Legislature(1999 - 2000)
05/06/1999 02:20 PM Senate TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 84-INTERNATIONAL AIRPORTS REVENUE BONDS
CHAIRMAN WARD brought HB 84 before the committee for consideration.
TAPE 99-12, SIDE B
Number 545
MR. KURT PARKAN, Deputy Commissioner for the Department of
Transportation and Public Facilities (DOTPF), stated HB 84 would
authorize $25 million in additional bonding authority for the
Anchorage International Airport Terminal expansion project. He
introduced Mr. Dave Eberle, Program Manager for Gateway Alaska in
charge of the construction of the project; Mr. Mort Plumb, Director
of the Anchorage International Airport; Mr. Jim Kubitz with the
Alaska Railroad Corporation; and Mr. Devon Mitchell, Debt Manager
for the Department of Revenue (DOR).
MR. PARKAN explained the purpose of HB 84 is to provide the airport
a means of interim financing to enable the terminal redevelopment
project to be constructed in a timely manner. The Governor
introduced legislation last year to authorize $204 million in
revenue bonds to finance the terminal redevelopment project. In
addition to the bonding, DOTPF included $26.3 million in federal
highway funds for a portion of the roads leading up to the
terminal.
The Senate bill that ultimately passed the legislature last year
reduced the amount $25 million. The expressed intent of the
legislature was that DOTPF secure additional federal dollars from
the Federal Aviation Administration (FAA). During the summer,
DOTPF received those discretionary dollars through a Letter of
Intent. In February of 1999 the DOR issued $170 million in revenue
bonds for the project. Currently the project is about 5% complete
and major construction will begin this summer.
DOTPF received the bonding authority coupled with federal highway
funds to do the roadside and land-side improvements. However, the
funding will be received over a 10-year period which creates a cash
flow problem. The project's completion date is anticipated to be
3 to 4 years. To solve the cash flow dilemma and maintain the
current project schedule, DOTPF is asking that the previously
requested $25 million in bonds be authorized for interim financing.
As proceeds from the FAA are received, they will be used to offset
the additional bonds the department is requesting.
Overall, the project cost remains at $230 million as anticipated;
the $25 million in bonding authority will simply provide forward
funding to allow the project to be completed as originally
scheduled. Additional bonding authority will not increase the cost
of the project and it will ultimately reduce the impact on the
airlines. HB 131 will benefit the airport by allowing the terminal
project to be completed on schedule, and the airlines because it
reduces their costs. The airline carriers voted to approve the
project with the full $204 million in bonding authority; DOTPF is
reducing that amount by supplementing the cost with federal funds
thereby reducing the costs borne by the airlines and the traveling
public.
CHAIRMAN WARD asked Mr. Plumb or Mr. Eberle to address the
questions he had faxed to them.
Number 488
MR. DAVE EBERLE, Program Manager for Gateway Alaska, said one
question asked whether the design plan still contains five new jet
gates and seven gates for smaller aircraft which, he said, has
changed somewhat. The regional carriers now have the benefit of
exclusive use of seven gates; the jet gates have been moved to the
new Concourse C and reduced to four full-time gates for a net loss
of one gate. One additional jet gate is currently earmarked as an
alternate; in the event that bids come in higher than anticipated,
that gate will not be built.
MR. EBERLE presented the committee with a contingency analysis
he had prepared. The original contingency amount was $30.6 million.
He has accepted requested additions totaling $11.8 million and
suggested reductions of $4.8 million. He said these additions and
reductions will occur until the project is completed, and balancing
them is a means of managing the contingency in order to stay within
the $230 million budget.
MR. EBERLE said he has identified potential alternates to reduce
the scope of construction by not building certain aspects with the
objective of staying within the original project budget.
Number 445
MR. MORT PLUMB, Director of the Anchorage International Airport,
said one question was whether the traffic projections were "too
rosy" and have already fallen short in the first year. He said
they had identified many shortcomings in the terminals, such as
baggage claim and ticket cuing areas, and forecasted traffic in the
year 2005. The Asian economy and other factors have impacted
Alaska's economy, more particularly in cargo business with some
impact in passenger business. He believes the forecast will be
fairly representative and the only impact to the airport will be
when to build additional infrastructure and what that trigger point
would be.
