Legislature(1995 - 1996)
03/12/1996 01:40 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 466 1 "An Act establishing the Adak Reuse Authority." REPRESENTATIVE CARL MOSES, Sponsor HB 466, testified in support of the legislation. He provided members with a proposed Committee Substitute for HB 466, #9-LS1580\F, 3/11/96 (copy on file). He noted that Terri Lauterbach in a memorandum dated 3/11/96 clarified the relationship of subsections (a) and (b) in AS 30.17.260 (copy on file). TIM BENINTENDI, STAFF, REPRESENTATIVE CARL MOSES provided members with a memorandum dated 3/12/96, summarizing changes made by the proposed committee substitute (Attachment 1). Representative Parnell referred to page 5, lines 18 to 21. He noted that the Administration has the discretion to determine whether sufficient money is available to the Adak Reuse Authority with respect to each proposed transfer. Mr. Benintendi explained that this provision provides oversight and addresses concerns regarding the State's liability. The language expands oversight to the Administration and ties the receiving of federal assets to federal funding to help develop the assets. He did not think that the language would impinge upon the authority of the Legislature to make similar determinations. Representative Parnell summarized that the Office of Management and Budget has to act in accordance to legislative appropriation or authority to receive federal appropriations. Representative Parnell referred to page 7, lines 14 and 15. He noted that the bond limit was changed from $400 to $100 million dollars. Mr. Benintendi explained that a total bond sum of $400 million dollars was deemed to be excessive. He stated that $100 million dollars is more realistic. Representative Parnell referred to page 11, lines 7 - 9. Mr. Benintendi explained that this provision would assure that any applicant entering into activity with the Adak Reuse Authority is not in arrears on any taxes due the state of Alaska. Representative Parnell noted that line 9, "paid all taxes due" may be changed to "current on all taxes due." Co-Chair Hanley noted that taxes can be due while an individual is under appeal or on a payment schedule. He noted that the intent is not to preclude someone who has appealed the process, had their taxes reduced and are on a schedule for the remaining amount. He stated that the amount in default or in arrears needs to be distinguished from what is due. Representative Parnell cited page 13, line 17: "The municipality may not levy taxes to pay the indebtedness." Mr. Benintendi stated that the language could be amended. He noted that the intent is that the assets of the Adak 2 Reuse Authority cover the debt. Representative Parnell referred to page 15, line 21. He asked what other obligations could be issued. Representative Moses referred to obligations under lease agreements. Representative Martin stressed the importance of legislative oversight. He questioned if arrearage of taxes to the federal government would be included under page 11, lines 7 - 9. Mr. Benintendi stressed that the concern is to protect the State. Representative Martin noted that the federal government takes assets to cover arrears of federal taxes. Representative Moses did not think arrears of federal taxes would be the Adak Reuse Authority's responsibility other than to discover an applicant's financial capability. Representative Brown cited page 14, lines 13 - 17. Mr. Benintendi explained that the objective was to facilitate the autonomy of the Adak Reuse Authority. Representative Brown observed that page 14, line 21 states: "To further ensure the effective budgetary decision making by the legislature, the authority shall..." She questioned who owns the assets if they do not belong to the State. She pointed out that the legislation sets up an entity of the State. A corporation would be created to run and generate economic activity using assets the State receives from the federal government. She acknowledged that the assets would be transferred to a local municipality after organization. She asserted that until the transfer the assets and obligations would be the State's. JIM BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW observed that the language in HB 466 is similar to enabling language for the Alaska Industrial Development and Export Authority (AIDEA). He emphasized that the intent is to make funds separate from the state treasury. They are corporate receipts. He noted that language referring to the Executive Budget Act is similar to language governing AIDEA. He noted that under this language the Legislature and Administration have only required that AIDEA submit its operating costs. Loan programs and capital expenditures are not part of AIDEA's budget submission. The Alaska Industrial Development and Export Authority's budget submissions are shown as corporate receipts not as state general fund receipts. Mr. Baldwin stressed that public corporations are created to be separate entities and to have their own assets. The corporation itself may be an asset of the State, but it is created to have separate assets. Creditors can only seek recovery against the corporation's assets if there is a 3 default. He