Legislature(2007 - 2008)SENATE FINANCE 532
02/27/2008 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB236 | |
| HB321 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 236 | TELECONFERENCED | |
| + | HB 321 | TELECONFERENCED | |
| + | SB 216 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 273 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
February 27, 2008
9:19 a.m.
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee meeting
to order at 9:19:17 AM.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
MEMBERS ABSENT
None
ALSO PRESENT
Frank Richards, Deputy Commissioner Of Highways & Public
Facilities, Department Of Transportation And Public
Facilities; Jeff Ottesen, Director, Division of Program
Development, Department of Transportation & Public
Facilities; Jerry Burnett, Director, Division of
Administrative Services, Department of Revenue; Ian Fisk,
Staff, Representative Thomas; Mary McDowell, Vice-President,
Pacific Seafood Processors Association; Senator Johnny
Ellis; Kurt Smith, State Traffic and Safety Engineer,
Department of Transportation and Public Safety
PRESENT VIA TELECONFERENCE
John Duffy, Borough Manager, Mat-Su District; Ron Siebels,
Military Order of the Purple Heart, Anchorage
SUMMARY
SB 236
"An Act establishing the Alaska transportation
fund and relating to the fund; and providing for
an effective date."
SB 236 was heard and HELD in Committee for further
consideration.
HB 321
"An Act relating to the salmon product development
tax credit; providing for an effective date by
amending an effective date in sec. 7, ch. 57, SLA
2003, as amended by sec. 4, ch. 3, SLA 2006; and
providing for an effective date."
CSHB 321 (FIN) MOVED to report out of Committee
with the accompanying fiscal note
SB 216
"An Act designating the Alaska Highway and portion
of the Richardson Highway as the Purple Heart
Trail."
SB 216 MOVED to report out of Committee with the
accompanying fiscal note
9:19:24 AM
SENATE BILL NO. 236
"An Act establishing the Alaska transportation fund and
relating to the fund; and providing for an effective
date."
Co-Chair Stedman commented that the intent today was for the
Administration to present the bill and to take public
testimony.
FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, presented an overview of SB 236 (Crossroads
Ahead, Why a State Funded Transportation Program is Right
for Alaska, copy of file). He explained his intention to
describe the State of Alaska's Transportation System and how
constrained Alaska is in addressing its aging assets. He
planned to include Governor Palin's approach to meeting the
transportation needs for the future with the creation of an
Alaska Transportation Fund. Mr. Richards remarked that in
looking at the existing infrastructure across Alaska, there
are concerns about safety, congestion, and deterioration (p.
2). Mr. Richards described that portions of Alaska's Highway
are in very poor condition. He estimated the backlog of
pavement repairs, that have reached the end of its useful
life, is 2100 miles of the National Highway System,
including the Glen, Parks, Richardson, Sterling, Alaska and
Dalton Highways. The pavement deterioration cost on these
roads is growing at a rate of $80 million a year. The Alaska
Highway System and Community Transportation Program are in
addition to this need. Mr. Richards pointed out the
challenges with Alaska's bridges. He related that good
progress has been made towards bridge repairs, but the job
is not complete (p. 5). Mr. Richards related that work has
been completed on the: Washington Creek Bridge, several
Parks Highway bridges, Hicks Creek, Kenai River at Soldotna,
and South Channel at Unalaska. The Tanana River Bridge on
the Alaska Highway and bridges at Hyder and Gustavus are
scheduled for projects this year, if environmental permits
can be obtained. Mr. Richards continued that ten percent of
Alaska's bridges (86) need seismic retrofits. This work
includes:
Lengthening bearing seats
Cabling girders together
Anchoring bridges to their supports
Strengthening columns and footings
Replacing tall rocker bearings with shorter rubber
bearing pads or isolators
Mr. Richards indicated that $20 million has been spent to
date on seismic retrofits, but the process is still not
complete. The department has completed "Phase I" retrofit,
but will need to start "Phase II" in the next few years,
funding permitted. Mr. Richards reported that across the
state transportation assets are being impacted by changing
climatic conditions (p. 6). Those factors having a
disastrous impact on the pavement are:
Heavier precipitation events
Greater frequency of Strong Storms
Warmer summers
Extended shoulder seasons both fall and spring with
more freeze/thaw cycles
Mr. Richards described the extensive permafrost degradation
associated with shifting ground that is impacting Alaska's
highways and airports. Mr. Richards indicated that work is
needed to protect the Copper River Highway, estimating $50
million, to shore up and raise the grade as a direct
consequence of the river changing course following a major
2006 storm event.
