5. The state pays $1 to vendors for every license issued. When combination licenses are purchased, the state saves that money, but there is no discount to the consumer, so it seemed appropriate to give a discount since the state saves money. Senator Donley testified that he had been working with the department. They were unsupportive of the legislation generally, but were supportive of certain aspects. He proposed a draft CS to satisfy some concerns of the department by lowering the reduction on the resident discount $2 instead of $5. It serves as an incentive to reduce paperwork by having fewer licenses. Additionally, the department believed that $60 for the fourteen day license was high, so the CS changes it to $50. The seven day license is a new provision supported by the department and is reduced from $40 to $30. The three day license is repealed at the department's request. The new scheme is: 1 day license - no change - $10 3 day license - repealed 7 day license - added, replaces 3 day license - $30 14 day license - added - $50 Senator Donley indicated that the department would also still like to see an annual license but he disagreed, noting it was an important element to the legislation to not allow annual licenses to non-residents. GERON BRUCE, Legislative Liaison, Department of Fish and Game; testified next. He thanked Senator Donley for working with the department in areas of common ground. The concerns of the department dealt primarily with the elimination of the annual non-resident sport fish license, except for the case of someone engaged in the guiding industry. He spoke of the fourteen day license and the need for multiple license purchases for someone taking an extended trip in the back country. The Board of Fisheries is looking at addressing the issue of excessive harvest of king salmon and other trophy species by non-residents by establishing seasonal bag limits. There was a concern that someone with a fourteen day license that was staying longer and renewing the license several times would believe that they had a new bag limit as well, which would lead to increased violations. Another concern was with new residents arriving in the spring having to purchase a series of fourteen day licenses throughout the fishing season because they would not be qualified to get a resident license for a year. Mr. Bruce voiced an additional concern with the provision for the non- resident annual license for someone engaged in the guiding industry, that being the ratio of the fee between non- resident and resident fee. Mr. Bruce referred to House legislation which would establish a guiding licensing system for sport fish guides and charter operators. He said it was receiving support from the industry, the general public and the department. That bill contains a provision that a sport fish guide must have a resident sport fish license in addition to the guiding license. Under the provision in SB 7, the non- resident would be required to pay $200, while a resident would only pay $15, a significant difference. Because it is also a cost of doing business, there is concern that it may be challenged as a violation of the commerce clause. As a final point, he clarified the Carlson case which was referenced earlier by Senator Donley. There were two parts to the case. One part which the plaintiffs had appealed to the U. S. Supreme Court was denied a hearing. The other issue deals with the privileges and immunities of the commerce clause and is still being resolved in state Superior Court. The state is fighting hard to maintain a three-to-one ratio and the ratio in SB 7 is significantly greater. Mr. Bruce concluded his testimony by making himself available for questions. Senator Phillips asked if foreigners were taking advantage of the situation more than out-of-state American citizens. Mr. Bruce did not have the information to confirm factually. He noted one of the reasons for the guide licensing bill and SB 7 was to try to get information about what is happening with non-resident take and the guiding industry in general, which is expanding rapidly, as is the percentage of non- resident harvest of recreational fishing resources. He had heard commonly known rumors about Germans in the Southcentral region and Bristol Bay, but couldn't say whether there was more abuse there than with people taking fish to flea markets in Arizona because he did not have the information. Senator Phillips inquired if the mechanism existed to find out. Mr. Bruce said the information would be available if there were prosecutions, and the guide licensing bill will provide information regarding who's taking what in the guided fisheries. The presence of Senator Parnell was noted. Senator Donley MOVED for adoption of a proposed CS draft. Senator Adams objected for the purpose of questions. He asked if the amendments in the proposed CS were offered in the Resources Committee. Senator