Legislature(2013 - 2014)
04/02/2014 03:21 PM Senate FIN
| Audio | Topic |
|---|---|
| Start | |
| HB23 | |
| SB218 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
2d CS FOR HOUSE BILL NO. 23(RLS)
"An Act creating the Knik Crossing Development
Corporation as a subsidiary corporation of the Alaska
Housing Finance Corporation and relating to bonds of
the Knik Crossing Development Corporation."
3:22:44 PM
Co-Chair Meyer confirmed that the committee was working
with version R of the legislation.
3:23:02 PM
Senator Olson MOVED to ADOPT Amendment 1 (copy on file):
Page 6, following line 22:
"(f) The state may not issue bonds under (a) of
this section for financing the Knik Arm Crossing
until the Knick Arm Bridge and Toll Authority has
been approved for a loan for construction of the
Knick Arm Crossing from the Federal Highway
Administration, United State Department of
Transportation, under 23 U.S.C. 601-
609(Transportation Infrastructure Finance and
Innovation Act of 1998)."
Co-Chair Meyer OBJECTED for the purpose discussion.
3:23:07 PM
Senator Olson explained that Amendment 1 would add into
statute language to specify that unless TIFIA loans were
issued from the federal government, the state would not
issue any bonds for building the Knik Arm Crossing.
REPRESENTATIVE MARK NEUMAN, commented that he had worked
with Senator Olson to draft the amendment.
Co-Chair Meyer WITHDREW his OBJECTION.
3:24:29 PM
There being NO further OBJECTION, Amendment 1 was ADOPTED.
3:24:41 PM
Co-Chair Kelly MOVED to ADOPT Amendment 2 (copy on file):
Page, Line 15:
Delete "Notwithstanding any other provision of
law"
Insert "Subject to AS 19.75.211(c) [NOT
WITHSTANDING ANY OTHER PROVISION OF LAW]"
Page 4, Following line 31:
Insert a new bill section to read:
"* Sec. AS 19/75/211(c) is amended to read:
(c) The authority may not issue bonds under
this chapter without prior approval from the
legislature. If the [THE] authority receives
legislative approval, the authority may
issue bonds in an aggregate amount not to
exceed $500,000,000 plus the cost of
issuance.
Renumber the following bill sections accordingly.
3:24:47 PM
Co-Chair Meyer OBJECTED for the purpose of discussion.
3:24:51 PM
SUZANNE ARMSTRONG, STAFF, SENATOR KEVIN MEYER, spoke to
Amendment 2. She related that the amendment proposed to put
in place a sideboard on the authority of KABATA to issue
bonds. Under current authorizing statues KABATA was
authorized to issue bonds at an aggregate amount not to
exceed 500 million plus the cost of issuance. She explained
that a question had been raised concerning the retention of
KABATA's bonding authority, if the state was issuing bonds
for the project. The amendment stipulated KABATA had to
receive legislative approval prior to the issuance of the
bonds.
3:26:27 PM
Representative Neuman approved Amendment 2 as a "friendly
amendment".
3:27:12 PM
Co-Chair Meyer WITDREW his OBJECTION.
There being NO OBJECTION, Amendment 2 was ADOPTED.
3:27:32 PM
AT EASE
3:29:00 PM
RECONVENED
3:29:36 PM
Vice-Chair Fairclough understood that if the state passed
the legislation it would have approved up to $300 million
worth of bond as its commitment to the process as it was
currently presented. She surmised that Amendment 2 stated
that KABATA would have to seek legislative approval for an
expansion.
3:30:53 PM
Representative Neuman replied that the amendment spoke to
funding concerns.
3:32:12 PM
Vice-Chair Fairclough inquired whether Amendment 2 only
affected the expansion portion of the project.
Representative Neuman understood that the amendment spoke
to future expansion of the Knik Arm Bridge.
Vice-Chair Fairclough surmised that if the bill went to the
floor, was passed and concurred by the other body, the $300
million would be approved.
3:32:51 PM
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE, STATE DEBT MANAGER,
DEPARTMENT OF REVENUE, replied that the bill would provide
all of the pieced of the financing puzzle for the project.
He said that Amendment 2 would eliminate the ability of
KABATA to issue toll revenue bonds, which would be
supported by toll revenue growth in the future, for an
expansion project or other projects associated with the
bridge. He agreed that $300 million in state toll bonds
would be authorized with the passage of the bill. The
finance plan included: operation and maintenance would be
paid by the project; federal funds would be appropriated to
the project; a TIFIA loan, for an additional $350 million,
would be supported by a direct pledge of toll revenue form
the bridge. He said that there would be no state pledge
associated with the TIFIA loan. He spoke to the concern
about the elimination of the ability of KABATA to issue
bonds to potentially limit the type of arrangement that
could be made with TIFIA for purposes of maintaining the
TIFIA loan.