emphasized that the legislation states that the Adak Reuse Authority is independent from the State. As a creature of the State the Legislature can specify varying ways for handling their finance and accounts. He noted that finances and accounts are handled differently among the various public corporations. There is no set formula to follow. Representative Brown maintained that AIDEA's assets are considered as state assets. She noted that they are part of the budget plan proposed for appropriation. Co-Chair Hanley clarified that AIDEA's assets would be paid to the State in the form of a dividend. Mr. Baldwin stressed that AIDEA is surrendering its assets. He maintained that if AIDEA did not surrender its assets it would have to be dissolved for the State to access them. Co-Chair Hanley noted that the Legislature retains control of AIDEA's operating budget. Representative Brown summarized that the Adak Reuse Authority's operating budget would be under the Executive Budget Act. Mr. Baldwin agreed that the Adak Reuse Authority's operating budget would be submitted through the Office of Management and Budget in the general appropriation bill. Representative Brown asked if conditions of the federal transfer would be affected by the language that expresses that the land does not belong to the State. Representative Moses replied that this implies that the Adak Reuse Authority is not the direct responsibility of the State. LAMAR COTTEN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS AND CHAIRMAN, LOCAL REUSE Adak Reuse Authority PLANNING ACTIVITIES gave a brief background on the closure of Adak. He observed that the Navy approached the state of Alaska indicating that Adak would be on the August, 1995 Base Realignment and Closure list and scheduled for closure on January 1, 1998. The Navy assisted the State in developing a reuse process. The process is broken into two components, planning and implementation. He noted the absence of a local entity. Mr. Cotten observed that a Local Reuse Adak Reuse Authority Planning Committee was created by the State. He emphasized the Committee's intent to involve local groups in the planning process. He noted the diversity of interests in the region. He observed that the local school district and the U.S. Department of Commerce provided funds for a conceptual reuse plan. He noted that a preliminary plan will be ready in May. He noted reuse potential in transportation, fishing, and storage. He discussed assets of the base. He observed that assets are estimated at $1.0 4 - $3.0 billion dollars. Mr. Cotten noted that it is the intent of the Adak Reuse Authority Planning Committee to finish the initial conceptual plan by May. A final plan along with marketing activities would be completed in the summer. Mr. Cotten observed that the base is located on lands which will return to the Department of Interior. He noted that the Department of Interior is undergoing negotiations with the Aleut Corporation in regards to the lands. The Aleut Corporation is interested in obtaining the base lands. The State is not opposed to ownership of the base land by the Aleut Corporation. The State's position is that the Adak Reuse Authority should be self sustaining. State general fund support should not be needed. He noted that there is a provision in the bill that says the Adak Reuse Authority must demonstrate the means to operate the base for two years without state funds. To generate operating funds the Adak Reuse Authority has to be in the position to receive rents and other income. The Navy estimated base operation and maintenance costs for full capacity at $30.0 million dollars. The State does not anticipate that the entire base and assets will be assumed. The planning process will dictate which parts of the base will be obtained. He observed that there are 600 - 700 housing units on the base. He pointed out that these housing units will be of little value if they are not maintained. Mr. Cotten noted that Senator Steven's office has been involved in discussions regarding the base. He emphasized the Senator could introduce federal legislation at some future date. Mr. Cotten explained that the State is concerned that somebody could get the key assets on the base with the expectations that the State or a municipality would pick up traditional maintenance and operation activity. Mr. Cotten referred to page 13, line 11. He observed that the legislation assumes that assets and liabilities of the Adak Reuse Authority would be assumed by a municipality. He noted that the city of Unalaska and the Aleutians West Borough have expressed interest in incorporating the base. He added that base civilians have also expressed interest in creating a second class city. He stressed that the State would not support transference of the Adak Reuse Authority to a second class city. Representative Brown asked if the fiscal note covers public safety and education services. Mr. Cotten stated that these services are not covered by the fiscal note. He stressed 5 that the function of the assets are to pay for traditional operational costs including traditional municipal costs. He cited page 5, lines 14 - 21. This provision would assure that funds are available before