Donley said they had discussed the numbers and the Resources Committee encouraged him to continue to work with the department. The proposal was not exactly what the department wanted but it was toward that direction. Senator Adams inquired why the three day license was being eliminated. Senator Donley said it was the suggestion of the department. Mr. Bruce interjected that their belief was that the one day license was specifically established for people on cruise ships who wanted to fish for one day. The Sport Fish Division believed there was very little demand for the three day license and the seven day license would cover that. Senator Adams next inquired about the repealer in Section 9 of the CSSB 7 (RES). The proposed CS does not repeal the same statute and he wanted to know the difference. KAREN BRAND, Legislative Aide to Senator Donley, testified that AS 16.05.340 (a)(8), which is repealed in CSSB 7 (RES), but not in the proposed CS, is the annual non-resident license. Co-chair Sharp asked if there were continued objections to adopting the proposed CS. Hearing none, CSSB 7(FIN) was ADOPTED. Senator Torgerson said the CS raised the rate to $38 because it reflects the savings, but a $1 fee is still being paid out. He suggested raising the fee to $39. Senator Donley agreed that the $2 difference would be for the combination of three licenses, for dual licenses it would only be $1. At $38, there would still be a loss of $1 per license. Senator Torgerson noted it was not breaking even. Senator Donley said he'd be happy to go with $39. Senator Torgerson next commented that he didn't understand how SB 7 helps enforcement officers trace non-residents who harvest, process, etc. Senator Donley said it could set off a red flag if someone stayed the entire season. Senator Torgerson doubted that enforcement officers would track this, pointing out a zero fiscal note. Senator Donley stated his hope that they would. From discussions with some of the wildlife protection officers, it was his impression that they took the problem more seriously than those in the Sport Fish Division. Senator Torgerson referred to Section 3 with a $5 license for people who had received assistance for the preceding six months. Although noting it is an existing statute, he questioned why back up for the preceding six months when the fishing season starts in mid-May, which would take it back to the winter when there's a higher volume of people on assistance programs. They should be able to pay during the summer when they come off the assistance. Senator Donley said the amount was only 75 cents a few years ago, and even raising it to $5 was a reasonable amount. He did not know the reason behind the six-month provision because it was carried forward from the old law. Senator Torgerson asked Mr. Bruce if an annual license was put back in, what fee would be considered in relation to the adopted CS. Mr. Bruce replied that they would look at a fee of 2.5 times the fourteen day license. Senator Donley MOVED Amendment #1: p. 2, line 14: delete 200, insert 150. He said it was closer to what the department deemed appropriate for an annual license. It is a ten-to-one variance from the existing resident license. He noted there have been U. S. Supreme Court cases authorizing a ten-to-one difference between resident and non-resident sport licenses. Senator Phillips suggested adding to the amendment: p. 1, lines 7 and 9: delete 38, insert 39. Senator Donley concurred and requested that be included in Amendment #1. Co-chair Sharp called for discussion on Amendment #1. There being none, he called for a show of hands on the motion. By unanimous vote, Amendment Senator Adams asked for clarification of the wording in Section 5, "a current license to carry passengers for hire" and whether it related only to Alaska six-pack licenses or those given all over by the Coast Guard. Senator Donley responded that his intent for people who already had commercial licenses in Alaska was to allow them to purchase an annual license because it was key to getting their commercial license. He was trying to deal only with Alaska, it did not occur that anyone from outside would do it. He thought it was a good point. Senator Adams suggested some research needed to be done on the six-pack license. Senator Donley thought it would be appropriate to narrow it down to "in Alaska" after the word "hire." Co-chair Sharp suggested the issue be researched and addressed later because the bill would be held in committee awaiting a new fiscal note. Senator Donley pointed out the existing fiscal note with a positive revenue of about $6 million, which may be less with the changes in CSSB 7(FIN). Co-chair Sharp called for additional questions or comments. There being none, he announced CSSB 7(FIN) would be HELD in committee and requested an updated fiscal note. SB 82 was next on the agenda and Co-chair Sharp called on the sponsor, Senator