Legislature(1995 - 1996)
04/23/1996 08:45 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 466(FIN) am An Act establishing the Adak Reuse Authority. Co-chairman Halford directed that CSHB 446(Fin)am be brought on for discussion. REPRESENTATIVE CARL MOSES came before committee accompanied by his aide, TIM BENINTENDI. The Representative advised that Adak could become a showpiece for the nation, demonstrating what could be done with a base closure. He suggested that the magnitude would be comparable to closure of Elmendorf or Eielson Air Force Base. While some question the opportunity at Adak, future economic opportunity is limited only by imagination. Fresh fish to the Orient presents great opportunity because of the adequate airport. Representative Moses specifically noted that tuna could be flown from the site since, in the summertime, the tuna industry is "considerably closer to the Aleutians" than to Midway where the product is normally sold. Representative Moses referenced information from representatives of the Aleut Corporation suggesting that the state would become a "deep pocket" for U.S. Department of Defense involvement at Adak. He countered that statement, saying that the opposite is true. HB 466 would enable an unbiased public authority to work toward the future of Adak. The Navy will be much more lenient in dealing with a public authority, in terms of what the military will leave behind. It will not be a black hole for the state. The authority would be in a position to dispose of property to commercial interests to support management expenses of the authority until adequate municipal entities develop. Representative Moses expressed resentment regarding false information indicating that Senator Stevens had suggested creation of a profit or non-profit entity. The Senator merely suggested that that approach should be considered. Technically, the proposed authority is a non-profit which would operate for the benefit of the future of Adak. The Congressional delegation and the U.S. Navy are waiting for HB 466 to pass. Time is of the essence. Representative Moses next referenced concern raised by the Aleut Corporation that stripping of facilities might occur. He said he did not believe an authority delegated with economic development of Adak would do anything to disadvantage that goal. Much equipment left behind by the U.S. Navy will be sold to commercial interests moving into Adak. The Representative termed "ridiculous" a caveat that equipment could not leave the island. Much equipment will be surplus to needs on Adak. He said he was a stockholder of the Aleut Corporation, and he suggested that a majority of the members were in favor of the proposed bill. He urged passage as soon as possible. Senator Zharoff asked if the authority would receive ownership of the land. Representative Moses said that would have to be decided by Congressional legislation. END: SFC-96, #90-B, Side 1 BEGIN: SFC-96, #90-B, Side 2 Senator Zharoff attested to problems associated with a similar transfer at Kodiak. He then voiced his understanding that if the Aleut Corporation has "top filed" on the land, and it is vacated by the present owner, the corporation would have first option on the land. Representative Moses acknowledged that possibility but reiterated that the final decision would be made by Congress. He then described past discussion of land selections with the corporation. He attested to difficulties that would arise should one entity own the land while another owns the improvements. Further discussion followed regarding the impact of "top filing," using both Ft. Richardson, Adak, and Kodiak as examples. Senator Zharoff suggested that the proposed reuse authority would merely add an additional layer of bureaucracy. LAMAR COTTEN, Deputy Commissioner, Dept. of Community and Regional Affairs, came before committee. He explained that discussions relate to an exchange rather than "top filing." The exchange involves land that would revert from withdrawal status from the refuge back into the refuge. It then becomes the property of the U.S. Department of the Interior. Interior has expressed interest in undertaking exchanges with the Aleut Corporation for over-selection. In light of that, the state initiated discussions involving itself, the U.S. Navy, and the Aleut Corporation. Discussion focused on the proper configuration of land status, in the future, for Adak. The state recognizes that consensus on status must be reached. Senator Stevens would then introduce legislation to make appropriate exchanges and/or transfers. Mr. Cotten said the state is not interested in becoming a participant in a situation where the base is to be transferred to the Aleut Corporation and an authority is in place. If there is an economic value to parts of the base, and two-years of revenue stream can be demonstrated to cover operating costs, the authority would want to choose those lands. The problem between the Aleut Corporation and the authority (or the state) rests in the fact that the corporation would prefer that "We take over things that are traditional municipal or state responsibility." Those things (breakwaters, roads, etc.) do not make money. The department believes the authority should acquire properties that can produce a revenue stream to cover responsibilities that do not produce income. The proposed bill reflects a conservative approach for state review of pros and cons and to ensure a cash flow from properties it acquires through the authority. Under a likely scenario, the authority would not take over the entire base. Mr. Cotten referenced over 500 housing units and many buildings for which no use is envisioned. The premise is private sector interest in renting, leasing, or buying certain facilities: the fuel station, water front property, warehousing, the school, buildings near the airport, machine shops, etc. Mr. Cotten directed attention