9:26:13 AM
Mr. Richards pointed out that the Alaska Marine Highway has
identified a list of deferred maintenance that amounts to
$18 million in immediate needs (p. 7). This information
suggests the real number is much larger, but often, without
access to hidden spaces, the actual degree of need can not
be known. He explained that problems are often only
discovered when a vessel goes into the yard, and hidden
areas are opened as part of planned work, at which time
bigger problems are discovered. Mr. Richards noted that the
state owned and community owned harbors are deteriorating
primarily due to long standing budget declines. The needs of
our remaining assets and those of the community owned
facilities continue to be an issue. The state owns forty
nine harbors in twenty two communities (Chenega, Cordova,
Craig, Homer, Juneau, Ketchikan, King Cove, Kodiak, Old
Harbor, Pelican, Petersburg, Sand Point, Seldovia, Seward,
Sitka, Skagway, Tatitlek, Valdez, Wrangell, Whittier, and
Yakutat). The Association of Harbor Masters and Port
Administrators (AAHPA) have identified approximately $100
million in needed harbor repairs. This incorporates
approximately four hundred seventy six (public and private)
port and harbor facilities in the state (as of 2004), with
two hundred forty in southeast Alaska and two hundred thirty
six in southwest and western Alaska. Mr. Richards indicated
that Alaska is the largest airport operator in the United
States with two hundred fifty six airports statewide (p. 9).
He mentioned that Alaska airports continue to receive
healthy investments from the FAA, but many airport needs are
unmet. Mr. Richards mentioned the need to deal with safety
items, such as rutting on soft runway embankments and
crowding of the runway/airports by homes and businesses.
Additionally, the airport assets are deteriorating with
cracked asphalt surfaces, loss of gravel surfacing
materials, and aging lighting systems that are very
difficult to maintain.
9:28:24 AM
Mr. Richards illustrated how challenged Alaska is to fund
major priority National Highway System projects with the
current federal program (p. 10). The current annual National
Highway System allocation is approximately $80 million a
year. Mr. Richards showed on the chart how long it would
take to fund the priority projects if it was only funded
with the annual allocation of National Highway System funds
(p. 10). Mr. Richards elaborated that if the department
wanted to upgrade the Parks Highway, it would require
allocating all the National Highway System funds for two
years. The list of funding needs could include dozens of
other equally worthy projects, such as the Haines or Seward
Highways. He mentioned that the Fairbanks list included the
three main routes leading to Fairbanks; the Parks Highway,
the Richardson Highway and the Elliott Highway. Mr. Richards
also reminded the committee that these costs are in 2008
dollars which do not include the impact of future
construction cost increases. He also mentioned that trends
in federal program may result in smaller funding levels, so
it is likely even a longer timeline is needed to address
these selected set of needs.