3:35:28 PM
Vice-Chair Fairclough understood that Amendment 1 would
protect the state in not allowing the project to advance
without the TIFIA loans; Amendment 2 would protect the
state on any other kind of bond issuance for expansion by
requiring legislative approval for expansion funding.
Mr. Mitchell replied that she was correct in her
understanding.
3:36:17 PM
Senator Dunleavy queried the estimated total cost of the
project was.
Representative Neuman replied that the estimated total was
approximately $894,424. He noted that cost overruns would
fall back on the builder.
3:37:23 PM
Senator Dunleavy clarified that the cost was $894 million
and not thousand.
Representative Neuman said yes.
3:37:28 PM
Senator Hoffman clarified that the cost was for a two-lane
bridge.
Representative Neuman replied in the affirmative.
3:37:37 PM
Senator Dunleavy asked whether there were estimates for a
four-lane expansion.
Representative Neuman did not believe that projections for
the cost of a four-lane expansion had been run.
3:38:25 PM
Senator Dunleavy asked whether $300 million was the state's
bonding amount for the project before the committee.
Representative Neuman said yes.
Senator Dunleavy asked for further explanation on the full
funding of the project.
Mr. Mitchell replied that additional funding to the state
issued bonds the TIFIA loan was anticipated to be $341.3
million and the additional federal aid that would be needed
was $226 million. He said that the federal funds would be
in addition to $18.9 million in funding that were currently
available, but unobligated. The current fiscal years
proposed appropriation of $55 million.
3:39:56 PM
Senator Dunleavy continued to probe the cost of the project
and the obligation to the state.
3:40:29 PM
Vice-Chair Fairclough thought spoke to the annual payments
for the state's bond liability. She asked in what year the
state would begin letting bonds for the project.
Mr. Mitchell responded that the state would need to be
obligated before additional federal dollars could be spent.
He anticipated that debt service on the operating side
would ramp-up within the next few years.
3:42:03 PM
Vice-Chair Fairclough asked for a specific number of years.
Mr. Mitchell responded one to three years.
3:42:14 PM
Senator Olson asked Mr. Mitchell to speak to Page 5,
section 5, line 17.
Mr. Mitchell clarified that the bill would create the
authority for the state to issue bonds, either the
authority or state bonds would be valid and binding.
Senator Olson asked whether Mr. Mitchell supported the
language.
Mr. Mitchell said that he had no reservations concerning
the language. He added that if the legislature was going to
consider that the state issue bonds it should be clear that
the pledge would be binding and valid.
Senator Olson inquired whether the payments on the TIFIA
loans were backed by the moral obligation of the state.
Mr. Mitchell replied no.
3:44:04 PM
Senator Dunleavy understood that the top end of exposure to
the state for bonding would be $450 million.
Mr. Mitchell said yes.
Senator Dunleavy surmised that TIFIA funds were not
incorporated into that figure; the state did not have a
moral obligation for TIFIA.
Mr. Mitchell relayed that operation and maintenance would
be paid first and that TIFIA would be paid second. If the
revenues were insufficient, TIFIA would need to negotiate
with KABATA to develop a plan to rectify the matter. He
added that many of the issues would be negotiated in the
beginning of financing and that none of the options would
include the state appropriating money to pay the TIFIA
debt.
Senator Dunleavy thought that if the toll scenario serviced
the TIFIA loan what was left over would be servicing the
bonds for the state.
Mr. Mitchell responded in the affirmative.
3:45:26 PM
Senator Olson understood that the state was last in line to
be paid back for the project.
Mr. Mitchell responded that the state was third in line; if
there was not excess toll collection for the toll revenue
bonds then the state would be obligated to consider
appropriating money to pay the debt service. In the event
that there was excess toll revenue the state would be
relieved of the obligations.
3:46:33 PM
Senator Olson expressed concern that in the event that the
TIFIA money needed to be paid back a direct appropriation
from the legislature would be needed.
Mr. Mitchell responded that the state was not going to be
responsible for the TIFIA portion of the loan. He said that
the appropriation that should be considered would be the
one associated with the toll revenue bonds of the state.
3:47:35 PM
Senator Olson understood that the state was not responsible
to the TIFIA loan if the tolls came up short.