to page 13, lines 9 through 16, and noted that if a municipality other than a second class city is created or the area is annexed by a municipality to the east, the authority would be integrated into that municipal government within a year. The assets and liabilities assumed by the authority would be transferred to the municipality. Senator Rieger asked if establishment of the authority could evolve into a situation similar to the Alaska Railroad. Mr. Cotten said he was unfamiliar with operations of the railroad. He advised that any bonded indebtedness to be issued by the authority would require legislative approval. Tim Benintendi added that referenced language at page 13 was tightened to accommodate the concern raised by Senator Rieger. The authority would not linger in the wake of a viable municipality. Discussion of annexation followed. Two entities have expressed interest: Unalaska and the Aleutians East Borough. Co-chairman Halford suggested that the ultimate means of bringing the issue back before the legislature would be a four-year sunset provision. Representative Moses said he was so optimistic about the future of Adak he did not feel sunset would be necessary. The Aleutians East Borough has already prepared annexation paperwork, and the City of Unalaska is having a study conducted. Mr. Cotten advised that he had written to the Aleutians East Borough registering concern over annexation. Concern has less to do with Adak than state policy regarding "leapfrogging" over an existing municipality (Unalaska). The department is leery about setting that precedent. Senator Zharoff referenced ability of the authority to bond. He further referenced succession on dissolution of the authority providing for the municipality to succeed to authority assets, liabilities, rights and powers. He then pointed to exemptions from taxation and asked how all aspects of the foregoing would fit together. Mr. Cotten explained that issuance of debt would require state approval. The authority would be exempt from taxation, but those who lease or buy could be taxed. Assets would consist of properties and revenue streams; liabilities would be contracts or bonded indebtedness. Mr. Cotten stressed the unknown nature of the undertaking. At the present time, there is an idea of what the authority would acquire and what it would not, but that is the extend of what is known. The state, the U.S. Navy, the Aleut Corporation, and the Department of Interior are attempting to "look at what's realistic." The Aleut Corporation has some "chips" to deal with Interior. Mr. Cotten stressed that the state is not going to be a "cash cow" to pay for the operating expenses of somebody to become a capitalist. He further advised that frustration with the Aleut Corporation approach stems from the fact that while the corporation anticipates taking over a portion of the facilities, it expects the state to operate the airport through state general funds. The state would need to balance that general fund expenditure with a revenue stream from the area. Co-chairman Halford suggested that once the area is incorporated within a municipality, it is eligible for revenue sharing, community grants, equal treatment in terms of airports and roads. It appears that the U.S. Navy is giving the state a multi-billion dollar asset which could become a multi-million dollar annual drain on the treasury. As the Navy moves out, the department will not allow creation of a city of twenty-five people. A minimum of 400 people is needed for a first class city capable of incorporating and taking over the assets of the base. Mr. Cotten acknowledged that, in theory, the state might be obligated to take on certain operations such as the airport. He voiced a reluctance to do so unless an offsetting revenue stream could be developed. Representative Moses stressed that need for state participation would triple under the Aleut Corporation proposal. He voice need for a state authority to lease the fuel facilities for which four different concessions are bidding. The authority would be delegated with development of Adak for the benefit of the future. Representative Moses noted that it would be difficult for Alaska's Congressional delegation to obtain federal transitional moneys if take over is by a private entity. That is the reason for the proposed bill. Discussion followed between Senator Zharoff and Representative Moses regarding responsibility for hazardous cleanup. Representative Moses advised that the $90 to $100 million in federal cleanup over the next two years would jump start the economy of Adak. Mr. Cotten added that cleanup is to be coordinated with state selection of what has the highest reuse. As an example, he noted that the existing waterline goes through the landfill and would not meet EPA standards. Representative Moses cited factory trawler interest in renting warehouses for base operations. The 1,000 units of housing are worth $50 million at "rock bottom prices." Co-chairman Frank asked what would happen to properties that are not acquired. Mr. Cotten said that the property would be transferred to the Department of Interior. The Navy and Interior will then determine whether facilities remain or are demolished. Since the area is within a wildlife refuge, the Department of Interior would probably prefer removal. The U.S. Fish and Wildlife Services wishes to continue its presence on the island. Representative Moses cited difficulty in determining what might be useful in the future. Discussion followed regarding approval of a majority of the membership of the authority prior to disposal of property or facilities. Senator Zharoff asked if more than a simple majority should be required. Representative Moses expressed reluctance to tie the hands of the unbiased authority delegated to what is best for the future of Adak. CHIS GATES, representing the Aleut Corporation, next came before committee. Senator