9:29:42 AM
Mr. Richards stressed that the use of federal funds is even
more challenging with the latest Highway Reauthorization
bill, named the Safe, Accountable, Flexible, Efficient
Transportation Equity Act (SAFETEA-LU), due to the:
Impact of deductive earmarks
More set aside programs such as safe routes to school,
recreational trails, and others
More Restrictive regulations
Loss of flexibility within the various funding
categories
General purpose funds within SAFETEA-LU, available for
project accomplishment, were actually much lower than in its
predecessor bill TEA-21 (p. 11). Mr. Richards explained that
the next chart represents the best estimate on what the
Federal Highway Administration (FHWA) receipts will be over
the next couple of years based on current information, with
plenty of uncertainty thrown in (p. 12). The formula funds
are inclusive of both the flexible and inflexible types of
apportionment. This chart does not include earmark funds
anticipated in the 2008 and 2009 years, from the SAFETEA-LU
earmarks. Mr. Richards showed that the trust fund shortfall
has been updated with the latest information from the
Federal Highway Administration. The $50 million rescission,
shown in 2009, is as written into SAFETEA-LU legislation;
only an act of Congress can change this. Mr. Richards
indicated that it is a guess as to what the program will
change to and in what year it will change. The next
reauthorization is scheduled for 2010. Mr. Richard assumed
that the 2010 levels will be a continuation of the 2009
levels, and showed the funds will grow very modestly before
accounting for trust fund difficulties. The shortfall is
about equal to the initial funding from the Alaska
Transportation Fund (ATF), of approximately $50 million each
year.
9:31:23 AM
Mr. Richards related the huge impact of construction costs
over recent years, causing great consternation among the
owners of facilities. Asphalt pavement costs are up
approximately 80 percent and earthwork costs are up 60
percent. The values shown in the chart are from a review of
all of the bid tabs over last seven years (2000 to 2006),
providing a good representation of actual inflationary
impacts (p. 13). Mr. Richards admitted that he had no clear
explanation why Alaska costs are nearly doubled that of the
national average, except anecdotal evidence; fewer bidders,
the high cost of freight to rural Alaska, and known high
workload in other construction sectors such as military, and
other federal programs. Mr. Richards commented that cost
increases also follow the price of oil. He explained that
highway and airport construction is very energy intensive,
due to moving heavy materials, using big equipment, and
items such as asphalt pavement which are big users of oil
and fuel to produce.
9:32:47 AM
Mr. Richards maintained that there are many federal laws,
permits, and federal reviews to be complied with when using
federal funding. Each dot shown on the chart results in more
process, permits, and reviews which can add years and great
costs to the projects (p. 14).
Mr. Richards remarked that after twenty years of nearly flat
line maintenance and operations budgets, the department has
received increased funding over the last few years. The
department greatly appreciates the support (p. 15). Mr.
Richards stressed though that the department has experienced
a significant loss of buying power over the last twenty five
years of approximately $50 million. During this interval,
more responsibilities have been added to the department,
such as, increasing lane miles, larger airports, lighting
systems, and new traffic lights which increase the challenge
of getting the job done well. The current General Fund
operating budget covers basic needs to perform snow and ice
control and general routine maintenance, but does not
provide resources to perform preservation activities.
9:34:02 AM
Mr. Richards stressed that Alaska's Transportation System is
truly unique and very diverse; the largest airport operator
in the nation, a ferry system that traverses 3,500 miles of
routes along the coasts of Alaska and Canadian Peninsula and
a huge coastline with the need for safe ports and harbors.
He indicated that Alaskans support these systems with a much
higher amount of ownership costs than citizens in the rest
of the United States. This is a reflection of Alaska's large
geography, coupled with low population (p. 16).
9:34:47 AM
Mr. Richards acknowledged that Alaska has been extremely
fortunate to receive approximately $6.44 of federal highway
funds (FHWA) for every $1.00 paid in federal taxes at the
fuel pump. He mentioned that the Reauthorization of Highway
bill will occur in 2010, which is expected to be very
different from previous bills, emphasizing greenhouse gas
reductions. A new national Commission Report, just released,
proposes a complete makeover of the federal transportation
programs, replacing the formula approach with a performance
measure approach, and oversight by a national commission (p.
17).
9:35:22 AM
Mr. Richards remarked that other states have long had state
and/or local funding mechanisms to supplement the use of
federal funds. The Departments of Transportation, in other
states, also have the largest roads and highways,
representing on average about 20 percent of their state's
road network. Alaska owns and maintains, for the state,
approximately 40 percent of the road network, so this too
subtracts from what can be done on really crucial highway
and ferry links (p. 18).
