Legislature(2005 - 2006)BELTZ 211

03/06/2006 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
+= SB 193 DEFERRAL OF MUNICIPAL PROPERTY TAXES TELECONFERENCED
Heard & Held
*+ SB 291 MUNICIPAL HARBOR FACILITY GRANTS TELECONFERENCED
Heard & Held
+= SB 247 REVENUE SHARING PROGRAM TELECONFERENCED
Heard & Held
+= SB 246 APPROP TO REVENUE SHARING FUND TELECONFERENCED
Heard & Held
            SB 291-MUNICIPAL HARBOR FACILITY GRANTS                                                                         
                                                                                                                                
CHAIR BERT STEDMAN announced SB 291 to be up for consideration.                                                                 
                                                                                                                                
1:51:48 PM                                                                                                                    
                                                                                                                                
SENATOR GARY STEVENS moved CS for SB 291 [\Y Version].                                                                          
                                                                                                                                
SENATOR JOHNNY ELLIS objected for explanation purposes.                                                                         
                                                                                                                                
CHAIR STEDMAN  stated that this  was the first hearing  and there                                                               
was no intent to move the  bill that day. The proposed CS changes                                                               
the bill to align it with  the House companion bill. He asked for                                                               
latitude to present the bill.                                                                                                   
                                                                                                                                
SENATOR ELLIS removed his objection.                                                                                            
                                                                                                                                
CHAIR STEDMAN passed the gavel to Vice-Chair Gary Stevens.                                                                      
                                                                                                                                
SENATOR  STEDMAN, Sponsor  of  SB 291,  explained  that the  bill                                                               
would create a  municipal matching grant for harbors  so it would                                                               
affect all of coastal Alaska.                                                                                                   
                                                                                                                                
Starting  in  the 1930s  the  state  began  to build  harbors  in                                                               
coastal  areas  stretching  from  Ketchikan to  Sand  Point.  The                                                               
state's agreement with the municipalities  was that they would do                                                               
the  major  maintenance  and the  municipalities  would  run  the                                                               
harbors and do ongoing administration.                                                                                          
                                                                                                                                
For whatever reason, the maintenance  wasn't done and the harbors                                                               
fell  into disrepair.  When  the state  moved  forward to  divest                                                               
itself of harbor ownership, it  assigned applicable dollar values                                                               
[for   deferred  maintenance]   to  the   various  harbors.   The                                                               
municipalities didn't  feel that the financial  consideration was                                                               
near enough  to deal with  the deferred maintenance and  that has                                                               
been an unresolved issue.                                                                                                       
                                                                                                                                
Over the  last several  years his  office has  been working  on a                                                               
solution  to the  under  funded status.  After  meeting with  the                                                               
harbormasters  association and  the Department  of Transportation                                                               
and Public Facilities  ("DOT"), the solution they  decided on was                                                               
to establish a 50/50 capital  matching grant system. Harbors that                                                               
had been  transferred would receive  priority, but it  would also                                                               
include new harbors and harbor maintenance issues.                                                                              
                                                                                                                                
To apply to  DOT for the match municipalities would  have to have                                                               
an enterprise fund established.  They would establish and collect                                                               
moorage  fees that  would be  at  a sufficient  level to  finance                                                               
ongoing administration  and major maintenance. Each  harbor would                                                               
be eligible  for just one  match grant.  The amount to  bring the                                                               
old harbors up to standard is  estimated to be about $100 million                                                               
so the state match would be $50 million.                                                                                        
                                                                                                                                
The  bill contains  language to  allow  marine fuel  tax and  the                                                               
state portion  of the fisheries business  tax to be used  to fund                                                               
the program. The Legislature would  fund the program on an annual                                                               
basis.                                                                                                                          
                                                                                                                                
Given the  funds available,  DOT would have  the ability  to rank                                                               
the  applicants.  He  reiterated   that  the  harbors  that  were                                                               
previously  transferred would  receive  priority.  He noted  that                                                               
pages 2 and 3 of the bill give the ranking process.                                                                             
                                                                                                                                
He summarized  the idea is to  come up with a  compromise between                                                               
the state and coastal municipalities  so that old state owned and                                                               
operated  harbors  could  be  brought  up  to  standard  to  help                                                               
stimulate economic development.                                                                                                 
                                                                                                                                