Mr. Mitchell said that was correct.
3:47:44 PM
Co-Chair Meyer believed that the TIFIA loan would not be
given if the project did not seem viable.
Mr. Mitchell understood that the TIFIA program was designed
to be available for projects that were relatively large and
otherwise difficult to finance on a long-term basis.
3:48:36 PM
Representative Neuman spoke to the checks and balances that
had been written into the current bill version.
3:49:10 PM
Co-Chair Meyer inquired what would happen if the state was
denied the TIFIA loans.
Representative Neuman said that if the TIFIA loans were not
approved then KABATA would need to develop a new financing
plan.
Co-Chair Meyer added that the legislature then would be
asked for money to fund the project.
Representative Neuman agreed.
Senator Olson asked what KABATA would consider if this were
the case.
Representative Neuman said that if the TIFIA loans were not
approved KABATA would develop another financing plan to
move forward.
Senator Dunleavy wondered about the anticipated plan for
the Glenn Highway build-out over the years.
3:50:24 PM
Senator Olson asked about the approximately $900 million to
build the bridge. He wondered if the costs for the
improvements on the northwest side of the bridge had been
considered.
Representative Neuman replied that in 2014 the stretch of
the Parks Highway between Wasilla and Big Lake would begin
construction for a four-lane divided highway. In 2016 a
four-year divided highway on Kink/Goose Bay Road would
begin. He said that the cost would be approximately $100
million and was included in the current state
infrastructure plan. He added that the Mat-Su Borough, in
anticipation of future projects, had created an 800 foot
utility corridor from mile 73 to the Knick Arm Bridge area.
He anticipated that the best future expansion would be to
build a road straight north that would send highway traffic
straight north and would reduce the cost of future
expansion projects.
3:54:37 PM
Senator Olson asked what the cost would be for improvements
on the Government Hill side of the bridge.
Representative Neuman replied that Phase 2 was estimated at
$1.2 billion.
Senator Dunleavy queried the anticipated traffic volume on
the bridge.
3:55:37 PM
Senator Dunleavy inquired about the payment schedule for
the TIFIA loans.
Mr. Mitchell said it would depend on final financing. He
added that there would be semi-annual payments; $20-$25
million, per year, over a 20 year timeframe.
Representative Neuman added that currently there were 19
thousand vehicles per day at the front und of Knik/Goose
Bay Road and that DOT had testified that 10 thousand
vehicles per day would cover the cost of the bridge.
3:57:10 PM
Vice-Chair Fairclough wondered if a freight mobility study
was included in the backup.
Representative Neuman deferred the question to DOT or
KABATA.
3:58:19 PM
Senator Dunleavy inquired what the estimated minimum and
maximum average traffic counts were for the bridge.
JUDY DOUGHERTY, EXECUTIVE DIRECTOR, KNIK ARM BRIDGE AND
TOLL AUTHORITY (KABATA), responded that the maximum
estimation was 21 thousand vehicles per day. She said that
the project only needed to carry two lanes in order to
carry the TIFIA debt service. She asserted that the project
did not depend on ever expanding to four lanes.
Senator Dunleavy queried the minimum traffic counts.
Ms. Dougherty said that KABATA anticipated that the project
would reach 21 thousand vehicles. Immediately following to
completion traffic was expected at approximately 6,000
vehicles per day.
4:01:20 PM
Senator Hoffman requested the maximum number of vehicles
that the two-lane bridge would carry.
Ms. Dougherty replied that the anticipation was that the
bridge would carry 21 thousand maximum vehicles per day.
Senator Hoffman wondered how long a vehicle could be
delayed at the tollbooth.
Ms. Dougherty replied that the tolling would be electronic;
cars would have a transponder and there would be no delay
in passing through the tolling mechanism, tourists
included.
Senator Hoffman asked how tourists would be charged.
Ms. Dougherty responded that tourists did not generally
travel in their personally owned vehicles. She stated that
KABATA would have payment arrangements with all vehicle
rental companies.
Co-Chair Meyer understood that the system had worked in
other states.
4:03:12 PM
Senator Hoffman recalled that it had been previously stated
that expanding the two-lane bridge into a four-lane bridge
would cost an additional $300 million, which he believed
was a low estimate. He said that Page 19 of the audit noted
an approximate cost of $1.6 billion. He requested that the
department weigh in on the possible cost of an expansion.
