Legislature(2009 - 2010)HOUSE FINANCE 519

04/01/2009 01:30 PM House FINANCE

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01:38:27 PM Start
01:39:41 PM HB90
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Postponed>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 90(FIN) Out of Committee
HOUSE BILL NO. 90                                                                                                             
     "An   Act   relating   to    bonding   limitations   and                                                                   
     confidentiality  of  records   and  information  of  the                                                                   
     Alaska Industrial Development  and Export Authority; and                                                                   
     providing for an effective date."                                                                                          
TED   LEONARD,   EXECUTIVE   DIRECTOR,    ALASKA   INDUSTRIAL                                                                   
DEVELOPMENT AND  EXPORT AUTHORITY, (AIDEA), reported  that he                                                                   
had seen the amendments and was available for questions.                                                                        
1:40:40 PM                                                                                                                    
Co-Chair Hawker MOVED to ADOPT Amendment 1:                                                                                     
     Page 1, line 7:                                                                                                            
     Delete "and conduit revenue"                                                                                               
Vice-Chair Thomas OBJECTED.                                                                                                     
Co-Chair Hawker  explained that  the legislation  without the                                                                   
amendment would  have completely  removed both the  refunding                                                                   
categories of  bonds and new  conduit revenue bonds  from the                                                                   
$400  million-a-year  ceiling.    He  reported  that  he  was                                                                   
comfortable excluding  refunding bonds, but  conduit revenues                                                                   
continue  to put  new  money into  the  economy. Amendment  1                                                                   
removes conduit  revenue bonds  from the exclusionary  clause                                                                   
and keeps them under the $400 million-a-year annual limit.                                                                      
1:41:46 PM                                                                                                                    
Mr.  Leonard   understood  Co-Chair  Hawker's   concerns  and                                                                   
believed AIDEA could work with that limit.                                                                                      
Vice-Chair Thomas WITHDREW his objection.                                                                                       
There being NO OBJECTION, it was so ordered.                                                                                    
1:43:01 PM                                                                                                                    
Representative Joule MOVED to ADOPT Amendment 2:                                                                                
     Page 1, line 2, following "Authority;":                                                                                    
     Insert "relating to municipal taxation of interests in                                                                     
     certain property of the Alaska Industrial Development                                                                      
     and Export Authority; providing for an effective date                                                                      
     by amending the effective date of sec. 3, ch. 117, SLA                                                                     
     2000, as  amended by sec. 2, ch. 74, SLA 2003, and by                                                                      
     sec. 3, ch. 67, SLA 2008;"                                                                                                 
     Page 3, following line 9:                                                                                                  
     Insert a new bill section to read:                                                                                         
     "*  Sec.7. Section  19, ch.  117, SLA  2000, as  amended                                                               
     by sec. 2, ch. 74, SLA 2003, and by sec. 3, ch. 67, SLA                                                                    
     2008, is amended to read: Sec. 19. Section 3 of this                                                                       
     Act takes effect November 30, 2012 [2009]."                                                                            
     Renumber the following bill section accordingly.                                                                           
Co-Chair Stoltze OBJECTED.                                                                                                      
Representative  Joule   related  that  in  1999,   the  state                                                                   
assessor, for the first time,  included the AIDA-owned DeLong                                                                   
Mountain Transportation System  (DMTS) in the assessment full                                                                   
value  determination  for  Northwest  Arctic  Borough.    The                                                                   
Transportation System  includes a 52-mile road  and port site                                                                   
loading facility.   Up  to that  point, the Northwest  Arctic                                                                   
Borough had received an exemption  from the assessment of the                                                                   
DMTS.  Over the years the sunset date was extended.                                                                             
Representative  Joule explained  that  the amendment  extends                                                                   
the  exemption  until November  30,  2012.   The  full  value                                                                   
determination is  used to calculate the required  local share                                                                   
for the  school support.   Including  the DMTS increases  the                                                                   
local contribution for the Northwest  Arctic School District.                                                                   
Representative  Joule  noted  that  the  DMTS  is  owned  and                                                                   
financed  by AIDEA  to encourage  and  enable development  in                                                                   
this remote area.  He maintained  that it is publically owned                                                                   
and should  not be included in  the tax base.   The Northwest                                                                   
Arctic Borough  does not  have a tax  base that it  levies on                                                                   
its  property  tax  base.   They  do  derive  their  revenues                                                                   
through  a payment  in lieu of  taxes (PILT)  - an  agreement                                                                   
with the Red Dog Mine.                                                                                                          
Representative  Joule   stressed  that  not   including  this                                                                   
amendment  would increase  the burden  on the  Borough.   The                                                                   
PILT  agreement is  in  effect until  2011.   This  amendment                                                                   