2:00:37 PM                                                                                                                    
                                                                                                                                
SENATOR ALBERT  KOOKESH asked  if a harbor  project, such  as the                                                               
one done in Juneau, could be done in phases.                                                                                    
                                                                                                                                
SENATOR STEDMAN explained that Juneau  has seven different harbor                                                               
entities in  its system and the  cost of the last  project was in                                                               
the neighborhood of $6 million.  Acknowledging that the cap is an                                                               
arbitrary number, he  said if a municipality matched  the cap for                                                               
one harbor  that would  amount to  $10 million.  That is  a large                                                               
harbor  when you  consider that  breakwaters and  dredging aren't                                                               
included  because  they can  be  built  with federal  help.  This                                                               
targets floats and electrical and water systems.                                                                                
                                                                                                                                
SENATOR  ELLIS   asked  where  the  bill   talks  about  one-time                                                               
eligibility  and  how  phase funding  squares  with  the  sponsor                                                               
statement that talks about one-time eligibility for a harbor.                                                                   
                                                                                                                                
SENATOR STEDMAN replied  the idea is that  the granting mechanism                                                               
isn't  for  municipalities to  use  for  catch-up maintenance  on                                                               
harbors  that previously  received a  capital improvement  grant.                                                               
This  is designed  to improve  or replace  an entire  harbor. The                                                               
cost of  the Juneau Harris  Harbor project was about  $6 million,                                                               
which  is well  under the  $10 million amount  allowed under  the                                                               
50/50 match.                                                                                                                    
                                                                                                                                
As far  as phasing  is concerned, the  bill doesn't  address mega                                                               
harbors.  Most communities  have six  or fewer  harbors and  this                                                               
bill would allow  the upgrade of one or two  harbors per year. It                                                               
isn't  designed to  allow a  municipal entity  to split  a single                                                               
harbor upgrade into a two or more year project.                                                                                 
                                                                                                                                
2:06:01 PM                                                                                                                    
                                                                                                                                
SENATOR  ELLIS   asked  him  to  make   the  distinction  between                                                               
municipal ports  and municipal harbors because  the grant program                                                               
is to  benefit municipal  harbors. He also  asked if  any harbors                                                               
are an entity other than municipal harbors.                                                                                     
                                                                                                                                
2:06:33 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  responded to  the second  question and  said yes                                                               
there  are. The  goal is  to move  away from  capital improvement                                                               
projects  and  encourage   municipalities  to  create  enterprise                                                               
funds. The  bill doesn't apply  to the various harbors  the state                                                               
still owns where  the users don't pay moorage. At  some point the                                                               
state will  face a policy  call on how  to deal with  small docks                                                               
that service a dozen or fewer  people when no one wants to assume                                                               
financial  responsibility, but  this  bill  doesn't address  that                                                               
issue.  The  hope   is  that  when  the   proposed  mechanism  is                                                               
established the boroughs will absorb those harbors.                                                                             
                                                                                                                                
VICE-CHAIR  GARY STEVENS  called an  at-ease from  2:10:02 PM  to                                                             
2:10:37 PM to return the gavel to Senator Stedman.                                                                            
                                                                                                                                
CHAIR STEDMAN  asked Mr. MacKinnon  to come forward and  give the                                                               
state perspective.                                                                                                              
                                                                                                                                
2:10:53 PM                                                                                                                    
                                                                                                                                
JOHN  MACKINNON,   Deputy  Commissioner  of   Transportation  for                                                               
Highways and Public Facilities,  explained that harbors have been                                                               
transferred in  batches. The  most recent  was the  November 2002                                                               
bond  issue   that  included  26   or  27  boat  harbors   in  10                                                               
communities.   The  figures   DOT  used   to  estimate   deferred                                                               
maintenance were  based on a  statewide Corps of  Engineers study                                                               
done  in  1992  with  adjustments for  inflation  and  additional                                                               
deferred maintenance. The rule was to  bring the harbors up to "a                                                               
Chevrolet standard"  for a  boat harbor.  That standard  is below                                                               
what  most  communities want  and  doesn't  include power,  water                                                               
sewage dump stations and harbor lighting.                                                                                       
                                                                                                                                
The department  had a  certain amount of  money available  and it                                                               
had no choice  but to make the transfers. With  that in mind, Mr.                                                               
MacKinnon said  he views SB 291  as a carrot rather  than a stick                                                               
in  terms of  harbor  transfer. Furthermore,  the funding  source                                                               
makes sense because there's a connection to harbor users.                                                                       
                                                                                                                                
