Legislature(1995 - 1996)
03/18/1996 01:45 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 466 "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\G, 3/14/96 (copy on file). TIM BENINTENDI, STAFF, REPRESENTATIVE CARL MOSES provided members with a memorandum dated 3/18/96, summarizing changes made by the proposed committee substitute (Attachment 1). He noted that the proposed committee substitute provides that two of the four public members of the Adak Reuse Authority must be residents of the area within the boundaries defined by the Aleut Regional Corporation. This change occurs on page 1, line 15 though page 2, line 3. Mr. Benintendi observed that "jointly operate" was changed to "for the operation of" on page 3, lines 18 - 19. He explained that this would preclude joint operating agreements with federal entities. Representative Brown noted that Mr. Vassar commented on the need for general authority to finance activities within the facility during the 3/12/96, House Finance Committee meeting. Mr. Benintendi responded that item 5 of Attachment 1 addresses this issue. Language was deleted on page 5, line 10 that restricted the Adak Reuse Authority's ability to use state grants, appropriations, or other transfers to satisfy bond obligations or establish collateral. The restriction on the Adak Reuse Authority to use rents, fees or other charges for financing development or improvement of unrelated facilities was also deleted from the proposed committee substitute. Mr. Benintendi observed that comments during the 3/12/96, House Finance Committee meeting, indicated that the bill did not clarify that the Adak Reuse Authority has the ability to issue bonds. This was clarified on page 4, line 7. Mr. Benintendi explained that the proposed committee substitute was amended on page 4, line 28, to allow the Adak Reuse Authority to expedite regulations. 2 Mr. Benintendi noted that a provision was added on page 6, lines 5 - 6 to require legislative approval of the Adak Reuse Authority's share of any financing which exceeds $10.0 million dollars. Representative Brown asked what mechanism the Legislature would use to approve the bond issuance. Representative Mulder compared the provision to requirements under AIDEA. Mr. Benintendi referred to page 11, lines 8 - 11. He noted that previous language required that project applicants be current with state tax matters. This language was expanded to clarify that applicants are considered current if they are meeting payment schedules, have a tax case under appeal, or are meeting terms of tax dispute settlements. Mr. Benintendi noted that the proposed committee substitute deleted language which restricted a future municipality's option to accept the indebtedness of the Adak Reuse Authority when succession occurs. Representative Brown referred to page 14, line 18. She questioned the relationship of the State to the Adak Reuse Authority and to the municipality that would take over the Adak Reuse Authority. She asked if the Adak Reuse Authority would still be subject to provisions of the Executive Budget Act after it is integrated with a municipality. JIM BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW responded that once the Adak Reuse Authority is merged with a municipality it would not be subject to the Executive Budget Act. The Adak Reuse Authority would become a municipal entity. The assets would no longer be assets of the State. Representative Brown asked if the membership provisions of the Board would still apply. Mr. Baldwin noted that under the merger the Adak Reuse Authority would be a municipal agency subject to the control of the borough or city that assumes responsibility. He estimated that state law would cease to be in effect. Representative Parnell noted that on page 13, line 16 the legislation states: "On integration, the municipality succeeds to the rights, powers, duties, assets and liabilities of the Adak Reuse Authority." He questioned if the Adak Reuse Authority has a duty to comply with the Executive Budget Act. He asked if the municipality would succeed to that duty. Mr. Baldwin stated that when a municipality incorporates another city the other city does not stay in effect. 3 LAMAR COTTEN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS AND CHAIRMAN, LOCAL REUSE AUTHORITY PLANNING ACTIVITIES compared the provision to the creation of a borough. He observed that under state law existing first class cities within the borough transfer the power of education, assets, liabilities, and duties to the new borough. The first class city no longer has any responsibility, authority or duty to provide education. Representative Parnell restated the question by Representative Brown regarding which other provisions are dissolved upon integration. Mr. Cotten stressed that the municipality would assume the Adak Reuse Authority's indebtedness. Representative Parnell concluded that the only requirement that is placed on the Adak Reuse Authority that would not pass to the municipality is the section regarding the Executive Budget Act. Mr. Cotten agreed with his assessment. Representative Brown asked if the Governor should continue to appoint the members of the board. Mr. Baldwin stressed that the Adak Reuse Authority would become a municipal entity. He pointed out language regarding the retention of powers and duties refers to the powers and duties necessary to support its indebtedness. The Adak Reuse Authority would be subject to municipal ordinances. Representative Mulder MOVED to adopt Committee Substitute for HB 466, #9-LS1580\G, 3/14/96. There being NO OBJECTION, it was so ordered. Representative Moses referred to page 13, lines 16 & 17. He stressed that this language assumes that the Adak Reuse Authority is dissolved after it is merged with a municipality. Representative Martin asked if Atka could incorporate Adak. Representative Moses