Mr. Richards continued that in addition to their existing
fund sources, many states also see the need for more and
different ways to fund construction using such things as
tolls, public/private partnerships, and user fees for
vehicle miles driven. This alternate type of funding would
be very difficult to institute in Alaska with its small
population base (p. 19).
9:36:18 AM
Mr. Richards remarked that there are strategic advantages to
having a state funded program; projects can be completed
much faster often making them less costly. Alaska would have
relief from federal oversight and would not have to follow
many of the federal laws. The National Environmental Policy
Act (NEPA) would be avoided if there are no federal actions
involved, such as wetlands permits, which would benefit
preventative maintenance and major maintenance type
projects. Mr. Richards specifically mentioned Section 4(f)
of the 1966 Transportation Law that prohibits federally
funded roads through parks that can be very demanding in
Alaska (p. 20). Mr. Richards explained that the next chart
represents two different project timelines (p. 21). The top
line shows a federal project and the process that must be
followed. He indicated that in a federal project one phase
must be completed before the next phase can begin, adding
approximately seven years to complete a project. The lower
portion of the chart shows state funded projects time line.
Mr. Richards pointed out that work on state funded projects
can be completed in parallel, saving about two to three
years and the associated higher costs of construction.
9:38:03 AM
Mr. Richards indicated in the next chart some of the
successes in completely several projects with time savings
including (p. 22):
Boniface Parkway Extension
Dowling Road East
Washington Creek Bridge on Elliott Highway
Ketchikan Tongass Avenue
Pile Bay - Williamsport (Cook Inlet to Lake Iliamna)
Work on Glenn Highway at Merrill Field
Mr. Richards presented that the next chart was prepared from
all funds appropriated to transportation, including (p. 23):
Annual capital budget
Supplemental capital budgets
GO bond funds in 2003
State and local projects and
Deferred maintenance and maintenance station
construction
Mr. Richards indicated that it does not include:
Match funds to aviation, highways, National Highway
Safety administration (NHTSA) and Federal Motor Carrier
Safety Administration (FMCSA)
Grant Anticipation Revenue Vehicle (GARVEE) bonds
(since they are repaid with federal funds)
Two key points to chart are:
General funding has been very erratic. This is not
ideal to department workload, consultants or
contractors.
The proposed Alaska Transportation Fund (at the
beginning amount of $50 million per year) would have
been quite meaningful in five of the past nine years.
9:39:47 AM
Mr. Richards proposed that the department can not
realistically continue to rely solely on Federal programs to
meet Alaska's Transportation needs. The department will
continue to utilize the federal funds made available for
specific modes but there are still assets like ports and
harbors that do not have a dedicated federal program to fund
their needs. Federal aviation funding is somewhat more
robust than Alaska's highway funding but it still not enough
to get the job completed. While the 3,300' runway standard
is still being implemented, with many communities needing
this improvement, the desire for much longer 4,500' runways
is growing due to costs of moving fuel by air. The loss of
barge service due to water levels in some river systems is
behind this need for larger airstrips. Mr. Richards remarked
that based on the analysis of needs and projected funding,
it is time to institute a funding stream that will provide
for Alaska's existing and future Transportation needs. Mr.
Richards elaborated that an Alaska Transportation Fund would
allow for a fund stream that could provide resources for all
state and local modal needs and develop a program approach
to meet these needs. Mr. Richards indicated that the
department would follow, AS 44.42.050, on the project
selection process. There are currently individual modal
selection processes in place but there is the need to create
a multi-modal process using performance measures to guide
project selections. Alaska's project scoring process has
been identified as among the best in the nation. The Denali
Commission looked at several approaches throughout the
nation and opted to follow one nearly identical to the
Department of Transportation's Project Evaluation scoring
process.
9:41:32 AM
Mr. Richards observed that individual project appropriations
did not allow the department to develop a programmatic
approach. The Alaska Transportation Fund will provide a
consistent fund source. Mr. Richards estimated that the
initial Alaska Transportation Funding appropriation of one
billion dollar would generate approximately $50 million per
year. The alternative to raise this level of funding would
be to raise the gas tax from 8 cents to 20 cents (p. 26).