the assets are assumed. He emphasized that the base should be driven by public contracts with federal agencies and the private sector. He explained that the federal government will continue these services in the interim. He added that the federal government has a major clean-up responsibility and will maintain a presence until clean-up is completed. Mr. Cotten further discussed the Department's fiscal note. He observed that some expenses in the fiscal note may be covered by revenues from leasing and renting. He asserted that the fiscal note reflects a conservative outlook that these operations may not occur quickly. The fiscal note provides for an executive director, staff assistant, travel and legal costs. Representative Mulder felt that the fiscal note could be reduced. He noted that legal work could be performed by the Office of the Attorney General. Mr. Cotten agreed that work would be performed through the Office of the Attorney General. He did not know if the Department of Law would have to be reimbursed. Representative Moses emphasized that federal transition money should be available. (Tape Change, HFC 96-72, Side 2) ELARY GROMOFF, JR., ALEUT CORPORATION provided members with a letter from the Corporation to Co-Chair Hanley, dated 3/11/96 regarding proposed changes to the legislation (Attachment 2). He emphasized the Aleut Corporation's willingness to work with the state of Alaska regarding the reuse of Adak. He noted that Adak is a traditional Aleut land. He observed that the Aleut Corporation is currently negotiating with the federal government on land transfers. He maintained that the Department of Interior wants to transfer the lands to the Aleut Corporation. He stressed the need for equal representation. He noted that the local Aleut community is composed of Village Corporations, the regional corporation and tribal governments. He referred to a memorandum provided to members from the Aleut Corporation, dated 3/12/96 regarding the Corporation's concerns (Attachment 3). CHRIS GATES, ATTORNEY, ALEUT CORPORATION emphasized cooperation. He requested that a majority of the Adak Reuse Authority's Board members come from the region. He observed that the legislation states that the Adak Reuse Authority "shall" be integrated into the municipality within one year after incorporation. He expressed concern that assets not 6 be stripped by a municipality that may not be interested in seeing Adak effectively developed. He asked that provisions be included that would prevent stripping assets for 4 to 5 years. He emphasized that Adak needs to be aggressively marketed in order to create 500 full-time year around jobs. He maintained that these jobs must exist to justify the starting infrastructure. He stressed that the Aleut Corporation is prepared to immediately begin aggressive marketing. In response to a question by Representative Kohring, Mr. Gromoff noted that the Navy estimates the value of the base at $2.8 billion dollars. Mr. Gates summarized discussions with the U.S. Department of Fish and Wildlife. He noted that the Aleut Corporation would allow the U.S. Department of Fish and Wildlife to retain 65,000 to 75,000 acres that were identified for land selection by the Corporation in exchange for base lands. Mr. Gromoff noted that the U.S. Department of Fish and Wildlife consider the base lands to be compromised. Co- Chair Hanley clarified that the lands will be exchanged acre for acre. Mr. Gates pointed out that the Aleut people are exchanging all of their legitimate ANSCA entitlement land "to place all of their eggs in the Adak basket." He reiterated the need for a team approach and substantial involvement of the Aleut people. Representative Brown asked if the Aleut Corporation would want to own the land if representation remains the same as is currently in the legislation. Mr. Gromoff stated that the Aleut Corporation would still pursue land ownership. He stated that the Aleut Corporation would look at first rights on some Navy facilities. He asserted that the Aleut Corporation will be the land owners. Representative Brown referred to page 13, Succession. Mr. Gates requested that "shall" be changed to "may" on page 13, line 13. Representative Brown questioned if "within one year" could be deleted. Mr. Gates did not support the deletion of "within one year." Mr. Gates asked for a prohibition on stripping assets from the Island for at least 5 years without a super majority vote. He stressed that operations and maintenance costs at the base would be a minimum of $10.0 million dollars a year. He stated that assets should remain in place while aggressive marketing occurs to assure full-time year around jobs. Representative Mulder maintained that the Adak Reuse Authority is going to pursue those avenues which it finds 7 financially feasible and economically advantages for the promotion of Adak. He argued that they would not strip the assets for a one time cash out. Representative Mulder stressed that representation is the most important issue. He asked if the Aleut Corporation would accept 3 members on the Board. Mr. Gromoff responded that the Corporation is seeking people representation. He suggested that the Adak Reuse Authority be composed