addresses beyond that time frame.   Without the extension the                                                                   
Borough would have to renegotiate with the Red Dog Mine.                                                                        
Representative  Joule related  that  he has  talked with  the                                                                   
administration  which  has indicated  support.    He said  he                                                                   
chose to  go with an  extension rather  than a repeal  so the                                                                   
Borough  assembly  could fully  deal  with  the issue.    The                                                                   
amendment sets the  date out another 3 years  beyond the time                                                                   
frame when the  PILT agreement would be taken up  again.  The                                                                   
amendment is also supported by Teck Cominko, Ltd.                                                                               
1:46:55 PM                                                                                                                    
Co-Chair  Stoltze  reported  that  it has  been  a  long-term                                                                   
Representative   Kelly   requested   information   from   the                                                                   
Department of Commerce, Community and Economic Development.                                                                     
TYSON  FICK,  LEGISLATIVE LIAISON,  DEPARTMENT  OF  COMMERCE,                                                                   
COMMUNITY  AND   ECONOMIC  DEVELOPMENT,  offered   to  answer                                                                   
Representative Kelly  asked when the amendment  would have an                                                                   
effect on the Borough and what  would happen if the amendment                                                                   
was not adopted.  Mr. Fick did not know.                                                                                        
AT-EASE:       1:50:20 PM                                                                                                     
RECONVENED:    1:55:02 PM                                                                                                     
Representative Kelly  inquired when the amendment  might take                                                                   
affect.  He  understood that if the PILT can  be renegotiated                                                                   
in 2011,  it would  take place  prior to  the outcome  of the                                                                   
legislation.   He read  the amendment as  an extension  of an                                                                   
exemption.  He questioned if that was accurate.                                                                                 
Co-Chair Stoltze  pointed out  that the administration  would                                                                   
like to  find a  solution before  the end of  its term.   Mr.                                                                   
Fick agreed.                                                                                                                    
Representative   Kelly  concluded  that   it  was   truly  an                                                                   
Representative  Joule reported  that  there was  an offer  to                                                                   
repeal, but after  consultation with the Borough,  he thought                                                                   
an  extension  would  be  better.    The  mine  was  recently                                                                   
assessed and negotiation with  the Borough took place at that                                                                   
time.   The state  assessor and  others involved support  the                                                                   
Co-Chair Stoltze  asked if the  administration could  be made                                                                   
available to answer  questions on the House Floor.   Mr. Fick                                                                   
reported that they could.                                                                                                       
1:59:42 PM                                                                                                                    
Representative  Kelly  summarized  his understanding  of  the                                                                   
bill.   The  date of  the extension  takes  place before  the                                                                   
meetings  on the PILT  between  the Borough  and the Red  Dog                                                                   
EDDY   JEANS,  DIRECTOR,   SCHOOL   FINANCE,  DEPARTMENT   OF                                                                   
EDUCATION AND  EARLY DEVELOPMENT, clarified that  the way the                                                                   
full value determinations  works is that there  is a two-year                                                                   
delay  before  it  impacts  the   foundation  program.    For                                                                   
example, the full values that  were issued in October of 2008                                                                   
were  the  full values  used  to  determine the  FY10  budget                                                                   
Representative  Kelly summarized  that if  this extension  is                                                                   
not put into place,  extra costs to the Borough  could not be                                                                   
recovered through the PILT negotiations  in November of 2011.                                                                   
Mr. Jeans summarized  that based on the dates  discussed, the                                                                   
required local  effort would be  established before  the PILT                                                                   
is reopened for  negotiation.  Representative  Kelly asked if                                                                   
it has a real affect before negotiations.   Mr. Jeans did not                                                                   
know.  Representative Kelly restated  his question.  He asked                                                                   
if the Borough  has to come  up with some money  because they                                                                   
couldn't  get  it  covered  through   the  PILT  negotiations                                                                   
without  the  extension.    Mr.   Jeans  explained  that  the                                                                   
required local effort would increase in FY12.                                                                                   
2:03:42 PM                                                                                                                    
Representative Kelly  concluded that it  needs to be  done in                                                                   
order to  give the administration  a chance to work  this out                                                                   
so that  the Borough  has enough time  to negotiate  the PILT                                                                   
payments with  Teck Cominko.   He  surmised that it  wouldn't                                                                   
have to be extended another time.                                                                                               
Representative  Joule thought  that part  of the  negotiation                                                                   
has to do with the price of the commodity.                                                                                      
CHRISTINE HESS,  STAFF, REPRESENTATIVE JOULE,  explained that                                                                   
price  would be a  part of  the negotiation  process, but  it                                                                   
would  not  be  guaranteed.   If  commodity  prices  did  not                                                                   