9:42:31 AM
Mr. Richards continued that state law already defines how
transportation projects should be identified through a
planning process, and how they should be selected for
funding by the Executive branch, with approval and
appropriation by the Legislative branch. This core process
will continue, with the Alaska Transportation Fund as a new
funding source (p. 27). Mr. Richards remarked that there is
currently a programmatic approach funded by the federal
highway and federal aviation funds. This means that there is
an annual allocation of funds that can be used to fund
various phases of multiple projects. This approach allows
the department to use the pool of funding to shift between
projects if delays or cost increases require funds to be
reallocated. Mr. Richards emphasized that this is more
efficient as funds are not parked for total project
consumption, which happens when there is an individual
appropriation. Over the last few years there has been severe
erosion in the purchasing power due to high costs of fuel
and construction. This has meant that individual project
appropriations have required coming back to the legislature
to seek more funding or reduce the scope of the project. The
Alaska Transportation Fund would allow the department to
shift funds to cover these impacts and proceed on a timelier
basis.
9:44:22 AM
Mr. Richards stated that once the Alaska Transportation Fund
is established, the funding for the first few years will be
used to (p. 30):
Target know priority safety needs
Let contracts for existing bid ready projects
Target preservation activities
Address economic development and congestion needs
Mr. Richards believed it was truly a tragedy that seventy-
five to eighty people per year were losing their lives from
accidents on Alaska's highway and road systems.
Transportation needs to address the problems in order to
save lives, injuries, and the large monetary impact that
accidents cost society. Mr. Richards commented that the
safety numbers shown are from the Strategic Highway Safety
Plan, just completed in Sept. 2007. He said a goal has been
set to reduce fatal accidents statewide by one third over
the next ten years, but this will take investment and a new
funding mechanism to accomplish.
Mr. Richards remarked that preservation is the smart thing
to do. Preservation activities generate $4 of saving for
every $1 spent, i.e., delayed costs of reconstruction,
prolonged life of the assets. Approximately $13 million in
Federal Highway Funds and $4 million in Federal Aviation
Funds are being used for preservation activities. This is
addressing some of the needs and helping with the operating
budget (p. 32).
9:45:55 AM
Mr. Richards stressed that congestion relief impacts
everyone from the economic costs associated with time
delays. It is estimated that savings are promoted by
addressing congestion in the form of providing additional
lanes or alternate routes (p. 33).
9:46:33 AM
Mr. Richards emphasized that transportation is vital to the
viability of our country and is especially important is
Alaska with its huge landmass and spread out population. He
saw transportation as key to promoting opportunities for all
Alaskan's in line with our Constitutional mandate (p. 34).
Mr. Richards reported that picking projects will require two
levels of decision; how much to give each type of system
(mode) and how to select projects within each mode and the
criteria to be used. The department will use statewide
assessments of needs to answer the first question. For
example, if highways backlog is ten times greater than ports
and harbors backlog, then dollars would be apportioned
accordingly. Mr. Richards remarked that a well established
and nationally recognized modal is in place for scoring
criteria. There is also a plan to evaluate whether there is
a need to update criteria and include new items for such
things as preventative maintenance projects. There will be a
public process in developing new regulations (p. 35).
9:47:44 AM
Mr. Richards stated that the department is completing the
2030 Plan. It provides a detailed examination of how much
funding is needed to address transportation needs across the
state. It considered all the modes and provides good
baseline data. Mr. Richards noted there is a recognition
that more needed to be done on Ports and Harbors statewide
and the department is working with the Corps of Engineers
and the Denali Commission to fund a comprehensive study
statewide. All updated information will be used to allocate
funding across the modal needs, if provided with additional
funding (p. 36).
9:48:26 AM
Mr. Richards reiterated that Alaska is at a "Fork" in the
road. He believed that one way leads to likely economic
impacts from congestion, deteriorating assets and continued
safety challenges. The other way leads to a brighter future
with more self reliance and determination. He emphasized
that the needs for the future are great when considering (p.