of nine members with two appointed by the Governor. He stressed that he would at least like to see an equal vote. Representative Mulder noted that the legislation calls for seven members on the Adak Reuse Authority. He stressed that there needs to be state involvement. He estimated that the legislature would take a dim view of assisting a semi-tribal organization that was created through ANILCA. He stressed that three members on the Adak Reuse Authority would provide for fair and adequate representation. He noted that company towns have a history of failure. Mr. Gromoff emphasized that the Aleut Corporation has cooperated with the State. He stressed the Corporation's willingness and ability to market and invest in Adak. He disagreed that Adak would be similar to a one company town. He stressed that the Aleut Corporation can meet the Navy's closure schedule. He expressed support for four regional members on the Adak Reuse Authority's Board. He acknowledged that a municipality will be needed to provide public support. He stressed that Adak should be an Aleut community. He pointed to the high unemployment rate among the Aleut people. He maintained that Adak is an opportunity to create jobs and opportunities for the Aleut people. Representative Mulder asked why the Adak Reuse Authority would not meet the Navy's schedule. Mr. Gates questioned what would happen if the congressional delegation is unable to obtain two years worth of funding. Mr. Gromoff restated that the Aleut Corporation is ready to back the plan with aggressive marketing and financial support. He stressed that there are no guarantees of federal support. He observed that the Corporation through a subsidiary offered to operate and maintain the facilities and contract to the Navy. Mr. Gates added that the legislation requires regulations to be reviewed by the Office of the Lieutenant Governor. He restated the request to provide representation for the region. He stressed that the people of the region are the ones that will suffer from failure or benefit from success. 8 Representative Brown noted that the legislation calls for three state commissioners to be members of the Board. She questioned if members of the public would have more time and interest. Representative Mulder suggested that the commissioners be allowed to appoint designees. Mr. Cotten spoke in support of retaining the provision to designate three commissioners. He pointed out that page 2, line 1 - 5 allows the commissioners to appoint designees. He suggested that in addition to the Department of Community and Regional Affairs, the Department of Transportation and Public Facilities, Department of Commerce and Economic Development or Department of Natural Resources could have a vested interest in the Adak Reuse Authority. Mr. Cotten clarified that there is no agreement in regards to land ownership by the Aleut Corporation. He added that the legislation creates an Adak Reuse Authority that will have title to the property. He restated that the Local Reuse Adak Reuse Authority Planning Committee will have a preliminary plan in May. He pointed out that their plan calls for extensive marketing activities. Co-Chair Hanley asked if the sponsor would support language preventing removal of assets for the first 3 to 5 years. Representative Moses stated that he could not imagine the Adak Reuse Authority removing assets. He spoke against the proposal to add language prohibiting removal of assets. He maintained that the language would be too restrictive. Mr. Cotten pointed out that it may be wise to move some assets off the Island. He noted that there will be surplus housing on the Island. He stressed the need for housing in other areas of the region. Co-Chair Hanley summarized concerns that a municipality could absorb the Adak Reuse Authority only to utilize the assets. Mr. Gates noted that discussions have taken place between the federal government and the Aleut Corporation that Mr. Cotten was not privy to. He maintained that there are draft agreements for the land transfer. He asserted that the land issue is well down the road. He maintained that this is the appropriate time to anticipate and address problems. He expressed hope that the Adak Reuse Authority and municipality will act in good faith, but emphasized the need for assurances. In response to a question by Representative Parnell, Mr. Gates noted that the majority of the value is in real property. Representative Parnell asked if real property should be restricted. Mr. Gates asked how generators would be defined. Co-Chair Hanley pointed out that housing would be real property. 