Legislature(1999 - 2000)
03/31/2000 01:45 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 319
An Act providing for and relating to the issuance of
state guaranteed transportation revenue anticipation
bonds for the purpose of paying the cost of
transportation projects that qualify for federal
highway aid and the allocation of those bond proceeds;
and providing for an effective date.
JOSEPH PERKINS, COMMISSIONER, DEPARTMENT OF TRANSPORTATION
AND PUBLIC UTILITIES, stated the State's ability to expand,
diversify and strengthen our economy through improved
transportation could be enhanced through the mechanism
provided in the proposed legislation.
This year, we have an opportunity to expedite construction
of some large and much needed highway projects through a
relatively new federally approved funding mechanism. The
mechanism allows states to acquire full bond funding for
projects ahead of the usual schedule of annual federal
allocations. The National Highway System (NHS) Act of 1995
revised Title 23 and lifted limitations on the use of
federal highway funds for bond issuance and debt service by
making the costs eligible for federal-aid reimbursement.
Essentially, the State would be borrowing to build projects
now and paying back with future federal money.
Commissioner Perkins commented that HB 319 is a $350 million
accelerated transportation bond initiative that would allow
the State to take advantage of the new federally authorized
flexibility like other states have done. Alaska will be
about to enjoy the economic and safety benefits of projects
now, by selling bonds funded by the flow of future federal
dollars.
Commissioner Perkins stated that it is anticipated that debt
service payments on the bonds will amount to approximately
10% of our annual highway program, which will be between
$35-$37 million dollars per year. HB 319 calls for the
issuance of general obligation bonds because our State
Constitution requires a vote of the people for the State to
incur long term debt. The bonds will be paid with future
federal funds but will be backed by the full faith and
credit of the State's general fund. The backing will give
the State an excellent bond rating which translates into
good interest rates. He noted that the bond market has
embraced these bonds in other states.
It is anticipated that within the first three years, there
will be enough investment earnings to cover the full State
general fund match requirement. It is expected to save
approximately $48 million dollars in general funds, which
will still satisfy the arbitrage restrictions of the Internal
Revenue Service (IRS).
Commissioner Perkins enumerated that in addition to the
substantial savings in general fund there are many benefits
to the bond initiative:
? First: Money is saved because we avoid the cost of
construction inflation by building projects now instead
of years into the future. This helps offset the interest
paid on bonds.
? Second: The money will fund large, capital intensive
projects without affecting smaller projects. Level debt
service evens the flow of federal funds for projects
throughout the State by avoiding the peaks and valleys in
funding large projects most recently experienced with the
building of the $80 million dollar Kennicott ferry. The
impact on projects for rest of the State was substantial
when that vessel was funded.
? Third: It will allow the Department to do critical
projects that are needed now to address safety,
congestion and economic output rather than wait years for
the projects to be funded.
? Fifth: It would increase the percentage of work being
contracted to the private sector for design.
? Sixth: It does not negatively impact the current
Statewide Transportation Improvement Program (STIP).
Debt service payments would not start until September
2003. In fact, it could allow some projects further out
in the STIP to be advanced.
Commissioner Perkins continued, the accelerated
transportation bond package includes 11 specific projects in
different regions of the State.
He noted that congestion is a major problem in Anchorage.
It will be reduced with two major construction projects
utilizing this financing.
(TAPE CHANGE, HFC 00 - 96, Side 2).
Commissioner Perkins noted that the first project would be
Glenn Highway near Merrill Field. The bottleneck there is
due to the fact that we have six lanes narrowing to four
lanes and then widening to six lanes again. We will be
spending $65 million to reconstruct the Glenn Highway from
Gambell Street to McCarrey, as recommended in the Anchorage
Metropolitan Area Transportation Study (AMATS) 1991 long
range transportation plan. The project will consist of
adding capacity and new interchanges to improve the flow of
traffic into and out of downtown Anchorage. The
construction should begin in summer of 2003.