37):
The potential for significantly less federal
transportation funds
The anticipated decline in the amount of oil revenues
and the need to live within our means
The urgent need to address our needs now so we do not
get farther behind the power curve
The growth of our great state and the need to develop
our natural resources such as the Gas Pipeline
9:49:08 AM
Co-Chair Stedman referred to page 23, and requested the
addition of a few more bars on the graph to see full state
and federal spending on Department of Transportation
projects from FY 00 to FY 08. Mr. Richards questioned if Co-
Chair Stedman wanted to see, by fiscal year, the total
transportation funds broken down by fund source. Co-Chair
Stedman remarked that there were no federal funds included
in this chart to determine the federal capital match to
maximize the federal revenue coming into the state. Mr.
Richards indicated he would do this. Co-Chair Hoffman
questioned the benefits to rural Alaska in improved
transportation if this program were implemented.
9:51:02 AM
Mr. Richards remarked that the Fund would be available for
the legislators to appropriate for projects across the model
needs, including harbor, ports, airports, roads, local
roads. It would not be specific to one particular mode. Co-
Chair Hoffman wondered if there would be any construction of
new roads in Alaska. Mr. Richard acknowledged that toward
the economic development of Alaska, if there are funds
available, the Department of Transportation would be
supportive of building new roads. The last new road in
Alaska was the Red Dog Road in the 1980s. Co-Chair Hoffman
commented that in looking at the outline presentation of
existing problems that the amount generated from the Fund
would barely scratch surface.
9:53:09 AM
Mr. Richards observed that the initial appropriation of $1
billion will generate approximately $50 million that is not
currently available. It is a start to begin replacing lost
federal dollars and allowing for inflation.
9:54:06 AM
Co-Chair Hoffman questioned how aggressively the funds will
be managed. Mr. Richards deferred to the Department of
Revenue. Senator Elton referred to page 10, in the middle
column, titled "Cost to Build." He assumed that the dollar
figures in the middle column are not actually the cost to
build but costs to get to the deferred maintenance and some
repairs to highway projects. Mr. Richard responded that the
middle column, "Cost to Build" is the actual cost to
construct the project, not the deferred maintenance needs
for that section.
9:55:50 AM
Senator Elton commented that he understood the figure is not
the original construction cost but the cost of enhancements
to facilities. Mr. Richard agreed that this is the cost of
enhancement. Senator Elton wondered if he understood
correctly that in earlier testimony to suggest that Alaska
is falling behind about $80 million a year on the pavement
component of the transportation system. Mr. Richards
answered that he was referring to the National Highway
System and the deteriorating pavement that is currently on
the books and combined with the rate of growth equals $80
million a year.
9:56:55 AM
Co-Chair Hoffman referred to figures on page 10, and
commented that, with the $50 million generated each year, it
would still take 50 years to complete just those projects.
Mr. Richards remarked that the loss of the federal highway
funds presents a great challenge, therefore the $50 million
generated in this fund would be a great help. Co-Chair
Stedman maintained that it would be better to try and get
more federal money than less federal money. Mr. Richard
explained that federal dollars are more difficult to obtain
with the rescissions that Congress is enacting. The next
reauthorization will probably be to shift the fund source,
from a gas tax, to something different. There will also be
an emphasis on greenhouse gas reductions and performance
measures. Mr. Richards has been indicated that much of the
funds will be divided for specific congestion relief across
the country which goes to the top one hundred
municipalities, where Alaska will not be included.
9:59:04 AM
Senator Elton referred to page 13, and questioned if, in the
seven years from 2200-2006, the cost of inflation has
doubled the costs of maintenance to the Department of
Transportation. Mr. Richards stated that this graph
represented the cost of construction for new pavement and
earthwork associated with highway and aviation. Pavement has
risen approximately 80 percent and earthwork has risen over
60 percent over those six years.
10:00:39 AM
Senator Huggins asked if the 20/30 study included the
pipeline infrastructure.