did not think that Atka would be prevented from forming a borough that could incorporate Adak. Representative Martin asked if the Adak Reuse Authority should be protected. Representative Moses emphasized the importance of quick action. Representative Navarre asked if there are other alternatives to the formation of an Adak Reuse Authority. Representative Moses stressed that the legislation follows the general process for a base closure. Representative Navarre expressed concern with the level of bonding authority. He noted that $100.0 million dollars equals the State's current capital projects improvement 4 budget. He asked who will be liable for the bonds spent by the Adak Reuse Authority. Mr. Cotten noted that language on page 13, lines 16 and 17 clarifies that the Adak Reuse Authority succeeds to the municipality the rights, powers, duties, assets and liabilities of the Adak Reuse Authority. Representative Navarre emphasized that $10.0 million dollars for each project is still a significant amount. He suggested that many projects will be just under $10.0 million dollars. He suggested that the Adak Reuse Authority not be given bonding authority. He stated that bonding authority could be considered after the transfer. Mr. Cotten pointed out that the Board's membership includes three cabinet level positions. He maintained that there will be oversight and involvement by the Administration. He observed that there is no municipal corporation near the base. He added that the State only provides education. He emphasized that the Adak Reuse Authority has to demonstrate that it has two years of non-general fund money to operate. Representative Therriault asked if the legislation should clarify that the Adak Reuse Authority dissolves upon integration. Mr. Baldwin asked if some statutory provisions should be added to require the municipality to accept some responsibilities of the Adak Reuse Authority. Representative Therriault asked if there are provisions regarding responsibility for potential contaminates. Mr. Benintendi stated that the legislation does not include provisions regarding contaminates. He observed that the Navy's withdrawal plan calls for the removal of contaminates. Representative Moses stated that he assumed that the Adak Reuse Authority would be held harmless in regards to contaminates. Mr. Cotten noted that there is a reuse function and an environmental clean-up function. He noted that there are a finite amount of federal funds for clean-up. He observed that 92 hazardous sites have been identified. He stated that the areas that have the highest potential for reuse will be given priority for clean-up. He suggested that the Adak Reuse Authority would use good judgement in regards to taking title of contaminated areas. He added that the land technically returns to the U.S. Fish and Wildlife Service. In response to a question by Representative Mulder, Representative Moses noted that the Aleutians East Borough has presented a plan for incorporation of the base to their assembly. The city of Unalaska has had a survey done regarding incorporation of the base. There has not been 5 great interest in Atka for forming a borough. Representative Mulder asked if protections should be included to protect the State's interest. Representative Moses stated that he could envision enough people in Adak within two years to incorporate their own first class city to take the place of the Adak Reuse Authority. He stressed that the Adak Reuse Authority will be dissolved. Representative Mulder noted that the legislation does not protect against a hostile takeover of the Adak Reuse Authority by an adjourning borough. He pointed out that a municipality will protect their own best interest, not the interest of the State. Representative Moses emphasized that the question should be what is best for Adak. In response to a question by Representative Mulder, Representative Moses stated that the Aleutians East Borough can assess property tax. Representative Mulder pointed out that the real and personal property of the Adak Reuse Authority and its assets, income and receipts are exempt form taxes and special assessments of the State or a political subdivision of the State, on page 9. He asked if this would prevent the assessment of property taxes. Representative Moses did not think that this language would prevent the municipality from collecting property taxes. Mr. Cotten noted that page 10, lines 2 and 3 provides that the municipality's ability to tax would not be exempted. He added that annexation proceedings before the Local Boundary Commission could take 9 months to a year. He questioned if the State wants to transfer the base. He noted that the municipality will also assume liability. (Tape Change, HFC 96-78, Side 1) Representative Mulder expressed concern that assets could be stripped. In response to a question by Representative Mulder, Representative Moses stated that he could envision the Adak Reuse Authority bonding for geothermal activities. He did not envision the need for large capital projects. Representative Brown stressed the need for clarification regarding which provisions would apply after the Adak Reuse Authority is merged with a municipality. She referred to page 9, lines 26 and 27. She emphasized that this provision conflicts with language on page 10, subsection (b). She interpreted the bill to state that real and personal 6 property of the Adak Reuse Authority is exempted from taxation from local or state government. She asked what would happen to the private party that uses the financing mechanism provided by the Adak Reuse Authority. She questioned if the new municipality would have the authority to change the rules. Representative Brown stressed that the State may not know what environmental contaminations are present. She asked if the statutes could be amended to clarify that the State and