Legislature(1995 - 1996)

03/18/1996 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  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                 
                                                                               
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  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.                                                                     

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