Commissioner Perkins continued, the second Anchorage project
is the upgrade of C-Street. The first phase of that project
has already been completed, which was the portion from Tudor
Road to Potter Drive. Phase II of the C-Street
reconstruction will add 2 new lanes from Potter Drive to
Dimond Blvd., including lighting and pedestrian facilities.
The Department will construct a new road link south of
Dimond to Minnesota Drive. Construction of this phase will
begin in 2001.
The final phase of the C-street reconstruction is the
extension from Dimond to Minnesota. The Department will be
constructing four lanes from Dimond to Minnesota, including
a separated railroad crossing on C Street. We will also be
constructing interchanges at C Street and Minnesota, and
O'Malley and Old Seward. Construction of this phase will
begin in 2002. The second and third phases will cost a total
of $70 million.
Commissioner Perkins noted that a major project in the Mat-
Su area will consist of constructing an interchange at the
intersection of the Glenn Highway and the Parks Highway,
which will tie in with the construction now underway from
the Parks/Glenn Intersection to Wasilla. Additionally, the
Department will be adding four lanes and upgrading the Glenn
Highway from the interchange all the way into Palmer.
Construction of this phase will begin in 2002 and the
project will cost $60 million dollars.
Co-Chair Mulder agreed that the Gamble Street to McGeary
projects needs to happen. He asked how long would it take
to address the widening without the legislation.
Commissioner Perkins stated that it would take ten years.
Co-Chair Mulder did not believe that funding the problem
would make it go away. He asked if the property would be
purchased. Commissioner Perkins stated that it would, and
that they would be able to buy it all at once. He conceded
that there are ways of procuring properties. Commissioner
Perkins stated that the right of way is a very expensive
item.
Vice Chair Bunde asked if the decline in the State's
population growth had been considered. Commissioner Perkins
replied that had been taken into account, however, to
accommodate the current crisis, it should have been
addressed a couple of years ago. He stressed that more cars
are being purchased even though there is a reduction in
population. Additionally, the Department must move the
commercial traffic from outside of Anchorage.
Vice Chair Bunde recommended that more change need to be
made than just adding more lanes. Commissioner Perkins
proposed that the State takes a good look at "commuter rail"
systems to implement a good, high-speed service.
Alternative methods need to be investigated and constructed.
Vice Chair Bunde pointed out that the proposed idea uses
money that the State does not have. He asked if the
Commissioner foresaw the State needing to back the bonds at
some point in time. Commissioner Perkins did not foresee
that occurring as long as there is a federal gas tax. The
bonds could not be issued for any other kind of federal
receipts because we do not have trust funds. The reason
that these funds became available was because U.S.Congress
passed a law stating that the trust fund had to be spent
down. He emphasized that Senator Stevens cannot under
appropriated. This is what interests the bond people.
There is a guaranteed level of appropriation which brought
Wall Street into the program. Commissioner Perkins advised
that the worst thing that could happen would be less
gasoline use in the United States. That revenue will come
into the trust fund.
Commissioner Perkins added that our share could come down
with less driving in the U.S. or Congress repealing the gas
tax. Vice Chair Bunde clarified that the intent was to take
ten years of construction and fold it down into a three to
four year project. Commissioner Perkins referenced the
handout distributed to Committee members. [Copy on File].
He stated that the amount of money being requested for this
project is not that much. The Corp of Engineers has no
problem with the proposal, nor does the engineering
community. It will not supercede any other projects. There
are many different kinds of contractors. He did not see a
major impact.
Representative J. Davies commented on the different types of
contractors. He added that by putting out the bond provides
a certainty for our contractors planning. He believed that
the bonding approach would help. Representative J. Davies
pointed out that if the State waits for 10 years, there
would be more encroachments and ultimately it will be more
expensive to build.
