Legislature(2005 - 2006)SENATE FINANCE 532
03/07/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB115 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 63 | TELECONFERENCED | |
| + | HB 158 | TELECONFERENCED | |
| + | HB 115 | TELECONFERENCED | |
MINUTES
SENATE FINANCE COMMITTEE
March 7, 2005
9:04 a.m.
CALL TO ORDER
Co-Chair Green convened the meeting at approximately 9:04:17 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Fred Dyson
Senator Bert Stedman
Senator Lyman Hoffman
Senator Donny Olson
Also Attending: REPRESENTATIVE KEVIN MEYER; REPRESENTATIVE TOM
ANDERSON; BOB EVANS, Representative, Venture Development Group;
MARK PFEFFER, Partner, Venture Development Group
Attending via Teleconference: From An Offnet Site: JOHN STEINER,
Assistant Attorney General, Transportation section, Civil Division
(Anchorage), Department of Law and Primary Counsel, TSAIA and the
Alaska International Airport System
SUMMARY INFORMATION
HB 158-PUBLIC SCHOOL ACCOUNT/PUBLIC EDUC FUND
The Committee heard from the bill's sponsor and reported the bill
from Committee.
HB 115-AIRPORT CUSTOMER FACILITY CHARGES
The Committee heard from the bill's sponsor and representatives of
a private development group. A technical amendment was adopted and
the bill was held in Committee.
SB 63-USE SEAT BELT ROAD SIGNS
The bill was scheduled but not heard.
HOUSE BILL NO. 158
"An Act relating to the public school account and renaming the
public school account as the public education fund; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE KEVIN MEYER, Co-Chair of the House Finance Committee
which sponsors this bill, stated that, in addition to changing the
name of the Public School Account to the Public Education Fund,
this legislation would allow funds appropriated to K-12 public
education to remain in the Fund "for educational purposes" rather
than allowing them to annually lapse into the General Fund. This
has regularly occurred due to the fact that the Legislature "tends
to overestimate" the number of students who would be in the public
school system. As a result, the Legislature and the Administration
"fight" each year over the use of education funding that lapsed the
previous year. While this legislation would not alter the current
public education funding mechanism, as the base student allocation
(BSA) level is determined by separate legislation; it would support
"truth in budgeting" in that money budgeted each year for education
would continue to support education and pupil transportation as
opposed to lapsing into the general fund and being used to support
other general government services. This year's lapsed amount could
amount to approximately $14 million.
Co-Chair Green supported the language that would allow education
funding to remain in "an on-going account" as opposed to being
lapsed. She noted that expenditures from the Fund would continue to
require appropriation.
Representative Meyer concurred.
Co-Chair Wilken declared that addressing the lapsed funding issue
in this manner would serve to remove the "annual argument" that
occurs each year between the Administration and the Legislature
regarding public education funds that the Legislature had "battled
for" the previous year. Such funds could be viewed "as a spring
board for the next year."
Co-Chair Green agreed that the funds could provide "a little head
start on the next year's financing."
Senator Olson asked regarding these funds' lapse history.
Representative Meyer stated that the lapsed funds typically range
between eight and fourteen million dollars.
Co-Chair Wilken moved to report the bill from Committee with
individual recommendations and accompanying fiscal note.
There being no objection HB 158 was REPORTED from Committee with
zero fiscal note #1, dated February 18, 2005 from the Department of
Education and Early Development.
SENATE CS FOR CS FOR HOUSE BILL NO. 115(TRA)
"An Act relating to charges paid or collected by users or
occupants of an airport facility owned or controlled by the
state; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE TOM ANDERSON, Chair of the House Labor and Commerce
Committee, the bill's sponsor, read the sponsor statement as
follows.
HB 115 provides the mechanism (customer facility charges or
"CFCs") to improve airport facilities without the expenditures
of state funds. The most common projects to use CFCs funds are
car rental facilities. The bill also provides a revenue stream
to maintain and operate the facilities, without requiring an
increase in the airport-operating budget, as the cost of the
maintenance will be paid using the related customer facility
maintenance charge.
In 2001, the legislature passed chapter 99 SLA 2001, which
authorized the imposition of customer facility charges to fund
the construction of improvements on airport properties. CFCs
have been imposed by many other airports around the country as
a means of funding car rental facility improvements. No state
credit is pledged to support the bonds. Dallas-Fort Worth and
Denver are two examples out of many where CFC's have been used
successfully to build these facilities.