Zharoff again posed the question of the majority needed to approve a disposal. Tim Benintendi clarified that it would not be possible to move on an action on a tie vote or less than a majority of the board. Mr. Gates voiced his understanding that Senator Stevens believes consideration of a non-profit corporation instead of an authority might have merit. He then read from correspondence from the Senator indicating that the Aleut Corporation proposal "offers a mechanism to jump start the process of attracting commercial enterprises to Adak." Further, while the fiscal note is for $600.0, real state expenditures for operation of the airport and seaport will total millions. The Aleut non-profit (including the Aleutians East Borough, Dutch Harbor, state representation, and villages of the region) proposes that a corporation operate the airport. That would save millions of general fund dollars. Mr. Gates noted that reuse arrangements in Alaska generally utilize non-profits rather than authorities. He expressed his hope that the proposed bill would not allow ability to "strip out the assets" without a super majority (three-quarter) vote of the board. There will be great incentive to "sell stuff that we're going to need to make that town work." Co-chairman Halford asked if it was the intent that the state maintain the airport. Representative Moses acknowledged that someone would have to operate it since it is the mainstay of Adak. He said he anticipated a substantial amount of help from the federal government. Under a public authority, the Navy, other federal agencies, and the Congressional delegation would be better able to assist the future of Adak than if it is in the hands of a private entity. Co-chairman Halford referenced the $281.0 fiscal note and voiced his understanding that $100.0 of the total is federal. He sought assurance that only that amount would be spent. Representative Moses noted that, one way or another, the airport would be kept open since it serves as an alternate for all planes to the Orient. He stressed that the proposed bill provides a vehicle to take in moneys to support public needs until a municipality is in place. Discussion followed regarding activities leading to establishment of a new town. Representation Moses stressed that that would happen. The proposed bill would allow it to happen along an organized path. Once seed money is provided, the authority will be self-supporting. The authority must be in place for the Navy and Congressional delegation to commence transition. The Navy will be gone by January of 1998. Senator Randy Phillips inquired regarding a five or ten-year sunset. Representative Moses said while he did not think it was necessary, he would have no objection. He added that "Things are going to happen a lot faster than that." Senator Zharoff voiced concern that sunset provisions might impact ability to bond. Mr. Cotten concurred in that concern. END: SFC-96, #90-B, Side 2 BEGIN: SFC-96, #91, Side 1 Senator Rieger expressed concern that bonded indenture or lease obligations not prevent transfer of the authority to a successor. Co-chairman Halford agreed with the concern and voiced his belief that pledge of the state language at page 9 has problems. It appears that the authority could enter a covenant that supercedes state ability to change the powers and duties of the authority at a later date. Discussion followed regarding transition language to ensure that bond holders would not lose their investments, since the state would pick up the obligation, in the event of any change. Representative Moses reiterated that the legislature would have to approve any bonding. Further discussion followed regarding bond issues by AIDEA. Senator Rieger suggested that pledge of the state language might work if coupled with a restriction on bond indenture language so as not to preclude eventual transfer to a municipality or other entity. Co-chairman Halford observed that wording within the succession section at page 13 appears in conflict with pledge of the state language at page 9. If language in these sections is read so as not to include transition provisions, it may work as is. Referencing AIDEA financing, Senator Rieger voiced his understanding that the state has always been obligated to defer to language in a contract or a bond indenture. That is governed by a breach of contract provision in the Constitution. Co-chairman Halford suggested that if general language covers the issue, perhaps pledge of the state language is not necessary. He concurred that necessary provisions could be added when bonds come before the legislature for approval. Senator Rieger MOVED for adoption of the following amendment: Page 5, line 17, after "transfer" insert: (d) The authority may not enter into a trust indenture or contract which has the effect of precluding the transfer of the assets and liabilities of the authority to a successor. No objection having been raised, the AMENDMENT was ADOPTED. Senator Rieger directed attention to page 11, lines 23 through 29, and advised that provisions set forth do not reflect a "good deal" for the authority. Risk associated with loans often occurs in the outer years. There is a large differential in risk between initial and outer years. He suggested that no state agency should enter such an arrangement. Co-chairman Frank acknowledged the concern and commented that AIDEA presently has such authority. Senator Sharp MOVED for passage of SCS CSHB 466 (Fin) with individual recommendations and accompanying fiscal notes. No objection having been raised, SCS CSHB 466, (Fin) was REPORTED OUT of committee with a $281.0 fiscal note from the Dept. of Commerce and Economic Development and a zero note from the Dept. of Community and Regional Affairs. All members present signed the committee report with a "do pass" recommendation. Senator Randy Phillips was temporarily absent and did not sign.