SENATOR  GARY STEVENS  asked if  the bill  seeks to  complete the                                                               
transfer process or to upgrade  harbors that had been transferred                                                               
to the various communities.                                                                                                     
                                                                                                                                
MR. MACKINNON  responded this bill  would deal with  harbors that                                                               
have been transferred. This year's  capital budget has eight more                                                               
transfers and last year had  harbor transfers in two communities.                                                               
Some  harbors  aren't associated  with  a  municipality so  there                                                               
isn't an entity to transfer them to.                                                                                            
                                                                                                                                
SENATOR GARY STEVENS recapped saying the  funds in SB 291 are for                                                               
communities  that   already  own   their  harbors  and   not  for                                                               
communities  that  have  harbors   that  are  still  under  state                                                               
ownership.                                                                                                                      
                                                                                                                                
MR. MACKINNON clarified  that his understanding is  that the bill                                                               
would apply  to any harbor that  has been transferred as  well as                                                               
future transfers for as long as the program is funded.                                                                          
                                                                                                                                
SENATOR STEDMAN asked him to address the bond issue.                                                                            
                                                                                                                                
MR. MACKINNON  advised that  was a  November 2002  statewide G.O.                                                               
[general  obligation]  bond  issue  for  a  variety  of  facility                                                               
projects. A  little over $100  million in G.O. bonds  were issued                                                               
and about $30 million went to harbor transfers.                                                                                 
                                                                                                                                
CHAIR STEDMAN opened teleconference testimony.                                                                                  
                                                                                                                                
2:17:40 PM                                                                                                                    
                                                                                                                                
RAY MAJESKI, Harbormaster  in Sitka, said he wanted  to make sure                                                               
that  communities that  had already  accepted responsibility  for                                                               
the  harbors would  be at  the head  of the  line to  receive the                                                               
funds. He expressed the concern  that locals are being priced out                                                               
of the  harbor by  out of  state boaters  who find  Alaska harbor                                                               
rates comparatively reasonable.                                                                                                 
                                                                                                                                
CHAIR STEDMAN asked  him to comment on the  challenge of bringing                                                               
harbors up to  an appropriate standard in relation  to the amount                                                               
of money that the state allocated for the transfer.                                                                             
                                                                                                                                
MR. MAJESKI responded Sitka is  faced with borrowing $4.5 million                                                               
for  the $7  million Thompson  Harbor project.  The community  is                                                               
fortunate  in that  the assembly  sends the  lion's share  of the                                                               
fish tax to  the harbors, but even so moorage  rates are going up                                                               
at an alarming rate. Add to that  the fact that money must be set                                                               
aside  for future  construction because  everything currently  in                                                               
the water will need major  maintenance or complete replacement in                                                               
the  next 40  to 50  years.  Taking inflation  into account,  the                                                               
current harbor system  is valued at about $37  million and within                                                               
40 years that will be $121  million so it's imperative that money                                                               
be  set  aside.  SB  291  will  help  Sitka  move  in  the  right                                                               
direction.                                                                                                                      
                                                                                                                                
2:22:32 PM                                                                                                                    
                                                                                                                                
MARTY OLUM, Kodiak Harbormaster,  reasoned that it's important to                                                               
modernize  and maintain  harbors  because they  are the  economic                                                               
foundation upon which  other businesses in town  depend and grow.                                                               
He observed  that commercial fishermen upgraded  their vessels to                                                               
stay  competitive  in  the global  seafood  market,  but  harbors                                                               
haven't kept pace. Kodiak is  creating an enterprise fund and the                                                               
50/50 matching program  proposed in SB 291 will  be of tremendous                                                               
help.                                                                                                                           
                                                                                                                                
2:26:36 PM                                                                                                                    
                                                                                                                                
ALLAN SORUM,  Harbormaster for  the City  of Valdez,  stated that                                                               
when he was president of  the Alaska Association of Harbormasters                                                               
and Port Administrators  he became very involved in  the issue of                                                               
deferred maintenance  and harbor transfers. He  expressed support                                                               
for SB 291.                                                                                                                     
                                                                                                                                