recover and Red Dog was not doing  very well, there is a real                                                                   
possibility that  the Northwest  Arctic Borough's  PILT could                                                                   
Representative  Kelly wondered  if, under the  aforementioned                                                                   
scenario, it would  fall on the Borough to  pay the education                                                                   
piece or  to convince the  state to pay  it.  Ms.  Hess added                                                                   
that there is an  argument that it is a publicly  owned road.                                                                   
She commented on  the substantial increase of  the fair value                                                                   
determination on the Red Dog Mine recently.                                                                                     
Representative Kelly  understood that the  administration was                                                                   
comfortable  with  the  amendment  as  long as  there  was  a                                                                   
discussion of it.                                                                                                               
2:06:57 PM                                                                                                                    
Co-Chair Hawker referred to a  letter from the governor dated                                                                   
April 12,  2008, which  deals with the  first extension.   He                                                                   
quoted,  "It  is  long  past time  to  assemble  the  various                                                                   
parties  and resolve this  situation on  a permanent  basis."                                                                   
The  governor   voiced  concern  about  the   impact  on  the                                                                   
Northwest  Borough School  District.   He quoted the  letter,                                                                   
"As such, I am  willing to support a short  extension of time                                                                   
on the  previous law  so that the  question will  be resolved                                                                   
during my  term in office.   You have  my assurance  that the                                                                   
administration will not defer this question."                                                                                   
Co-Chair  Hawker  voiced  concern   about  the  date  on  the                                                                   
amendment.    It   goes  beyond  the  term   of  the  current                                                                   
administration  and acts as  a safety valve.   He  wanted Mr.                                                                   
Fick's  assurance that  the matter would  be resolved  before                                                                   
the governor leaves office.  Mr. Fick gave his assurance.                                                                       
2:09:04 PM                                                                                                                    
Ms. Hess reported that the original  request was for a longer                                                                   
Representative Kelly suggested changing 2012 to 2011.                                                                           
Ms.  Hess   emphasized  that   2012  is  preferred   so  that                                                                   
negotiations  could  be  concluded.     Representative  Kelly                                                                   
commented that his  concern is that the actual  impact of the                                                                   
amendment would take place in  2013.  He asked Mr. Jeans if a                                                                   
date of 2012 would have an actual effect in 2013.                                                                               
Mr. Jeans  clarified that  if the  extension is made  through                                                                   
2011, it will show up on the 2012  full value, which would be                                                                   
the 2014 budget request.                                                                                                        
2:11:32 PM                                                                                                                    
Representative   Kelly  MOVED  to   ADOPT  an  amendment   to                                                                   
Amendment 2:                                                                                                                    
     On line 11                                                                                                                 
     Change 2012 to 2011                                                                                                        
Co-Chair Stoltze OBJECTED.                                                                                                      
Representative Kelly said the  purpose would be to enter into                                                                   
a debate and get it settled.                                                                                                    
2:12:23 PM                                                                                                                    
Representative Joule preferred to keep 2012.                                                                                    
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Kelly, Salmon                                                                                                         
OPPOSED:  Thomas, Crawford, Fairclough,  Foster, Gara, Joule,                                                                   
          Hawker, Stoltze                                                                                                       
Representative Austerman was absent from the vote.                                                                              
The MOTION FAILED (2-8).                                                                                                        
Co-Chair Stoltze MAINTAINED his objection to Amendment 2.                                                                       
A roll call vote  was taken on the motion to  adopt Amendment                                                                   
IN FAVOR: Salmon, Thomas, Crawford,  Fairclough, Gara, Joule,                                                                   
          Stoltze, Hawker                                                                                                       
OPPOSED: Foster, Kelly                                                                                                          
Representative Austerman was absent from the vote.                                                                              
The MOTION PASSED (8-2).  Amendment 2 was adopted.                                                                              
Co-Chair Stoltze  noted a zero fiscal note  by the Department                                                                   
of Commerce, Community and Economic Development.                                                                                
2:15:23 PM                                                                                                                    
Co-Chair Hawker  MOVED to  REPORT HB 90,  as amended,  out of                                                                   
committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
CSHB 90 (FIN) was REPORTED out  of Committee with a "do pass"                                                                   
recommendation   and  with  zero   fiscal  note  #1   by  the                                                                   
Department of Commerce, Community and Economic Development.                                                                     

Document Name Date/Time Subjects
HB090 Hawker Amendment 1(v.2).pdf HFIN 4/1/2009 1:30:00 PM
HB 90
HB 90 Amendment 2 R 1.pdf HFIN 4/1/2009 1:30:00 PM
HB 90