10:0
1:09 AM
JEFF OTTESEN, DIRECTOR, DIVISION OF PROGRAM DEVELOPMENT,
DEPARTMENT OF TRANSPORTATION & PUBLIC SAFETY, commented that
there is a section in the plan that talks about necessary
highway improvements once the pipeline moves forward but it
is waiting for more information on the route and other
logistics of the pipeline construction. The pipeline will be
placed somewhere between Prudhoe Bay and Fairbanks, so there
has work on this segment, but the department is waiting for
more information regarding other routes. Senator Huggins
questioned if the plan has any minimum or maximum numbers
for meeting the construction demands. Mr. Ottesen responded
that it does not directly, but there is a new full time
staff person and a consultant in Fairbanks working on
refreshing the numbers. Senator Huggins asked if the
Fairbanks employee's name was Mr. Reeves. Mr. Ottesen
replied in the affirmative. Senator Huggins suggested that
Mr. Reeves be given more visibility and that information be
distributed concerning his function.
10:03:39 AM
Co-Chair Stedman requested that Mr. Ottesen explain how this
endowment concept will integrate with the Statewide
Transportation Improvement Program (STIP) process. Mr.
Ottesen replied that the STIP process is required for
federally funded projects. State funded projects have not
been added to the STIP process as a portrayal of intentions.
The positive aspect is avoiding extra steps, time, and cost
to prepare the STIP for those projects. The downside is that
the public does not see the whole picture; the public is
only seeing federally funded, not state funded, projects.
Mr. Richards believed that there has been the fear that
adding state projects to the STIP would federalize them,
adding federal rules and processes. Co-Chair Stedman asked
if the endowment would only then go to stateside projects,
not to match federal funds. Mr. Ottesen replied in the
affirmative. Mr. Ottesen believed there would be a published
list, apart from the STIP, that would be equally visible.
Co-Chair Stedman commented on a concern that the legislature
select and appropriate funding that the Department of
Transportation ignores. Mr. Ottesen related that in the
20/30 plan the department tried to communicate the magnitude
of the gap between expectations concerning transportation
and the current ability is to deliver on those expectations.
He believed that this plan looks honestly at the achievable
goals in a wide variety of transportation modes throughout
Alaska. It is a restrained list but only achievable with
this additional funding.
10:07:38 AM
Co-Chair Stedman remarked that legislators, as elected
officials, conduct numerous meetings with local
municipalities to deal with local capital improvement issues
and concerns. During session, the legislature allocates
money as fairly as possible. He questioned if there would be
a process by the Department of Transportation to gather
public input. He also requested information on the ranking
procedure that would be used to fund the projects.
10:08:57 AM
Mr. Ottesen replied that are two decisions to make; how much
money to each mode of transportation and how that money is
allocated. He acknowledged there is a ranking method in
place using the STIP scoring method. The frustration in
recent years is how little is actually getting completed in
the list of projects because the dollars are not stretching
as far as they once did. Co-Chair Stedman asked about the
$20 million in bonds proposed to be voted on by the people
then list of projects generated. Co-Chair Stedman indicated
that he is waiting to see the list from the Department of
Transportation on projects ranking. He also pointed out that
he did not see any indication of a public process. Mr.
Richards answered the question of public involvement, by
relating that in Alaska Statute 44.442.050, it defines that
the Department of Transportation must follow processes and
put forward a project list of needs. Even with the
endowment, the Department of Transportation will continue to
seek public, legislative, community and municipality input.
10:12:32 AM
Senator Elton referred to page 25, where it states that the
Department of Transportation will follow AS 44.442.050.
Senator Elton remarked that he sees nothing in the bill that
constrains the department to follow this statute or
constrains the legislature to follow it as an appropriator.
He wondered why it was not reference in the bill.
10:13:41 AM
Senator Elton read from the statute AS 44.442.050 that
states that,
a cost effective analysis is not required for a project
that involves the rehabilitation and maintenance of an
existing transportation system or that primarily serves
local transportation needs.