2:28:39 PM                                                                                                                    
                                                                                                                                
GARY HENNICK, City Manager of  King Cove, testified in support of                                                               
SB 291.  He explained  that the community  has a  modest economic                                                               
base due to its location adjacent  to the rich fishing grounds of                                                               
the Gulf  of Alaska and the  Bering Sea. King Cove  was the third                                                               
local government to  accept ownership of the state  harbor in the                                                               
early  1990s. At  that  time  it seemed  as  though the  $350,000                                                               
maintenance  allocation  was  a   reasonable  sum.  However,  the                                                               
current estimate for bringing the  harbor up to standard is about                                                               
$4.5 million and  the changes in fisheries  issues, taxation, and                                                               
government revenue  sharing in  the last ten  years have  made it                                                               
clear  that even  with an  enterprise fund,  the community  needs                                                               
help.  He  echoed  the testimony  from  other  harbormasters  and                                                               
encouraged the committee to pass SB 291.                                                                                        
                                                                                                                                
In closing he brought up  two issues. First he questioned whether                                                               
in-kind  service  might   be  allowed  for  part   of  the  local                                                               
contribution so  that local labor  could be used to  every extent                                                               
possible.  Second he  suggested  that consideration  be given  to                                                               
facility size  and demand, the  percentage of watercraft  and raw                                                               
fish taxes that are generated  in a particular community, and the                                                               
inequity in the amount that  a community received when it assumed                                                               
ownership of its harbors ten years ago. .                                                                                       
                                                                                                                                
CHAIR STEDMAN  acknowledged that  when the harbor  transfers were                                                               
analyzed, the King  Cove discrepancy stuck out  and that warrants                                                               
consideration. With regard to in-kind  contribution, he said it's                                                               
important to  avoid previous pitfalls. Experience  indicates that                                                               
when communities have  a 50 percent equity position  in a harbor,                                                               
it receives better maintenance.                                                                                                 
                                                                                                                                
MR. HENNICK responded  the last ten years has shown  the issue to                                                               
be larger than anticipated.                                                                                                     
                                                                                                                                
2:35:56 PM                                                                                                                    
                                                                                                                                
CHAIR STEDMAN asked John Stone to come forward.                                                                                 
                                                                                                                                
JOHN STONE, President of the  Alaska Association of Harbormasters                                                               
and Port  Administrators, stated that the  association has worked                                                               
on this issue for several  years. It strongly supports a matching                                                               
grant program and  believes it is a good approach  to address the                                                               
current dilemma.  Many harbors  were at the  end of  their useful                                                               
lives at the  time that the time of state  transfers and everyone                                                               
has been  scrambling to recapitalize the  infrastructure. Through                                                               
that  process  it's  become  clear  that  the  funding  that  was                                                               
provided is from one-third to  one-fourth short of what is needed                                                               
to replace the infrastructure.                                                                                                  
                                                                                                                                
Communities  have been  working on  ways  to raise  revenue on  a                                                               
local level  and this  has often meant  large increases  in fees.                                                               
However,  the general  conclusion  is that  increased fees  alone                                                               
won't do the trick, which is why SB 193 is so welcome.                                                                          
                                                                                                                                
He provided  the committee  with written  comments and  said it's                                                               
encouraging that DOT is supportive  of the bill. In conclusion he                                                               
mentioned that  the cap might  become problematic if  the program                                                               
lasts  a number  of years.  He described  the Corps  of Engineers                                                               
breakwater  program that  has  a $4  million  cap. Although  that                                                               
amount was adequate  when it was established, now  when the Corps                                                               
does a breakwater project  a specific Congressional authorization                                                               
must be  made. He  suggested that indexing  to the  Anchorage CPI                                                               
might be preferable.                                                                                                            
                                                                                                                                
CHAIR   STEDMAN   agreed   that  the   last   suggestion   merits                                                               
consideration.                                                                                                                  
                                                                                                                                
2:40:53 PM                                                                                                                    
                                                                                                                                
WAYNE  STEVENS,   President  of  the  Alaska   State  Chamber  of                                                               
Commerce, stated  support for making funding  available to repair                                                               
and   improve  existing   facilities  to   serviceable  standards                                                               
consistent  with  DOT  regulations  as a  part  of  the  mandated                                                               
transfer of harbors to various communities.                                                                                     
                                                                                                                                
Noting that harbormasters have  identified more than $100 million                                                               
in  needed  repairs  he  said it's  important  to  maintain  this                                                               
important  infrastructure  for  the economies  of  these  coastal                                                               
communities.                                                                                                                    
                                                                                                                                
CHAIR  STEDMAN closed  public testimony  and  announced he  would                                                               
hold SB 291 in committee.                                                                                                       

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