Commissioner Perkins noted that the Department was working
on three projects in the Fairbanks area. The first is
University Avenue. This $20 million project will consist of
widening University Avenue to 5 lanes, intersection
improvements at University and Geist Road, a separated
railroad crossing, and the widening of the Chena River
Bridge.
The second Fairbanks project is the reconstruction of
Illinois and Barnette streets. This $25 million project
will improve traffic flow to Downtown Fairbanks and will
include sidewalks and landscaping and a new bridge across
the Chena River.
The final Fairbanks project is a reconstruction of downtown
Fairbanks streets. Downtown Fairbanks is experiencing major
infrastructure investments, including a new courthouse and a
new hotel. This $10 million project will complement that
investment and will include major improvements to streets,
sidewalks, lighting, and landscaping in downtown Fairbanks.
Representative J. Davies reinforced that cleaning up the
University Avenue Bridge area is an important safety issue.
He noted that area is the main bicycle connector and is a
major safety concern at this time.
Representative G. Davis inquired about the money going to
the downtown streets in Fairbanks. He asked who maintained
that work. Commissioner Perkins replied that project was
like the one on 5th and 6th Streets in Anchorage. The
Department does maintain them.
Representative Phillips pointed out that the Legislature is
receiving "mixed messages" from the Mat-Su area. Those
residents want to "cut government to the bone" while at the
same time, demand that these types of projects be funded in
their area.
Commissioner Perkins noted that the Alaska Marine Highway
System is undergoing major changes as the Department
implements the Southeast Alaska Transportation Plan,
bringing that system to a new level of service and
efficiency with the addition of new shuttle ferries that
will travel faster and more often. He noted that a new
shuttle ferry to service Sitka would be ordered this fall.
Two more are included in this bond package to accelerate the
implementation of the plan.
Commissioner Perkins pointed out that one of the new ferries
would serve in the north Lynn Canal, in and out of Juneau.
The other ferry will serve travelers between Ketchikan and
Wrangell. These ferries will follow the initial shuttle
design so that they can be easily redeployed where needed.
The long-term viability of the Marine Highway System is
dependent on the use of these smaller more efficient shuttle
vessels.
Commissioner Perkins stated that the Department also has a
few important rural projects in the bond package.
? In Kotzebue, reconstructing Shore Avenue and upgrading
Ted Stevens Way. Shore Avenue. The project provides
beach protection and enhancements such as
bicycle/pedestrian accommodations and viewing platforms.
Ted Stevens Way, approximately 2 miles of upgrade
including grade raining, widening, drainage and
surfacing, with minor erosion protection in the tidal
area and accommodation of bicycle/pedestrian traffic.
? In Nome, rehabilitating Bering, Seppala, and Front
Streets which includes minor drainage improvements and
enhancements along Front St. such as sidewalk widening,
lighting and scenic overlook with historical and
interpretive signs.
? In Bethel, releveling and paving Chief Eddie Hoffman
Highway.
? In Dillingham, paving 15 miles of the Dillingham to
Aleknagik Road, and includes Aleknagik Lake Wayside and
trailhead parking lot.
Commissioner Perkins commented, why did the Department
choose these projects, because they are needed. These
projects are ones that can be built within 5-6 years and
most are large dollar projects. They represent the diverse
transportation needs of this State.
Commissioner Perkins advised that the Department hopes to
make more investment earnings than needed for the match, so
the additional amount can be used to pay debt service,
thereby, reducing the impact on future STIPS.
Commissioner Perkins noted that the State could handle this
much engineering and construction in a short period of time.
He stated that to ask the contractors, labor leaders, and
consulting firms, the State typically receives 3-5 bids on
each of our construction projects. He concluded that there
is sufficient competition.
Co-Chair Mulder asked if all the projects included in the
list had been included in the STIP. Commissioner Perkins
replied that they were not all included. Co-Chair Mulder
inquired which projects were not included. Commissioner
Perkins replied the intersection in Palmer, Wasilla, the C
Street interchange, the Fairbanks Downtown project, and the
two shuttle ferries.