JEFF OTTESEN, DIRECTOR, DIVISION OF PROGRAM DEVELOPMENT,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, replied
that the estimate seemed low because the bridge supports
would already be built, the embankment leading to the
bridge will have already been built giving KABATA the
right-of-way. He stressed that a lot of the work will have
already been done in Phase 1, which was why the cost for
the first phase was high.
4:05:56 PM
Senator Hoffman asked if Mr. Ottesen stood by the $300
million figure for Phase 2, and if so how did the
department rectify the $1.2 billion to $1.6 billion
proposed by KABATA as the cost for project.
Senator Hoffman insisted that the department answer the
question and not KABATA, because KABATA had no experience
building bridges or constructing roads.
Mr. Ottesen replied that the numbers for the two projects
were hard to reconcile; they started with different
assumptions and were working under a "3P" model. He relayed
that the 3P approach involved profit on top of everything.
The project had a 3P constructor, financier and designer,
operating with higher rates of interest on the project and
a profit motive on top. He reiterated that the model was
different. He said that the state would pay interest of
approximately one-third of the cost to construct and not on
three-thirds. He said that the state was paying a lower
rate of interest on that same borrowing. He added that the
state would not pay profit on 100 percent of the cost of
the project. He said that the state was assuming more risk
with the assumption that it was getting a better deal.
4:07:51 PM
Senator Hoffman inquired if the administration stood by the
estimate of $300 million for Phase 2 to build an additional
two lanes.
Mr. Ottesen replied in the affirmative.
Ms. Dougherty clarified that the estimate for Phase 2 was
actually $550 million and not $300 million. She said that
the cost included the widening of the bridge. She shared
that there were project extensions that were part of Phase
2 that included 9.5 miles of two-lane roadway along Point
MacKenzie Road. She asserted that the bridge itself could
cost $300 million, but the project extensions and
connections were part of Phase 2 and were options to add
once traffic was at a point where the extension would be
necessary.
Vice-Chair Fairclough queried Ms. Dougherty's work
experience was before she went to work for KABATA.
Ms. Dougherty responded that she worked for 22 years at the
Department of Transportation and Public Facilities. She
noted that a large part of her career was spent on the
Seward Highway. She felt that she brought extensive
experience to the project.
4:10:50 PM
Senator Dunleavy understood that the TIFIA loans and state
bonds could potentially be paid if the average carload was
13,500 per day at $10 per toll.
4:12:34 PM
Senator Dunleavy inquired if there was a plan to expand the
Glenn Highway.
Mr. Ottesen replied that there was a series of projects
that had been laid out in a long-range plan by the
Anchorage Metropolitan Transportation Authority. He said
that most of the projects had not been funded and no design
or environmental work was being done. He said that there
was a plan but that no actual work was being done.
4:14:35 PM
Senator Hoffman asked what toll figure the department had
used for calculating the payback of the loans and bonds.
Ms. Dougherty responded that KABATA anticipated that the
toll would start at $5 per passenger car and approximately
$18 per truck in the opening year. She thought tolls would
grow with inflation.
4:15:38 PM
Mr. Ottesen commented that there was no other highway
project in the state that was proposing to pay all of
management and operations and much of its capital costs. He
said that if the state did not build this project, and had
to build capacity between Anchorage and Mat-Su, it would
have to build along the Glenn Highway Corridor. He said
that project would need federal aid or state funds and that
none of it would be paid for by the user base.
Co-Chair Meyer understood that building along the corridor
would cost $600 million.
Mr., Ottesen replied that yes. He added that once you got
into the Mat-Su and began moving traffic through the
Wasilla Corridor the cost would grow considerably. He said
that the traffic was being created by the growth of the two
corridors.
Mr. Ottesen clarified that the $600 million was the current
estimate for widening the Glenn Highway out to the Mat-Su
Borough area.
4:17:23 PM
Senator Dunleavy understood that other planned expansions
would occur regardless of whether KABATA moved forward with
the project.
Mr. Ottesen said yes.
Senator Olson noted that the state was facing financial
struggles. He expressed concern that the project would cost
the state more than expected and that the state's bond
rating could be negatively affected.
Mr. Ottesen responded that he could not speak to the
solvency of the state's finances. He said that he had been
in the state since 1977 and had worked in transportation
since 1987. He shared that he was here for the crash in
1987. He asserted that Alaska bounced back because it was
a resource state. He believed that growth would continue.
He said that the 2008 recession only dropped traffic in
Alaska by 4 percent.
4:21:26 PM
Senator Olson noted that the 2008 recession had little
effect on Alaska. He clarified that he was referencing the
recession that occurred in the mid 1908's. He reiterated
his concern that the project would prove too expensive and
could prohibit the state from entering into other projects.