MR. PLUMB explained HB 131 will allow the airport to get the bond
money up front to finance the construction costs, and over the ten
year period, it would receive the money from the federal government
to repay the bond debt.
MR. EBERLE stated no cost overruns have occurred thus far, and he
repeated that overall they would stay within the project budget.
The total spent on administration, engineering, design and other
non-construction expenses was $7.2 million through the end of
March.
Regarding the question of whether anything has been scaled back,
MR. PLUMB said overall the square footage has increased based on
the needs of the airlines. He offered to address specific
questions regarding scope items.
Number 380
SENATOR PEARCE expressed concern about the scope of the project.
The original design work was done by a company considered to be an
expert at airport design worldwide. She questioned why the
airlines are now demanding more from DOTPF when their needs were
defined in the scope by the expert designer. She noted the
domestic carriers are not the only ones paying for the expansion,
cargo carriers are involved as well. She questioned how DOTPF can
justify this expansion if the design was for a certain size.
MR. EBERLE said the original concept was based on averages, a
numerical model of other airports around the nation. At the time
the plan was developed, the design concept was based on
deplanements and preliminary discussion with the airlines and
tenants. The design concept contained an assumed square footage
without a floor plan; it was very general in nature. Now, as they
advance from the concept to the details of the schematic design in
the design development process, discussions with the airlines and
tenants have given rise to the various space increases. The goal
is to meet all the users' needs and to accommodate the traveling
public.
SENATOR PEARCE commented that DOTPF should never have brought the
project to the legislature and asked for bonding authority last
year. It should have come with the actual design and actual cost.
The cargo carriers bear the cost of the Anchorage International
Airport, not the passenger carriers, and now they will carry more
because the domestic passenger carriers want "new bells and
whistles after the fact."
MR. EBERLE responded the project cost remains at $230 million. The
project presented to the legislature last year was expected to cost
$204 million in bonding to be paid through airline revenues. That
figure has been reduced to $179 million due to additional federal
funding of $25 million. HB 131 requests bonding authority for
interim financing, but the net cost to the airlines is $25 million
less.
SENATOR PEARCE countered that she disagrees, because some of the
reductions are deferrals until a later date, including the North
terminal connector and completion of the third floor space. She
said that does not reduce the cost of the project or allow for
completion with the same amount of money.
MR. EBERLE replied he couldn't say the two projects referred to by
Senator Pearce will never be necessary, but whether they get added
will be subject to a vote of the airline carriers.
SENATOR PEARCE said the airlines should not run the AIA, the State
should.
Number 269
MR. PLUMB said the gate configuration changed in the past year.
The original concept had five additional gates, three of which
would be cross-utilized. In the end, the regional carriers got
three exclusive gates instead of three part-time, and domestic
carriers lost three. To accommodate the domestic carriers they
reduced the square footage of the regional carriers' area, the
square footage was added to the "C" extension. He noted that, and
a small amount of square footage added to the concession area, is
the cause of the change.
SENATOR PEARCE said the last time the group briefed the committee,
they said the square footage increased because they had to build a
mechanical utility underneath the terminal. MR. PLUMB said that
was correct. SENATOR PEARCE repeated they are not reducing, just
deferring some things. She emphasized that her point is that the
original plan attached to the North terminal, so that in the long
term, the North terminal would be fully utilized. Now, it is not
being attached so the white elephant is still sitting there and
$230 million will have been spent. She maintained that the project
will not be complete after the $230 million is spent and the group
will be before the legislature asking for more money to make the
project work.
SENATOR HALFORD asked the cost of the international terminal. MR.
PLUMB said it was about $26 million. SENATOR HALFORD asked if it
would sit vacant. MR. PLUMB said, "No, sir, it's 100% utilized
right now by Delta and international carriers." It was built as a
shopping center for international travelers, not as an
emplanement/deplanement terminal.
SENATOR PEARCE said she and Representative Hanley requested an
audit on the domestic terminal project, and at that time the
auditor concluded the project scope was not finalized prior to the
construction commitment. The scope was revised both before and
after the concession contract award date, which is partially why it
went way over budget. Airport tenants' requests for scope
revisions to the project necessitated redesign by the design
consultant at the State's expense. The large number of design
deficiencies resulted in the general contractor submitting over 750
design clarification and variation requests. The general
construction contract was awarded for $17.8 million with an
original contingency of $1.6 million through June 19, 1985.