Co-Chair Mulder asked if these projects were "on line" and
ready to go. Commissioner Perkins replied that they are not
all ready to go, but there has been sufficient work done on
each of them and that they could come up quickly. Co-Chair
Mulder asked if they had local support. Commissioner
Perkins replied that they are mostly supported but noted
that it is impossible to get total support on any project.
Co-Chair Mulder grilled Commissioner Perkins on the support
for the fast ferries. Commissioner Perkins replied that
they were recommended and included in the Southeast Plan.
They were "bought into" by all the communities in Southeast
Alaska. Nothing proposed was not included in that plan.
He reiterated that there is a lot of support for the fast
ferries in Southeast. Commissioner Perkins noted that there
was a letter included in the member's file from Mayor Egan,
Juneau, indicating Juneau's support for the ferries.
Co-Chair Mulder asked if there was a preference for the
ferries over a road. Commissioner Perkins remarked that
concern has become confused with the fast ferries. He
stressed that the Department does not have the money to do
the road. The Department has indicated that the road is the
preferable way to go, but the Department elects not to fund
the road right now. Regardless, a road would not be
completed for ten years. The option before the Committee is
to take the shuttle ferry and put it on the route, with the
Malaspina. That fast vessel could ultimately be used in
other places in the State. Currently, the Department is
working on a Prince Williams Sound Plan, which would include
a fast ferry and get rid of some of the older vessels.
(TAPE CHANGE HFC 00 - 97, Side 1).
Co-Chair Mulder voiced concern that the "road of fast
ferries" would end up costing the State the same amount as a
road. Commissioner Perkins spoke to the routes which the
fast ferries would navigate. When the Prince William Sound
Plan is complete, there will be a recommendation for doing
things differently. The oldest boat on that run is the
Bartlett and it is the most expensive boat to run.
Co-Chair Mulder suggested that it would be more cost
efficient to try one fast ferry first before buying two.
Commissioner Perkins responded that if these were new state
of the art boats, that would be a major consideration,
however, they are not. He enumerated the design and the
efficiency of these boats and the places that they are
currently being successfully used.
ROBERT J. DOLL, GENERAL MANAGER, FERRY OPERATIONS, SOUTHEAST
REGION, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES,
stated that the value to high speed is a long distance. The
shorter the distances become, the less the value. He
pointed out the large distance between the communities in
Southeast Alaska. He reiterated that the only way to handle
that concern is with speed.
Co-Chair Mulder concurred with Senator Torgerson, who has
stated that there must be improved service at less cost.
Mr. Doll noted that there has been a comparison in the cost
of operating the high-speed ferry and the Malaspina in Lynn
Canal. On that route, the high-speed ferry burned fuel at
$2500 dollars; the Malaspina used $2000 dollars worth.
However, in that same period of time, crew costs were much
less on the high-speed ferry. The technology of the high-
speed ferry not only allows the system to get the passengers
where they want to go quickly, but it also reduces the cost
of operating the Alaska Marine Highway System.
Co-Chair Mulder asked which ferries would be taken off line.
Captain Doll responded that the most likely one would be the
Bartlett in the summer of 2002; the Aurora would be
substituted for that ferry. The other ships have been
projected out for a ten-year period. If the fast ferry was
operating year round, the mainliners would be operating only
in the summertime.
Co-Chair Mulder asked if the Department could guarantee that
the operating costs for the Marine Highway would go down
from where they are currently at. Captain Doll stated that
he could not guarantee it for the first year of operation,
but that he could for subsequent years.
Representative Grussendorf interjected that the Southeast
communities do support the fast ferry. He noted that the
fast ferry system would not be just for Juneau, as it
services most of the other communities. The Alaska Marine
Highway System is an entire ferry road system.
Vice Chair Bunde inquired the size of the fast ferry crews.
