Legislature(2005 - 2006)SENATE FINANCE 532
04/27/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SR6 | |
| SB291 | |
| SB315 | |
| SB274 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 231 | TELECONFERENCED | |
| + | SB 291 | TELECONFERENCED | |
| + | SB 315 | TELECONFERENCED | |
| + | SB 274 | TELECONFERENCED | |
| *+ | SR 6 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR SENATE BILL NO. 291(CRA)
"An Act relating to the municipal harbor facility grant
program; and providing for an effective date."
9:18:56 AM
This was the first hearing for this bill in the Senate Finance
Committee.
SENATOR BERT STEDMAN, the bill's sponsor, provided background
information pertinent to the bill. Approximately 30 years ago,
most municipal harbors were constructed with State funds.
Agreements were set forth which, in essence, made the State
responsible for major harbor maintenance projects and the
municipalities responsible for harbor operations. However, over
time, the arrangement did not "work very well", and user fees
were insufficient to fund aging harbors' major maintenance and
replacement needs. Eventually the State issued a bond obligation
and used the proceeds to pay municipalities to assume
responsibility for their harbors.
Senator Stedman reported that the transfer program initiated a
"heated debate" between the State and the municipalities in
regard "to what they were getting and the condition of the
asset". Many communities accepted their harbors, but felt they
were receiving 30 to 50 cents on the dollar and being "stuck
with huge maintenance" and replacement expenses. In order to
address those looming expenses, many communities adopted plans
to increase such things as harbor rental fees.
Senator Stedman declared this bill would address the continuing
debate between communities and the State. It would implement a
program to provide a 50 percent capital matching grant to
coastal communities that desire to upgrade, expand, or construct
new harbors. In contrast to the original agreement in which the
State funded such projects "with no strings attached", this
program would implement "stringent requirements" in order for a
community to receive the 50 percent match. The requirements
would include the development of fee structures that would allow
the community to provide for maintenance and operational
expenses and replacement reserves. The program would be limited
to no more than one grant per community per year and total State
match funds of five million dollars per harbor. Thus a ten
million dollar harbor project could be funded with five million
dollars of community funds and five million dollars of State
funds. This would be sufficient to fund a large harbor project,
as attested to by the completion of a recent large harbor
project in Juneau that cost approximately $6,500,000.
Senator Stedman pointed out that as specified in Section 1, page
1, line 8, the proposal would include "permissive language" in
that the Legislature "may appropriate" up to ten million dollars
annually for approximately ten years. This money would be
comprised of up to five million dollars from both the marine
fisheries business tax and the marine fuel tax. The money would
be distributed first to communities that received harbors via
the transfer, and then to other communities on a list ranked by
the Department of Transportation and Public Facilities (DOT),
which would administer the program.
Senator Stedman disclosed that a tremendous amount of dialogue
and compromise between DOT, the Alaska Association of
Harbormasters, communities, and Legislators "who have been
active in this area" contributed to the development of this
program. It is an attempt to settle the on-going State/local
harbor dispute and an effort to ensure that harbor
infrastructures would be maintained. Individual communities
would establish harbor rates at a level sufficient to provide
maintenance and replacement funds. A community could also choose
to support its harbor infrastructure through general fund
subsidies or other mechanisms. In any case, the program's
requirements must be met in order to qualify for the match
program. He understood that all harbors either have or would be
increasing harbor user rates. While "harbor users are squealing"
about the higher rates, the increases are necessary.
9:25:02 AM
Senator Bunde asked how the revenues generated from the marine
fisheries business tax and the marine fuel tax are currently
utilized.
Senator Stedman stated these tax revenues are deposited into the
State's general fund. Currently, fifty percent of the fisheries
business tax, also referred to as the "raw fish tax", is
distributed to affected communities via the legislative process.
The Legislature also allocates revenues from the marine fuel tax
to those communities' general funds. The bill's permissive
language would allow the Legislature to utilize proceeds from
these taxes for this program. Nonetheless, since the revenue
generated from these taxes is currently deposited in the State's
general fund, they are considered "general fund assets". Thus
the program would be funded by a general fund allocation.
9:26:03 AM
Senator Bunde concluded therefore, that the funding mechanism
supporting this program would be the general fund.
9:26:13 AM
Senator Stedman reiterated that the raw fish tax is currently
split between communities and State's general fund. The effort
would include allowing harbor users to support harbor needs, as
"when people have an equity position in something, or are paying
for something, they are more inclined to take care of it".
Senator Stedman stressed that no new community harbors should be
constructed without a maintenance plan in place. Efforts must be
made to break the long-term cycle in which the State constructs
infrastructure, and then, due to a lack of maintenance, must
spend more money to fix it.
9:27:17 AM
Co-Chair Green understood therefore that, under the current
scenario, a community could argue that the harbor transferred to
them from the State had not been in the proper condition, and,
therefore the State should pay for the required upgrades. "The
beauty of this is that once" a community receives harbor
improvement funding through this program, they would be
ineligible to receive more.