Taylor, to address the committee. SENATE BILL NO. 82 "An Act relating to the sale or other disposal of certain state property; and providing for an effective date." SENATOR ROBIN TAYLOR, Sponsor, testified that SB 82 would prohibit the sale of any individually state-owned facility or piece of equipment valued at $1 million or more without the approval of the legislature. It was introduced in response to conflicting signals received from the Department of Transportation and Public Facilities over the future of the M/V Malaspina. He noted there was a complex procurement code and SB 82 takes care of the other side of the equation by allowing control over sales of assets. At recent task force hearings on the ferry system, he was informed that the administration could decide at any time to sell any piece of equipment they owned. He recalled that Governor Egan sold the Wickersham without legislative consent, the Chilkat was also sold without approval. Senator Taylor believed it was time that the policymaking body of the state had an opportunity to review significant sales. Senator Adams stated a need to define the word "value". He "would like to sell the Alaska Railroad, then the next thing is the 4-Dam Pool which we put $483 million into, and there are some that want to buy it for $84 million. A clear definition of "value" needs to be in the bill." He also referred to "state agency" on page 2, inquiring what agencies it included. Senator Taylor responded that inserting "current market" before "value" would establish the value. Regarding the 4-Dam Pool, he thought the assets were held under Alaska Industrial Development and Export Authority (AIDEA), but was uncertain whether SB 82 would reach to that, although he felt it should. Senator Phillips suggested "appraised" value would make him feel more comfortable. Senator Taylor replied that it was the same in that one must utilize some form of appraisal to establish a current market value. Co-chair Sharp inquired if the Alaska Energy Authority was still the same entity. Senator Taylor informed him that it was merged into the Department of Community and Regional Affairs, but the assets were held by AIDEA. Co-chair Sharp noted that AIDEA was not included in SB 82. He asked if they actually owned anything or just held the bonds as the financing agent. Senator Taylor stated his belief that AIDEA was an agency of the executive branch and would be covered by the wording. Senator Parnell referred to page 1, line 7, asking if "state facility" meant state owned, and if Alaska Housing Finance Corporation owned a building valued at $1.5 million whether it would be subject to the language. Senator Taylor confirmed that it would. Senator Donley MOVED Amendment #1: page 1, line 9: insert "current market" before "value". There being no discussion or objection, Amendment #1 was ADOPTED. Senator Donley MOVED Amendment #2: page 2, line 7: insert "Alaska Industrial Development and Export Authority". There being no discussion or objection, Amendment #2 was ADOPTED. Senator Torgerson asked for clarification regarding page 1, line 7 and asked if it was broad enough to include corporations or other entities. Senator Taylor confirmed. Senator Torgerson proposed Amendment #3, suggested by the sponsor. DUGAN PETTY, Director, Division of General Services, Department of Administration; addressed the committee. He noted there was a zero fiscal note from the department and didn't anticipate significant impact. There had been no disposals in the last five years that would have met the $1 million threshold. He raised concerns with SB 82, one of which was a broad interpretation of "disposal of state facility" as it relates to lease disposals, where the state is releasing an interest in a building, such as the Kotzebue hangar, that exceeds $1 million. Another concern was with property disposals with an existing facility. He referred to the disposal of the Mountainview armory and pointed out there could be broader implications with the definition of "facility" including disposals of buildings on real property. He suggested the language be narrowed in terms of definition of real property. Mr. Petty outlined another concern with whether "otherwise dispose of" on page 1, line 14, includes any form of transferring property, including lease, exchange or installment sale, whether or not the state receives compensation for the property. He referred again to the Kotzebue armory, noting it was not the intent of the Department of Military and Veterans Affairs to transfer title to the property, but simply to lease it. He thought an interpretation could require legislative approval on those types of lease transactions. Senator Torgerson asked if Amendment #3 addressed the last concern. Mr. Petty confirmed it did. Senator Torgerson MOVED Amendment #3: page 1, line 14 and page 2, line 1 (copy of Amendment #3 on file). Co-chair Sharp asked Mr. Petty