During negotiations with the state over the implementation of
the project, issues were identified and set forth in ch. 99
SLA 2001. These issues should be clarified to ensure the bonds
could be marketable. Those issues revolve around clarifying
the new revenue stream generated by the CFC should not be
considered revenue of the state when the bond is a private
initiative and ensuring that the bond trustee, not the state,
will take custody of the funds.
Because the facility will revert to the state in its entirety
at the end of the term, it would also be appropriate to allow
the imposition of a customer facility maintenance charge to
ensure the facility is well-maintained and kept up
appropriately. The charge also avoids any impact on the
airport's operating budget as the airport will not be
responsible for the maintenance and repair of the facility
while under airport car rental company's control.
This bill implements a valuable private market tool to
construct improvements to Alaska airports, without the
expenditure of public funds. This will improve the amenities
provided to the traveling public, both Alaskan and non-Alaskan
alike.
Representative Anderson noted the key element of this legislation
is that private entities and their customers, through funds
generated by the imposition of CFCs and customer facility
maintenance charges (CFMCs) rather than the State would provide
funds for the construction, maintenance, and operations associated
with improvements to airport facilities; specifically the car
rental facility project being advanced by a private development
group, Venture Development Group, and car rental agencies (RACs) at
the Ted Stevens Anchorage International Airport (TSAIA). Work on
this project has been conducted for several years, but was delayed
due to the terrorism attack on the United States on September 11,
2001. While the work on developing the project has resumed, further
clarification regarding the bond mechanism associated with the
passage of the CFC legislation in 2001 was identified and is
addressed in this legislation. "The definition of what bond related
purposes the CFCs could be applied to will also be clarified to
include debt reserve funds and other bond underwriter
requirements". Since the facility would become the property of the
State at the conclusion of the specified term, it was decided that
maintenance of the facility would be provided for by a CFMC that
would be separate from the CFC "for the protection of the bond
holders". This would also insure that no maintenance responsibility
would be levied on the State while the facility was under RAC
control. He voiced that one of the reasons he sponsored the
legislation was to insure that the CFC process would not obligate
the State. The expectation is that the fees would be less than four
dollars per transaction at the TSAIA. This legislation would create
new jobs, would reflect efficiency and innovation on the part of
the RACs, would enhance partnerships with private enterprise, and
would modernize the TSAIA to a level competitive with other
airports. This type of improvement at the TSAIA would combine with
other efforts to further define the community as a robust and
growing city.
Representative Anderson noted that the House Transportation
Committee added an immediate effective date to the legislation, and
that the Senate Transportation Committee's changes would serve "to
further tighten the bill's language and reduce the risk of
misinterpretation on the bonding". Letters of support [copies on
file] from the RACs have been included in Members' bill packets.
Co-Chair Green asked regarding the design of the proposed facility
at the TSAIA.
Representative Anderson stated that while "this is a work in
progress" the intent is to develop a car rental facility near the
airport. Access to the facility would be provided via an access
tunnel or a shuttle. The developer would provide further
information. This legislation would allow any airport in the State
to develop such a project provided there was sufficient population
support.
9:16:45 AM
Representative Anderson stated that the more convenient location
would also allow for better staff management at the car rental
agencies, as currently, employees are separated from the rental car
return location.
Co-Chair Green asked whether the proposed Anchorage facility would
be covered.
Representative Anderson affirmed that it would be.
Co-Chair Green viewed this as an important feature.
JOHN STEINER, Assistant Attorney General, Transportation Section,
Civil Division (Anchorage), Department of Law, and Primary Counsel,
TSAIA and the Alaska International Airport System, testified via
teleconference from an offnet site and explained that the changes
made in the Senate Transportation committee substitute, Version 24-
LS0300\I include such "linguistic changes" as the allowance of only
those CFC projects approved by the Commissioner of the Department
of Transportation and Public Facilities; clarifies that any third
party as well as any trustees to whom these charges might be paid
would be a third party bondee, as the proceeds return principal
interest and reserve just like a trustee; and that the fees would
generate sufficient proceeds to satisfy the requirements of the
indebtedness. The Version "I" committee substitute served to make
the bill "more precise." The concept of retaining reserves was also
included in Version "I".
Mr. Steiner further stated that language in Version "I" served to
clarify that the CFC "could be collected during some of the
preliminary stages of the project before the construction actually
occurs." Some minor language changes were also included regarding
the terms that would apply to a facility that would be built for
State ownership were either the State to issue the revenue bonds or
a third party on the behalf of the State's Department of
Transportation and Public Facilities to issue the bonds. Finally, a
clause was added to allow that the CFC would be exempt from
taxation.
Co-Chair Green asked the location of the tax exemption language.
Mr. Steiner replied that this language is located in Section 7 of
the bill.