Senator Stedman also clarified that other forms of State funds
provided to the community could not be utilized as the local
match. The local match must consist of municipal equity
generated by such things as local revenue bonds, general funds,
or harbor enterprise funds.
9:28:59 AM
Senator Hoffman asked how the award process specified in Section
1 Sec. 29.60.820(c) page 3 line 13 would be implemented;
specifically whether DOT would develop regulations in regards to
how the five priority criteria would be weighted.
9:29:54 AM
Senator Stedman stated DOT would implement a ranking process
procedure through which the funds would be dispensed. In order
to not advantage one community over another, no community could
receive more than five million in one year.
9:30:36 AM
KIM CARNOT, Staff to Senator Stedman, stated that the five
criteria specified in subsection (c) were developed with the
assistance of DOT and the Alaska Association of Harbormasters.
"DOT would adopt their own regulations."
9:31:16 AM
Senator Dyson voiced appreciation for the efforts exerted to
address harbor needs. As a result of environmental exposure,
"harbors deteriorate faster, when neglected, than any other
public infrastructure". He cited examples of harbor
deterioration he had witnessed. Water transport infrastructure
is important to residents and commercial enterprises in this
State.
9:32:25 AM
Senator Olson asked whether large and small communities in the
State would equally benefit from the program.
9:32:44 AM
Ms. Carnot responded, "any community is essentially eligible for
this program". Communities receiving harbor transfers from the
State would have first priority for major maintenance needs. New
construction projects would have lower priority. The goal of the
program would be to utilize revenues generated by the coastal
communities from such things as the raw fish tax to benefit
those communities. The five million dollar limitation was
specified in order to avoid having a larger community "absorb
all" the available funding to the detriment of a small
community.
9:33:40 AM
Senator Olson asked whether the program would be available to
harbors outside of Southeast Alaska.
Ms. Carnot remarked that any community with a harbor or that
intended to build a harbor would be eligible.
Senator Hoffman asked whether a community having solely a dock
and no harbor would be eligible.
Senator Stedman stated that such things as breakwaters, dikes,
dredging operations, and jetties were intentionally omitted from
the bill. Large commercial docks or wharfs would also be
disqualified. The reason for these exemptions is "the sheer cost
of them" as well as the anticipation that such projects might
qualify for federal funding. This program would be specific to
communities' float systems and associated things such as
electric, water, and parking lots.
Senator Hoffman asked whether "quasi-government" entities such
as the Community Development Plan (CDQ) groups in Western
Alaska, would be eligible for the program. CDQ communities are
Bering Sea coastal communities to whom the State awarded a share
of the offshore groundfish harvest.
Senator Stedman affirmed CDQ communities would qualify for the
50 percent capital match program. Transferred dock projects
would receive first priority, and any remaining funds could be
allocated to support new harbors or expansions.
9:36:55 AM
Co-Chair Green was impressed by the grant application language,
specified in Section 1 Sec. 29.60.810(1) through (4) page 2
lines 7 through 29 that would require an eligible municipality
to insure its harbor facility, implement a preventive
maintenance plan, and provide a fifty percent match of the
harbor project cost. These requirements would be "a major step
forward".
9:37:55 AM
JOHN STONE, President, Alaska Association of Harbormasters and
Port Administrators, and Harbormaster, City and Borough of
Juneau spoke in support of the bill. The Association
participated in the development of the bill and is therefore
familiar with its provisions. "It is a good resolution to the
dilemma that we face and we believe that it will, in the long
term", allow community harbors to become self-supporting in
regards to harbor operations and capital replacement needs. The
27 municipal harbor systems represented by the Association have
operated harbors for numerous years and have established fee
programs, such as enterprise funds allowable under municipality
law, to support their operations.
Mr. Stone shared that, since the harbor facilities and
infrastructures were initially owned by the State, none of the
communities had established replacement funds to meet
infrastructure needs. The level of money accompanying the harbor
transfer was insufficient to address the majority of harbor
replacement needs as most of the facilities were "at the end of
their useful life, beyond economic repair". Thus, communities
were forced to increase local harbor service fees. For instance,
existing fees in Juneau have doubled or tripled and new fees
were added. Juneau would also be issuing a revenue bond through
the Alaska Bond Bank to further assist the community in
addressing replacement expenses. Even these efforts would not
entirely address the infrastructure needs, and therefore, absent
additional funding assistance, some facilities would "disappear
over time".
9:41:04 AM
Mr. Stone communicated that the majority of community harbors
are facing similar situations and most have implemented "drastic
rate increases". He warned however, that increasing fees too
much would drive harbor users away. While funds for a large
capital project could be raised over an extended period of time,
having to address such projects in a short time period would be
challenging. Unfortunately, most of the transferred harbor
facilities would require replacement needs within a few years.
Mr. Stone stated that a tour of the harbor facilities would be
enlightening to Committee members. Infrastructure needs would
include electrical system upgrades, addressing "serious safety
hazards", and float system replacement. "The 50 percent matching
requirement is a good approach." He reiterated Co-Chair Green 's
observation that once a harbor is funded through this program,
it is removed from the list. Thus, over time, the State would be
weaned from supporting community harbors. That is the goal of
this program.