if the wording would solve the problem of state leasing with no implied future option of purchase. Mr. Petty said it would solve the problem of leasing property because there would be no title transfer under the lease agreement. Co-chair Sharp requested Mr. Petty's opinion on the example of AIDEA selling property over $1 million acquired through default. Mr. Petty replied that an AIDEA representative should address that, but his understanding was that some of AIDEA's assets are collateral to investors, so there may be complications when there are interests beyond the state in certain property. End SFC-97 # 39, Side 1 Begin SFC-97 # 39, Side 2 Co-chair Sharp said that when AIDEA floats bond issues, they pledge the assets and it gets the state off the hook. AIDEA is a financing agent and acquires property through default, rather than one to actively purchase property or equipment for use by the state. Co-chair Pearce addressed the issue of AIDEA having to wait for legislative approval to refinance defaulted property to a new corporation. Since the legislature was not involved in the original transaction and she questioned involving itself the second time. If businesses have to wait for the legislative process before they can take over a building that had gone back to AIDEA, it would hamstring opportunities from the ability to move quickly, particularly with airports, such as the Mark Air administration building. Co-chair Sharp shared similar concerns regarding AIDEA. Co-chair Sharp asked if there was further discussion on Amendment #3. There being none, and without objection, Amendment #3 was ADOPTED. Senator Donley suggested that if the committee wanted to exclude AIDEA from the list, they should list it, because it is a public corporation and should be excluded under the definition of "state agency." Co-chair Sharp commented on the international airport facility lease and rebidding system. Senator Donley believed it was important to be as specific as possible regarding the statutory definition of "state agency." Senator Torgerson added that AHFC may be in the same position regarding properties, exemptions and being a public corporation. Co-chair Sharp addressed Senator Taylor about the expressed concerns regarding collateralized loans, mortgages, bonds, timing of sales of repossessed property and asked if he'd be willing to look at those concerns. Senator Taylor responded that a simple solution would be to distinguish how the property was acquired, whether it was purchased or acquired through default. It was not his intent to hamstring the retaking and resale of property by AIDEA. Co-chair Pearce said that would not get to the sale or transfer of leases within the international airport system. Senator Taylor interjected that the amendment doesn't cover leases and that transfer of ownership is transfer of title. He wanted to avoid difficulties associated with lease questions. He suggested AIDEA be kept in the legislation for assets such as the 4-Dam Pool to allow for review of that sale, should it come up. He reiterated the distinction of how the property was acquired and suggested an amendment to indicate assets purchased by the state or an agency to get away from difficulties associated with AIDEA. Co-chair Sharp suggested Senator Taylor draft the suggested language regarding property acquired by lapse of lease and default of financing. Senator Taylor thought it could be easily solved by inserting "purchased" before "facility" on page 1, line 7. Co-chair Pearce asked if that would also catch things purchased with federal funds. Senator Taylor thought it would because those are pass-throughs and require appropriation. Senator Adams MOVED Amendment #4: page 1, line 7: insert "purchased" before "facility." The phrase would read "state purchased facility." Senator Parnell inquired if anything of significant value had been given to the state, such as the railroad. It was determined that, excluding land, nothing had been given and the railroad was considered a purchase. Senator Phillips referred to page 1, line 10, "legislature approves by law" and asked if a sale takes place during the interim, if Budget and Audit would get to approve it, or would it have to wait until January when the legislature convenes. Senator Taylor responded that it would require legislation during session. Senator Phillips said some circumstance may come up in the future that hadn't been thought of that might cause concern. He asked if there had been any past situation that required an emergency sale. Mr. Petty answered that it had not occurred with personal property but he couldn't speak to facilities on real property. Senator Phillips stated he wanted to avoid the battle, as Chair of Legislative Budget and Audit Committee, concerning the 45-day rule on RPL's. When they say no, it means no, but the governor says yes. Co-chair Sharp asked Mr. Petty if Amendment #4 would