Representative Anderson observed a typographical error in Section
7, line 16, page seven, in that instead of the subsection being
correctly identified as subsection (G), it was inadvertently
labeled subsection (F).
Co-Chair Green asked for clarification that this legislation would
apply to a variety of approved airport projects.
Representative Anderson understood that the legislation would be
limited to car rental facility projects.
Mr. Steiner clarified that this legislation "would apply to a
facility that would be occupied by a single user or group of users
and the facility being prepared by either a third party for turning
over to the State or by the State to be used by those third party
entities, typically in which those private entities would be
supplying the revenue stream for the facility". While rental car
facilities are the common scenario, this funding mechanism has been
used elsewhere in the nation to construct terminal facilities for
airline use. This would not be an anticipated occurrence for
Alaska.
Senator Olson understood that at the end of the 30-year period, the
State would own the facility. To that point, he inquired about the
facility's maintenance costs.
Representative Anderson responded that the project designer could
better respond to that question.
Co-Chair Green understood that the State would not be responsible
for the facility's maintenance expenses "during the life of this"
as those funds would be provided by the customer facility
maintenance charges.
Mr. Steiner, noting his participation in the development of a
Memorandum of Understanding [copy not provided] agreement regarding
this project, stated that the anticipation is that the CFC and the
CFMC, combined, would total approximately four dollars. The actual
amount would be determined prior to the beginning of the project.
During the period of time associated with the bonds, the State
would have no maintenance obligation associated with the facility,
as the facility would be maintained by an entity created by the
developer, to manage it. The primary funding would be provided by
the CFMC. Were the maintenance and operation expenses to exceed the
amount generated by the CFMC, additional funds would be the
obligation the tenant rental car companies rather than the State.
Senator Olson asked whether the CFC and CFMC charges might
"escalate in five or ten years".
Mr. Steiner shared that the primary factor in increasing the rate
"would be a reduction in the amount of traffic through the
facility." Before the bonds were sold, a feasibility consultant
would estimate the amount of rental car traffic, or "the number of
transaction days of rentals", that would be anticipated to utilize
the facility. Were the actual transactions to exceed or fail to
meet projections would dictate whether the charges should be
adjusted. Another influence could be increased maintenance
expenses. The Commissioner would determine whether the additional
maintenance or operating expenses would be addressed through an
increase in the CFMC or would be absorbed by the rental car
companies. The dollar amount required for the debt service would be
known in advance, based on the total cost of the facility, the
total number of transactions, and the interest rate on the bonds.
These factors would determine the total annual monetary needs.
Senator Stedman asked for assurance that an increase in fees rather
than obligating the State would address any potential revenue
shortfalls; specifically that the bondholders could not hold the
State accountable. In addition, he asked whether the "per day, per
average car size" four-dollar CFC/CFMC fee would be imbedded in the
airport system fees or would be eliminated at the end of the bond
period.
Mr. Steiner understood that unless something such as a major
rehabilitation of the facility were to occur, "in all likelihood"
the CFC charge "would crease" upon the conclusion of the 30-year
bond. The CMFC fee could continue, with the revenues shifting into
the State revenue stream, because at that point the State would be
assuming complete ownership and responsibility of the facility.
9:29:27 AM
Mr. Steiner, in response to Senator Stedman's question regarding
possible recourse against the State, stated that, "the support
behind the bonds would be a sole pledge of CFC revenues without
recourse to the State; either the general fund or the airport fund.
The only way in which the State might become responsible in any way
would be some kind of litigation alleging that the State had
somehow not fulfilled its obligation to impose the CFC" or make
some type of misrepresentation. He assured that the project was
"designed so that the State does not hold liability."
Senator Stedman voiced that 30-years is a long time. Continuing, he
asked regarding any bond issuance provisions that would allow the
fees to be increased to address future maintenance needs.
Co-Chair Green asked for clarification as to whether the proposed
CFC/CFMC fees would be levied on a per-day basis.
Representative Anderson deferred to Mr. Steiner.
Mr. Steiner replied that the State owns "the underlying airport
property" that would be leased to the entity that would manage it
for the RACs. The State would hold the facility 's "title from the
beginning and would obtain complete possessory rights at the end of
30-years." The State would require that the facility be properly
maintained during that period. The Commissioner would decide how
much of the maintenance costs would be derived from the CFMC. Were
additional funds required, "the rental car companies would be
required to absorb that under their subleases with the facility
management company to ensure that the State gets it back in a well-
maintained" status for the rest of its remaining useful life,
anticipated to be a minimum of another ten years. There would be
"mechanisms in the contracts to enable the State to make sure that
it is well-maintained throughout."