9 Mr. Gromoff noted that under the base closure surplus property will be available for other federal agencies unless it is identified in a Reuse Plan. The Navy will have to remove equipment that is not identified. He maintained that the Navy wants to find a way to keep as much of the equipment in the community as possible due to the cost of removal. He observed that it would cost $100.0 thousand dollars to move each house. KENNETH VASSAR, MUNICIPAL BOND COUNSEL, ANCHORAGE testified via the teleconference network. He summarized points of concern. He referred to page 3, lines 15 and 16. He stressed that bond counsel generally desires more flexibility, especially in the case of a brand new authority. He suggested that subsection (2) be amended to read, "to enter into agreement" for the operation of the facilities. Mr. Vassar cited AS 30.17.110 on page 3. He noted that the Adak Reuse Authority might finance projects for other entities. He suggested that this be referenced in the legislation. (Tape Change, HFC 96-73, Side 1) Mr. Vassar addressed page 4, lines 25 - 27. He noted that other authorities have the ability to expedite administrative procedure actions under which regulations may be in effect immediately instead of 30 days. He suggested that this ability would be helpful for the Adak Reuse Authority. Mr. Vassar referred to page 5, line 7 - 13. He noted that this section prohibits the Adak Reuse Authority from certain actions. He questioned why the Adak Reuse Authority is prohibited from the use of state grants, appropriations or other transfers. He noted that it is a restriction on the potential bonding authority of the Adak Reuse Authority. He added that (2) in the same section limits the ability of the Adak Reuse Authority to finance based upon its asset base. The Adak Reuse Authority would be dependent on a facility by facility revenue bonding approach. He noted that this is not consistent with other provisions of the legislation. He pointed out that the purposes section refers to creating jobs and advancing general prosperity. He stressed that (2) is in conflict with this purpose. It would preclude the Adak Reuse Authority from using other facilities that generate more than enough revenue to subsidize others in the early years. Mr. Vassar observed that AS 30.17.210 allows the Adak Reuse 10 Authority to issue bonds payable from designated projects whether or not they are financed in whole or in part with the proceeds of the bonds. He stressed that this language contemplates allowing the revenue from one facility to support another facility. He suggested that (2) on page 5, lines 11 - 13 be deleted. Mr. Vassar cited page 5, line 24. He noted that it is presumed that the Adak Reuse Authority has the authority to issue bonds. He suggested that the Adak Reuse Authority's ability to issue bonds be clarified in the powers section. Mr. Vassar noted that there is no moral obligation created in the bonding power. He noted that the Adak Reuse Authority will be new. He added that if the decision is made not to include moral obligation power then page 7, line 11 - 13, could affect the State's ability to issue bonds. Mr. Vassar observed that page 9, lines 25 - 27 raises questions regarding the type of financing that the Adak Reuse Authority might undertake. He noted that projects financed under this chapter are included in the exemption from taxation. He stated that if only Adak Reuse Authority projects are financed under this chapter this language would make sense. He stressed that if the Adak Reuse Authority is a conduit or revenue lender for private entities then private entities would benefit through Adak Reuse Authority bond packages while being exempted from property taxes. Mr. Vassar noted that reference is made under section 30.17.280 to conduit type financing by the Adak Reuse Authority. Mr. Vassar referred to page 13, lines 11 - 17. He pointed out that the Adak Reuse Authority would be attempting to enter into the bond market to sell debt, pledging their own general obligation indebtedness. He explained that the Adak Reuse Authority can sell bonds based on their asset base. The assets are pledged to secure bonds. He observed that a bond buyer would need to know that a municipality may be formed and when it is formed the Adak Reuse Authority would be integrated into the municipality. The general obligation debt of the Adak Reuse Authority would not become the general obligation of the municipality. He concluded that general obligation bond financing would not be realistic under this scenario. The Adak Reuse Authority would be limited to revenue supported financing. Mr. Vassar questioned the severity of page 13, line 17: "The municipality may not levy taxes to pay the indebtedness." He suggested that the language could be changed to: "The municipality may not be required to levy taxes." 11 Mr. Gates expressed concern that there is no restriction on the use of development fund account monies outside of Adak. He maintained that development funds should be focused on trying to create jobs and economic activity on Adak. Mr. Vassar pointed out that section 30.17.100, Purpose and General Powers specifically states that the Adak Reuse Authority is to "develop and implement a comprehensive reuse and redevelopment plan for the territory encompassed by the Adak Naval Air Facility..." He noted that "In furtherance of its corporate purposes...," section 30.17.110, Powers of the Adak Reuse Authority, relates back to the Adak Naval Air Facility. He added that the specific items mentioned in section 30.17.100, Purpose and General Powers also specify the Adak Naval Air Facility. He stressed that the Adak Reuse Authority would not be able to finance a project outside of the Adak Naval Air Facility. HB 466 was HELD in Committee for further discussion.