Mr. Otteson responded that there were cases where it did
not make sense for the state to invest in projects directly
when industry could finance improvements. He thought that
the KABATA project was a good example of building
transportation in the way that would cost the state less
overall. He asserted that the state was going to get the
chance to build the bridge with someone else footing a
large portion of the expenses.
4:23:18 PM
Senator Olson thought that the original plan for KABATA
evolved into the state taking on the majority of the
financial responsibility.
Mr. Ottesen replied that the original plan was to pay for
the project with earmarks. Then earmarks became a tainted
issue and were protected by the late Senator Stevens
through relabeling, which resulted in the loss of half of
the earmarked funding. He felt that the funding plan, as it
was currently set up, was sound.
4:24:47 PM
Senator Olson worried about future financial issues. He
believed that that money would be taken from other projects
in order to fund the bridge. He wondered what the plan was
for projects that were yet to be completed.
Mr. Ottesen responded that the department would be delaying
projects but that projects would not be cancelled,
technically. He asserted that the majority of the project
would be built with a 1 to 2 year delay and many would not
be delayed at all.
Co-Chair Kelly commented that bridges and dams were built
in the country during the Great Depression. He pontificated
on the merits of the project.
4:28:26 PM
Senator Hoffman stated that he had just come from a
groundbreaking for a new bridge in Western Alaska at
Aleknagik, and understood what the dream of a new bridge
could bring to people of the state. He said that he had
worked with the department on the Aleknagik Bridge for over
20 years to build the bridge and wondered if the KABATA
project would take as long to complete.
4:29:43 PM
Representative Neuman stated that there had been a lot of
talk regarding traffic revenues and the different
advantages of the project. He noted that one thing that had
not been discussed in relation to the project was what
would happen to the state's communities if these types of
infrastructure projects were not pursued. He worried that
the growth of Medicaid was a measurement of the health of
Alaskans. He opined the possibility the state would not
have infrastructure projects to attract capital money from
other entities that wanted to invest in the state. He said
that without projects like KABATA the state would fall
apart.
4:33:51 PM
SUZANNE ARMSTRONG, STAFF, SENATOR KEVIN MEYER, spoke to the
fiscal notes attached to the bill.
4:36:05 PM
Vice-Chair Fairclough commented for the record that she
drove on the Glenn Highway every day and sometimes had to
wait between 30 minutes and 2 hours to get home. She said
that the highway was heavily used. She stated that passing
KABATA had been a dream for the Anchorage area since 1960
and the project had only increased in cost. She felt that
the project would lower the cost of goods and services,
decrease carbon emissions, lower drive time and improve
public safety. She said that nearly all of the available
land was located in the Eagle River/Chugiak area. She
relayed that development had caused flooding problems in
her community and had resulted in major clean-up projects.
4:41:47 PM
Vice-Chair Fairclough believed that the project was a
greater public service issue for the people that lived in
the Anchorage and Mat-Su area. She supported the financing
structure in the current bill version. She stated that
safeguards in the legislation required a phased approach
and that the TIFIA loans would be repaid based on the
numbers given to the federal government.
4:43:58 PM
Senator Olson believed in the development of residential
areas. He warned that the state was headed into a recession
and that people would be leaving the state. He thought that
if the state had plenty of reserves and a revenue surplus
the project would be better timed. He strongly believed
that the state would not be able to support the project
financially.
4:46:07 PM
Vice-Chair Fairclough MOVED to REPORT SCS 2dCSHB 23(FIN)
as amended out of committee with individual recommendations
and the accompanying fiscal notes.
Senator Olson OBJECTED for the purpose of discussion. He
reiterated his concern that the state could not afford to
go forward with the project. He believed that the timing
was wrong.
Senator Olson MAINTAINED his OBJECTION.
4:49:12 PM
Senator Dunleavy said that he had been skeptical on the
original funding for the project. He believed that the
funding plan in the current version had renewed the
viability of the project.
4:53:51 PM
Co-Chair Meyer requested a roll call vote.
4:54:33 PM
A roll call vote was taken on the motion.
IN FAVOR: Fairclough, Hoffman, Dunleavy, Kelly, Meyer
OPPOSED: Olson
4:53:57 PM
SCS 2dCSHB 23(FIN) was REPORTED out of committee with a "do
pass" recommendation and with a new fiscal impact note from
the Department of Revenue and a zero fiscal note from the
Department of Transportation and Public Facilities.
4:54:39 PM
AT EASE
5:02:29 PM
RECONVENED
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