Ninety-nine change orders totaled $3,126,000 above the original
contingency. SENATOR PEARCE said, "I hope that we've learned
something from that previous experience. You gentlemen weren't
there at the time, but we've been through terminal expansions
before, and as far as I can tell, we are starting down the same
road. That's why I am bothered by this."
SENATOR LINCOLN asked about DOR's fiscal note which states that the
airport has secured a federal grant, called a Letter of Intent, for
$25 million, to be appropriated by Congress over a 10-year period,
and whether the grant is secured or anticipated.
MR. PARKAN responded the Letter of Intent is a promise by the FAA
to pay over the course of 10 years, subject to appropriation by
Congress every year. The grant totals $32 million in federal
discretionary funds, and $16 million promised from the airport for
their entitlements to be used toward terminal development. Letters
of Intent are frequently and most commonly funded by front-loading
with bonds. He said other airports use the same process.
MR. JIM KUBITZ, Vice President of Real Estate and Project Planning
with the Alaska Railroad Corporation (ARRC), stated the ARRC
secured a $28 million grant from the federal railroad
administration to build a passenger rail station at Anchorage
International Airport. A year ago he became involved in the
planning process of the airport at Commissioner Perkins' and Mr.
Sheffields' request in order to protect its right-of-way into the
airport for future development of a rail station. Through an RSA
agreement with DOTPF, ARRC was able to work with the project
architect to conceptually design a rail station into the airport.
ARRC continued to work with the airport, and was successful in
getting a grant from Alaska's congressional delegation. ARRC is
now geared up to be a full participant in the airport project.
MR. KUBITZ said ARRC uses its own revenues without subsidies and is
careful with its operating funds. The project is designed to stay
within budget. The schematic design is final, and because of
procurement rules, ARRC will go out to bid for a final design. The
estimated construction budget is $20 million with a 16-17%
contingency built in. The elevated track portion, or rail station,
will be about $10 million, with the rest used for contingency or
the tunnel. The tunnel will be built underneath the circulation
road that will connect to the main part of the terminal. Benefits
to the airport include the new tunnel to help connect the rail
station and long-term parking area to the airport terminal. The
Board has committed to the tunnel; DOTPF will build it. ARRC is
providing rights-of-ways to the airport for the circulation of the
road, and along the rail line for a bike path designed into the
project.
The Board has not given full approval until ARRC provides it with
a market identification study in June. ARRC intends to seek its
approval to continue with full design and construction of the
airport.
CHAIRMAN WARD asked who this will benefit.
Number 030
MR. KUBITZ said the potential markets identified for the rail
station are cruise ship passengers motor-coached by Princess and
Westours, as well as charter operations. Groups brought in on
charter aircraft could be put on a train and taken directly to
Denali Park, Fairbanks, Seward or Girdwood. ARRC is looking at the
commuter market because line changes between Anchorage and Wasilla
can speed up the train.
TAPE 99-13, SIDE A
Number 001
CHAIRMAN WARD stated three people are waiting on teleconference to
testify on HB 84.
MR. MIKE KEAN, Transportation Director of Anchorage Economic
Development Corporation (AEDC), testified in favor of HB 84. He
said AEDC believes the Anchorage International Airport is an
"economic engine" of the City of Anchorage its expansion is much
needed.
Number 028
MR. CLIFF ARGUE introduced himself as Staff Vice President of
Properties and Facilities at Alaska Airlines, and Chairman of
Anchorage/Fairbanks Airport Affairs Committee which represents 25
airlines. He said his comments represent Alaska Airlines and most
of the airline members of the committee. The airlines support HB
84. The bill is not a request for new or additional funding, it
will provide for a steady cash-flow to pay for the terminal project
as originally approved.
MR. RON LANCE, General Manager of United Airlines, expressed
support for HB 84 and agreed with Mr. Argue's comments.
Number 072
SENATOR PEARCE moved HB 84 out of committee with individual
recommendations. Hearing no objection, it was so ordered.
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