Captain Doll replied that there must be a competent ship
operator, which presents a "challenge". The State needs to
hold on to that personnel during the wintertime while they
are "laying over". Discussion has been started with the
Unions, and they have expressed their support to this
effort.
Co-Chair Mulder questioned the financing element and paying
off the bonds. He asked the amount of "lost opportunity"
resulting from the years of paying off these bonds.
Commissioner Perkins replied that the match is paid with the
payment. The match each year would be part of the $35
million dollars. He added that $3.5 million dollars would
be saved each year through a reduction in the match
requirement. He pointed out that this is State money.
FRANK DILLON, (TESTIFIED VIA TELECONFERENCE), ALASKA
TRUCKING ASSOCIATION, ANCHORAGE, testified in support of the
legislation. He maintained that the legislation is a good
deal and acknowledged that there would be minimal risk for a
large payoff. He noted that there are a lot of projects
with strong social value which would receive wide support.
He interjected that traffic problems could be solved by
adding lanes. Mr. Dillion pointed out that the match is
almost the same as that collected through fuel taxes.
BLAKE JOHNSON, (TESTIFIED VIA TELECONFERENCE), LABOR UNION,
ANCHORAGE, spoke in support of the legislation. He stressed
that the legislation would provide a prudent way of letting
voters decide to fund the roads.
DICK CATTANACH, (TESTIFIED VIA TELECONFERENCE), ASSOCIATED
GENERAL CONTRACTORS, ANCHORAGE, testified in support of the
proposed legislation. He maintained that the legislation
provides a good solution at almost no cost.
In response to a question by Co-Chair Therriault, Mr.
Cattanach commented that there is possibility that the
economy could become "overheated". He stressed that the
general contracting members have the capability to do the
projects.
Co-Chair Therriault asked if the fast ferries could be
removed from the package, while still addressing the
regional concerns. Commissioner Perkins responded that
there is not that much left to accomplish in Southeast
Alaska for the three year STIP.
Co-Chair Mulder questioned the North Douglas access project.
Commissioner Perkins observed that there is money available
for the North Douglas access. That money has been made
available to the City and Borough of Juneau. He emphasized
that the State does not have anything to do with the
project. That is a City project, other than passing to
them, the earmarked funds.
JOHN WHITLEY, (TESTIFIED VIA TELECONFERENCE), LEGISLATIVE
CHAIR, ASSOCIATED GENERAL CONTRACTORS (AGC), ANCHORAGE,
testified in support of the legislation.
In response to a question by Co-Chair Mulder, Captain Doll
noted that current contracts do not specifically address the
kinds of operative concepts that are in place. He stated
that he would want a commitment from the ferry out of Sitka,
to live in Sitka and not to bid out of that assignment as
other crews have done. Those kinds of work rules have not
yet been put in place. He added that they are also
considering a 40-hour workweek. Concerns such as these will
be embodied in a contract.
Co-Chair Mulder asked if it would be dangerous to
appropriate the contracts at this time. Captain Doll
replied that it could be written as a new contract or it
could be supplemental to the current contracts.
Co-Chair Mulder requested a ten-year cost projection from
the Department of how the additional ferry would result in
reduced costs. Captain Doll stressed that it would be
difficult to match revenues to the costs of operating the
old ships. He stressed that the State of Alaska needs to
get away from labor intensive ships.
Representative Grussendorf interjected that the cost for a
single lane highway mile amounts to approximately $4,000
dollars in maintenance costs.
Commissioner Perkins stressed that the Southeast Plan has
been under consideration for four years. The high-speed
ferries are part of the implementation of that plan. He
stressed that the quicker the plan is implemented, the
faster the benefits would be available.
Co-Chair Therriault expressed concern that maintenance is
being deferred by new projects. Commissioner Perkins
explained that there are $30 million dollars in maintenance
costs and that "patching and paving" can reduce maintenance
costs which are being prioritized.
HB 319 was HELD in Committee for further consideration.
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