Co-Chair Green understood that the Commissioner would establish the
fee.
Mr. Steiner affirmed.
BOB EVANS, Representative, Venture Development Group, expressed
that the Group "would be participating in the development of this
project" with the RACs. He shared that the Department of
Transportation and Public Facilities has worked with the Group from
the onset of this endeavor. The Department is "very supportive" of
the project.
Co-Chair Green understood there is widespread support for this
project.
Representative Anderson affirmed. No objections have been received
from any entity, including off or on-site car rental companies, the
chamber of commerce, or the visitor industry.
Senator Olson applauded the involvement of State government in the
project. He asked how this project would affect surrounding
businesses such as the air taxi providers at Lake Hood.
Mr. Evans explained how that the facility would accommodate the
eight car companies that would utilize it. Off-site car rental
companies would not be required to charge the associated facility
fees.
Representative Anderson stated that the site proposed for the
facility "has been designated and purchased". There are no further
plans to acquire or usurp other land holdings.
Mr. Evans communicated that the location of the proposed facility
would be "the open area" where the car rental vehicles are
currently stored. It would be a four-story structure with a tunnel
leading to the airport. The structure would allow room for the RACs
to clean, maintain, store, and rent vehicles in one location.
Senator Stedman asked for further information regarding the
development group.
Mr. Evans stated that in the year 2000, Venture Development Group
was approached by the RACS to initiate the project. Legislation
that was adopted in 2001 provided the ability to establish CFCs for
the purposes of debt service; however, after the terrorist attack
on the nation in 2001, it was necessary to expand the provisions of
that legislation to allow for operations and management. Venture
Development Group is a joint venture consisting of individuals
involved in construction and architectural firms. The Group
recently completed the design/build project for the Alaska
Psychiatric Institute (API).
Amendment #1: This technical amendment correctly identifies the
subsection reference in Section 7, line 16 page seven, as
subsection (G).
Co-Chair Wilken moved to adopt Technical Amendment #1.
There being no objection, Technical Amendment #1 was ADOPTED.
9:40:28 AM 9:41:37 AM
Co-Chair Wilken asked the amount of money the fees would generate
over a 30-year period.
Representative Anderson responded that the answer would require
extrapolation.
Senator Stedman furthered the question by sharing that in many real
estate ventures, the return is divided "into ongoing cash flow and
the residual value of the liquidation of it. Apparently there's
going to be no liquidation of it, it's just going to be transferred
to the State." Therefore, it would be addressed by the on-going
cash flow. The bonding and backing ability of the State would be
used to support the revenue bond. Therefore, he asked regarding any
parameters included in the proposal to guarantee, "that there would
be a fair and equitable rate of return to the development group"
without there being "an excessive rate of return using State backed
leverage". In other words, he asked what regulatory provisions
would be included "to protect the public".
MARK PHEFFER, Partner, Venture Development Group, informed the
Committee that "the actual transfer of the facility" to the State
would be at the completion of construction rather than at the
conclusion of the 30-year bond period. "There would be a customary
development fee charged during the development of the project that
would be part of the total capital costs and of the bond issuance."
Senator Stedman assumed therefore that the rate of return being
utilized by the Venture Development Group is zero
Mr. Pfeffer stated that is correct. An up-front development fee
would be charged "for the total development of the project". That
fee would be capitalized "as part of the allowable capital costs of
the overall project". "The transfer is to the State at the total
cost to the airport". The development group would have no further
"ownership in the facility. There's no rate of return over time."
Co-Chair Green and Senator Stedman asked that Mr. Pfeffer meet with
Senator Stedman to further discuss the particulars of the project.
Senator Dyson asked whether other entities have been provided an
opportunity to participate in this project, as there would be
criticism otherwise.
Mr. Pfeffer responded that the initial work on this project began
in the year 2000 "when the car rental industry sought out" an
entity who was willing to organize and develop this project.
Venture Development Group has been working on the project for the
past four and a half years. There would be an opportunity for
others to compete when the airport advertises the land for lease at
the airport.
Senator Hoffman asked whether it is anticipated that the facility
would meet the future needs of the State.
Mr. Pfeffer replied that it would. The facility would provide
approximately four times the current space; this would include
1,400 vehicle parking spaces as well as car washing, fueling, and
cleaning facilities. Were future airport growth to require more
public parking spaces, these components could be relocated.
Co-Chair Green ordered the bill HELD in Committee in order to
further review it.
ADJOURNMENT
Co-Chair Green adjourned the meeting at 09:49 AM.
| Document Name | Date/Time | Subjects |
|---|