9:42:31 AM
Senator Dyson reaffirmed his earlier comments about the
importance of harbors to both recreational and commercial users.
9:43:24 AM
Mr. Stone declared "harbor systems are probably the best
business creator in the State". The system supports recreational
activities such as sailing and subsistence and sport fishing.
Commercial endeavors include commercial fishing fleets, fishing
and sightseeing charters, and freight operators. "A tremendous
amount of economic activity is generated through the harbors."
Studies conducted by the Association conclude that harbors in
most communities "are a substantial portion of the gross
economic product of those communities".
9:44:34 AM
Senator Olson asked for examples of the harbor fees being
charged.
Mr. Stone responded, "each harbor system has its own fee
structure". Juneau, for instance, "has 142 different types of
fees …. Basically anybody that uses one of our harbor assets"
must pay a user fee. The harbor fee structure could be likened
to that of a utility company in that costs "are allocated" and
"apportioned to the user". A public harbor system fee structure
typically is more complicated than a private facilities' due to
its need "to strive for equity among the users".
Senator Olson asked whether a person in a rowboat would be
required to pay a fee.
Mr. Stone replied that moorage fees would be assessed were the
boat tied to the dock more than four hours.
9:46:04 AM
Senator Olson asked whether the program would be available to
private harbors.
Ms. Carnot replied no; this grant program would be limited to
municipalities with public harbors.
9:46:26 AM
KATHIE WASSERMAN, Deputy Director, Alaska Municipal League, and
former Mayor of Pelican, spoke to Senator Dyson's remarks. In
many small communities, such as Pelican, the harbor is the only
way to access the town. In those cases, it is imperative that
the harbor facility be maintained. She was mayor of Pelican when
the State transferred that harbor to the community, and she
could attest to the deteriorated condition of the facility. The
money each community received in the harbor transfer program
"was based on the value of the harbor". Thus the money provided
to Pelican was a meager amount, as the harbor was not worth
much. "It was sinking in most places." While the community was
able to fix a portion of the harbor, "three or four major
fingers" could not be addressed. "The 50/50 match program is a
very good way to go", as communities would have ownership of the
project. Even though most communities would prefer to be self
reliant rather than being supported by the State, assistance
would be appreciated.
In response to a remark from Senator Bunde, Ms. Wasserman
reiterated that communities such as Pelican never desired to be
solely reliant on State funding. Nonetheless State assistance
through this program would be appreciated.
9:48:26 AM
Co-Chair Green shared having received numerous harbor project
requests for the FY 2007 capital budget bill. The majority of
those requests sought 100 percent State funding support.
Continuing, she noted that the permissive language of the bill
would not obligate the Legislature to fund the program.
Senator Bunde spoke against the bill. In essence this program
would provide three-quarters of the revenues collected by the
raw fish tax to communities that already receive raw fish tax
proceeds. Enactment of this program would "create another
entitlement". Contrary to Ms. Wasserman's position, he believed
communities would "like to be 100 percent State supported".
Senator Bunde determined the fiscal note to be incomplete, as it
does not include grant projections. The State providing harbors
to communities has been a long-term frustration to him, as many
communities acted irresponsibility and allowed their harbors to
deteriorate, and then asked the State for more money to repair
them. He suspected that communities receiving five million
dollars through this program, would, in the future, request
further assistance. If a harbor was "essential to a community,
they must live up to the obligation". The State and other
entities are forced to rely on user fees to support activities.
9:50:38 AM
Senator Hoffman begged to differ; improved harbor facilities
could generate more money to the State. The watercraft fuel tax
and the fisheries business tax are "directly related to the
activities" and are "an indirect user fee". Good dock facilities
would attract fishing fleets, which would support the two taxes
that would fund this program. Thus, the State would receive
additional money by improving harbor facilities. It would be
appropriate for the tax revenues deposited into the general fund
to assist this program.
9:51:46 AM
Senator Olson also spoke in support of the bill. Harbors provide
safe havens to boaters, freighters, and fishing fleets. This
program is necessary.
Co-Chair Wilken moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
Senator Bunde objected.
Senator Bunde suggested that, rather than enacting another
entitlement program, each harbor should implement its own fish
tax to support its harbor system. This bill furthers his
frustration with what he has termed "the Great Alaska
Disconnect. There's always too much State funding unless it's in
someone's special interest … The State should provide endless
funds" without implementing any taxes or use of the earnings of
the Permanent Fund. Curtailing State support of things would
assist in making people "become more realistic".
A roll call was taken on the motion.
IN FAVOR: Senator Dyson, Senator Hoffman, Senator Olson, Co-
Chair Wilken, and Co-Chair Green
OPPOSED: Senator Bunde
ABSENT: Senator Stedman
The motion PASSED (5-1-1)
CS SB 291(CRA) was REPORTED from Committee with previous zero
fiscal note #1 dated March 2, 2006 from the Department of
Transportation and Public Facilities.
AT EASE 9:54:40 AM / 9:54:51 AM
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