MINUTES SENATE FINANCE COMMITTEE 11 May, 1998 8:40 a.m. TAPES SFC 98 # 168, Side A (000-) CALL TO ORDER Senator Bert Sharp, Co-Chair, convened the meeting at approximately 8:40 a.m. PRESENT In addition to Co-Chair Sharp, Senators Pearce, Torgerson, Adams and Phillips were present when the meeting was convened. Senator Donley arrived later. Also Attending: RANDY SIMMONS, Executive Director Alaska Industrial Development and Export Authority, Department of Commerce and Economic Development; KEITH LAUFER, AIDEA, DCED; MIKE GREANY, Director, Division of Legislative Finance and aides to committee members and other members of the Legislature. SUMMARY INFORMATION SENATE CS FOR CS FOR HOUSE BILL NO. 386(TRA) "An Act relating to the financing authority, programs, operations, and projects of the Alaska Industrial Development and Export Authority; and providing for an effective date." Senator Pearce moved that the committee adopt Version "X" as a Workdraft. There was no objection and Co-Chair Sharp so ordered. TOM WILLIAMS, staff to Co-Chair Sharp, outlined the changes proposed in the latest version. Senator Pearce asked about changes in Section 3 on page two, affecting AIDEA and the year 2000 deadline. RANDY SIMMONS, Executive Director of AIDEA, came to the table to respond. Senator Pearce moved to amend the "X" version to change the date to 2003on lines 15 and 17. Senator Donley objected. Co-Chair Sharp named the motion Amendment #1 and called for a vote. The amendment was adopted by a vote of 4-2-1. Senators Phillips and Donley cast nay votes and Senator Parnell was absent. Senator Pearce then noted that the CS did not include the Matanuska Port or the Whittier Port. Could AIDEA get to that, she asked. Mr. Simmons replied that they had authorization to spend $50 million on Cook Inlet projects and further described the projects. Senator Pearce pointed out that Cook Inlet did not have a deepwater port and needed one. Mr. Simmons agreed and suggested that the Whittier project could be a good project. Co-Chair Sharp entered the discussion and asked if a proposal was presented to them, which they found viable, would AIDEA have the authority to begin the project in the next year. Mr. Simmons told him that under the provisions of this bill, they could spend up to $10 million. Senator Torgerson inquired about the anchor tender in Nome. Mr. Simmons explained that the Army Corps of Engineers was working on the project. Senator Torgerson referred to Section 23 and asked if the funds listed were simply a transfer of assets. KEITH LAUFER, also representing AIDEA, explained that it was a merge process - a technical cleanup of the Alaska Industrial Export Authority. Senator Donley asked if Section 20 set out the kind of activities that AIDEA could participate. Mr. Laufer affirmed. Senator Donley then went on to point out language on page four, line 12, item C and said he thought it was used to justify the leasing of commercial office space. Mr. Laufer affirmed and when Senator Phillips asked how much commercial leasing AIDEA was involved in, Mr. Laufer said he didn't have exact figures, but that it wasn't much. Senator Donley argued that he didn't think commercial leasing was the type of business AIDEA should be involved in. He felt the organization should use its funds for housing ventures. He offered a motion to amend page 10 line 14. After "activities" he proposed inserting, "other than financing or refinancing." Senator Adams objected to the amendment and spoke to his objection. Senator Torgerson also objected, saying that he didn't think the Legislature should hamper AIDEA's role with economic development. Senator Donley countered that it would be allowed if it fell into other categories. Co-Chair Sharp asked if Senator Donley's concerns were directed at the State's purchase of the Bank of America Building, which Senator Donley responded, was part of his argument. Senator Phillips wanted to know what impact this amendment would have on the BOA Building. Mr. Simmons replied that they were unsure of the effects and he explained the reasons for the leasing programs. He told the committee that office space comprised of 14 percent of the total portfolio. Senator Donley suggested the commercial operations could refinance through private organizations rather than through this program. Mr. Simmons responded that AIDEA was working in partnership with banks on the commercial leasing holdings. Senator Pearce wanted to know if the banks or the business came to AIDEA with proposals for the projects. Mr. Simmons told him it was the banks. Senator Donley continued to speak for his motion, restating that he didn't think the State should be in the business of office buildings. Senator Phillips suggested deleting all of line four. Co- Chair Sharp pointed out that would eliminate all commercial ventures, to which, Senator Donley states was his goal. Co-Chair Sharp called for a vote on the amendment. It failed by a vote of 1-5-1. Senator Donley cast the yea vote and Senator Parnell was absent. Senator Donley expressed a desire to go through the list of projects. Mr. Simmons did so, starting with the port project for the Red Dog mine, which was allocated $80 million. He explained that AIDEA had a substantial interest in the mine. He described the dredging project. He told the committee that its feasibility still needed to be studied and he handed out pictures of the location. Senator Donley noted that $150 million in funding was still outstanding for this project and questioned why there was this request for another $80 million. Mr. Simmons' answer was to explain the use of revenue. Senator Donley was dismayed at the cash given to the Red Dog project with no intention of receiving in return. Mr. Laufer corrected him and told him of the agreement to re-coup the State's investment. He stressed that the Red Dog was a good partner and told of the $17 million per year the mine was paying the state. Senator Adams asked if Mr. Simmons would judge the Red Dog Mine to be the largest AIDEA project in the state. Mr. Simmons said it was and detailed his reasons for saying so. Last year there was a spike in the zinc prices. Senator Torgerson asked about the amount classified as the State's share of earnings and how it was used to pay off the Red Dog's debt. Mr. Simmons detailed the accounting. Senator Donley moved the discussion along and inquired about the Nome Port project. Mr. Simmons explained the timing issue and how the State could begin construction in one year, which would be earlier than the Corps could begin. Senator Donley then wanted to know about the last two projects, C and D. Mr. Simmons spoke briefly about project D, the Hatcher Pass ski resort. Co-Chair Sharp had knowledge about project C and addressed it. He explained if was an on-going project from the Hickel Administration and dealt with the Alaska Railroad right a way north of Healy. He said the project would allow double the amount of people to enter Denali National Park. The Department of Natural Resources was holding up part of the project according to Co-Chair Sharp and US Senator Murkowski was working in Washington DC to further the project. In Co-Chair Sharp's opinion, this was a clean project and would not allow for unlimited access. Senator Torgerson offered a motion to move SCS CS HB 386 (FIN) from committee with accompanying fiscal notes. There was no objection and Co-Chair Sharp so ordered. The committee took a brief recess, reconvened, and then recessed again to the call of the chair. ADJOURNMENT Co-Chair Sharp recessed the meeting to the call of the chair at approximately 9:20 a.m. SFC-98 (4) 5/11/98 am