clarify the potential problems and concerns previously discussed. Mr. Petty stated he still had a concern about disposal of real property that had a state constructed facility on it and how broad "facility" would be interpreted. The term can be so broad as to include buildings, harbors and roads. His presumption was that buildings would be included. Co-chair Sharp asked if he considered the value of the state purchased facility to include land that was not purchased as being sold as part of the package. Mr. Petty said a strict reading could go either way, but if "facility" were clarified as only the building, and without aggregating the land value in, there would still be situations with over $1 million in market value in the building. Co-chair Sharp said he could see where the land would be worth more than the facilities in some instances. Senator Torgerson asked what the impact on local governments would be if the state wanted to transfer to them. Senator Taylor noted page 1, line 7 read "other than another state agency." It assumes the municipality is a subdivision of the state because its authority is created by the state. Co-chair Pearce expressed concern "if we know for sure what we're doing with this" and indicated she would have been happier with "something that said we can't sell the ferry." When trying to think of every possibility and tailor legislation accordingly, something major is usually left out and it "comes back to bite us." She understood and was supportive of Senator Taylor's motive, but asked why he chose not to just say "we can't sell one of the vessels if it's more than a million dollars." Senator Taylor replied that it was "primarily because Mr. Gravel's proposal causes me concern right now, too, and I think that's even a bigger issue that may involve PCE, it may involve all kinds of other players who actually should be at the table when that decision is made." He acknowledged that the legislature had never ventured into establishing parameters around the authority of the executive branch to dispose of state assets, but that a huge amount of time has gone into looking at how they acquire assets through the procurement code and bidding process. He thought there should be something, even if rather crude, that gets the legislature into the arena to address major policy calls. Co-chair Pearce brought up the 4-Dam Pool. She asked if, as part of the bond covenants, Senator Taylor expected it would have to come back to the legislature. Senator Taylor said that someone could purchase it by assuming the bonded obligation and pledging the assets. In fact, the asset of $20 million in insurance reserves happens to be same amount of money that the Gravel purchasers were talking about using as their down payment. He said if he was looking at this from the point of view of somebody coming in to raid the corporation, he would assume that they would take it over and immediately clean out that account. That would take care of the $20 million down payment and they're off and running. Senator Adams added that the power service agreements would have to be looked at because it goes up to 20/30 on the pools and has to have the local communities involved. Senator Taylor commented that one could avoid coming to the legislature by assuming the power sales agreement, so it could occur without legislative oversight. Co-chair Pearce said it was interesting that the same sort of covenants exist on the International Airport's IRF, and legal counsel has advised that turning the airport over to the city of Anchorage couldn't happen without legislative approval. She wanted to know what the difference was. Senator Taylor was uncertain whether there was any bonded indebtedness outstanding on the 4-Dam Pool, he thought they were state grants to begin with, then turned into a state loan because the money came out of general funds. Co-chair Pearce MOVED CSSB 82(FIN) from committee with individual recommendations. Co-chair Sharp expressed concern that the numerous amendments made in the committee shows possible future pitfalls, although he did not object to moving the bill from committee. Senator Phillips shared similar reservations and was interested in hearing from AIDEA. Senator Parnell agreed with Co-chair Pearce and preferred a narrower approach by saying the ferry and the 4- Dam Pool couldn't be sold without legislative approval. Co-chair Sharp asked Co-chair Pearce to remove her motion while the committee acted on Amendment #4. Co-chair Pearce WITHDREW her MOTION. Co-chair Sharp asked if there was objection to Amendment #4. Without objection, Amendment #4 was ADOPTED. Co-chair Pearce renewed her motion to MOVE CSSB 82(FIN) from committee with individual recommendations. Without objection, CSSB 82(FIN) was REPORTED OUT of committee with a zero fiscal note from the Department of Administration. ADJOURNMENT The meeting was adjourned at approximately 10:23 A.M.