Adak Reuse Authority do not accept liability for environmental damage done by the Navy. Representative Martin reiterated concerns regarding the Adak Reuse Authority's exemption from taxation. He pointed out that line 30, on page 9 states that "the bonds or interest on them shall at all times be exempt from taxation." He asked if this would create a tax advantage over competing interests. Representative Therriault stressed that state statute would not necessarily shield the State from potential liability. He pointed out the existence of federal laws which deal with responsibility. CHRIS GATES, ATTORNEY, ALEUT CORPORATION urged the Committee to amend the bill to require that the public members come from the region. He expressed concern that assets from the base could be stripped. He maintained that there is an incentive to strip equipment from the base. He requested that a three year moratorium be placed on stripping assets with provision for exception by a super majority vote of the Adak Reuse Authority. He reiterated that the Aleut Regional Corporation is committed to making Adak work in a couple of years. He stressed that there are other options available to allow transference of the base without cost to the State. Mr. Gates noted other concerns with the legislation. He observed that the issue of conduit financing was not improved by the proposed committee substitute. He suggested that the legislation contain a performance audit provision. He requested that "small" be deleted on page 16, line 18. He pointed out that a company servicing Adak may not be a small company. He asked for further clarification of the succession process. He stressed that an alternative exists to a state authority. AGATHAN KRUKOFF, ALEUT REGIONAL CORPORATION testified via the teleconference network. He restated concerns expressed by Mr. Gates and Mr. Gromoff during the 3/12/96 House Finance Committee meeting. 7 Mr. Gates emphasized that the Aleut Regional Corporation is willing to cooperate. He reiterated that there is an alternative for a non-state authority that would fill the same function as the Adak Reuse Authority. Representative Martin expressed concern that the transition period needs to protect the State's interest. Mr. Gates restated concerns regarding the stripping of assets. He maintained that there are incentives to take assets out of Adak for use in other areas. He emphasized the need for local representation. Mr. Benintendi observed that the Navy will probably withdraw from the base by late summer or early fall of 1997. He maintained that the Adak Reuse Authority will need flexibility to deal with the assets that it has. Representative Mulder MOVED to delete on page 6, lines 4 and 5, "for which the authority's share of the financing would be more than $10,000,000." He explained that this would ensure legislative approval would be needed for bonds issued by the Adak Reuse Authority. Representative Brown OBJECTED for purposes of discussion. She asked what form approval would be given. Representative Martin noted that project approval would need to be included in two pieces of legislation. Each project would need to be included in authorizing legislation. The appropriation would be included in the general appropriation bill. He observed that projects could not be approved through the Legislative Budget and Audit Committee. Representative Mulder agreed with Representative Martin's assessment. Representative Brown WITHDREW her objection. There being NO OBJECTION, "for which the authority's share of the financing would be more than $10,000,000" was delete on page 6, lines 4 and 5. Representative Mulder MOVED to delete on page 13, lines 13 and 14 (g): "The total principal sum of bonds issued under this chapter may not exceed $100,000,000, exclusive of refunding bonds." He stated that the language would no longer be necessary. There being NO OBJECTION, it was so ordered. Representative Mulder noted that some technical amendments may need to be adopted to clarify succession provisions. In response to a question by Representative Martin, Mr. Gates noted that two members will be appointed from the region. 8 Representative Martin reiterated concerns regarding exemption from taxation. He pointed out that line 30, on page 9 states that "the bonds or interest on them shall at all times be exempt from taxation." He asked if this would create a tax advantage over competing interests. Mr. Gates clarified that this provision applies to the ability to sell tax exempt bonds to finance improvements on Adak. He suggested that the language may be required to sell tax exempt bonds. Representative Brown MOVED on page 9, lines 24 and 25, after "and" to delete ", together with a project financed under this chapter,". Representative Mulder OBJECTED for purposes of discussion. She stated that this provision would prevent a private project financed through the Adak Reuse Authority from being exempted from taxation. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to report CSHB 466 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Brown OBJECTED for purposes of discussion. She stated that she supports the concept of the legislation but expressed concerns that the legislation needs further amendments in regards to the succession provision. She noted conflicting opinions were expressed in regards to whether a number of major provisions would apply after integration with a municipality. A roll call vote was taken on the MOTION to move CSHB 466 (FIN) from Committee. IN FAVOR: Kelly, Kohring, Martin, Mulder, Navarre, Therriault, Foster OPPOSED: Brown Co-Chair Hanley and Representatives Grussendorf and Parnell were absent from the vote. The MOTION PASSED (7-1). CSHB 466 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Community and Regional Affairs and with a zero fiscal note by the Department of Military and Veterans Affairs.