Senator Elton mentioned that in the presentation there were
many examples that the need for this fund were for local
transportation or rehabilitation and maintenance. He asked
for assurance that the core concept is mandated in law. Mr.
Richards responded that the projects that will be developed
through the selection process will be worked within the
communities. When going through the ranking process, the
department will come to the legislative body with the
capital bill identifying the project and its fund source.
The legislature will determine if the is the appropriate
fund source or not.
10:15:31 AM
Senator Elton appreciated Mr. Richards response but he was
not sure this fund process is the same used in selecting the
$125 million projects in the GO Bond proposal. Senator
Huggins responded that if this is creating a fund, he
believes the confidence level of public on how this fund
will be appropriated is not high. He would feel more
comfortable if the approach to using this fund was based on
a more open system.
10:17:06 AM
JOHN DUFFY, BOROUGH MANAGER, MAT-SU DISTRICT (TESTIFIED VIA
TELECONFERENCE), supported a long term solution for coming
up with funding for the transportation system. He believed
this funding is an initial step, he did not believe this
funding was sufficient to meet the need of this state,
especially the Mat-Su Borough. Mr. Duffy indicated the fund
for the 5 percent annual allocation for capital projects is
equivalent to funding one major road project per year. Mr.
Duffy believed that the funding for transportation projects
should be $250 to $300 million per year. He indicated that a
description on the how the projects are selected is also
necessary. He listed serious problems, in Alaska and the
Mat-Su area, related to inadequate transportation funding
for building and repairs. He pointed out that many local
communities and boroughs in Alaska tax themselves for
additional funds for these needs. He suggested a "matching
fund" process for the state to match the funds collected
locally.
10:21:24 AM
JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF REVENUE, responded to the question
on how the money would be invested. He indicated that it
would be invested with an asset allocation similar to the
pension funds which have historically returned over nine
percent. Over a period the annual payout would grow
approximately three to four percent a year on average.
10:22:47 AM
Co-Chair Stedman remarked that taking the previous bill for
$120 million, adding that to the Governors Capital budget,
for FY 09, and looking at the supplemental for FY 08, there
is $2,048,000,000 in capital and he wondered how much of
this money would fit into this bill.
10:23:52 AM
Mr. Richards questioned if Co-Chair Stedman was asking what
portion of the funding of the current FY 08 and FY 09
capital budgets needs would be funded by the Alaska
Transportation Fund. Co-Chair Stedman responded that, of the
$2 billion on table, adding the FY 09 capital budget,
throwing in the $120 million of bonds, this comes to over $2
billion. He wondered how much of this $2 billion would fall
into this endowment process. Mr. Richards responded that the
intent of legislation would provide funding that would cover
a portion of that $2 billion need presently out there, if
this bill was in play. This fund source could be used to
draw on for specific needs in lieu of just the General Fund.
Co-Chair Stedman requested that the department return with a
more specific answer to this question. Mr. Richards
responded that he would.
SB 236 was heard and HELD in Committee for further
consideration.
10:26:47 AM
HOUSE BILL NO. 321
"An Act relating to the salmon product development tax
credit; providing for an effective date by amending an
effective date in sec. 7, ch. 57, SLA 2003, as amended
by sec. 4, ch. 3, SLA 2006; and providing for an
effective date."
IAN FISK, STAFF, REPRESENTATIVE THOMAS, presented an
overview of HB 321 for a Salmon Development Tax Credit as an
incentive to add value to Alaska salmon. This program
originated with the Joint Legislative Salmon Industry Task
Force through the Legislature in 2003. It allows a credit to
be claimed on up to 50 percent of qualified equipment
investments. The credit is applied to the fisheries business
tax which uses the tax at the first point of landing when
delivering fish for processing. Mr. Fisk noted that the
allowable equipment for the tax credit is filet machines,
pin-bone removal machines, lasers, and smoking equipment.
The equipment must be new and used predominately for salmon
products. Mr. Fisk remarked that products are changing from
"old-school" salmon products, such as tall cans, to filets,
portions of filets, vacuum packed, and smoked. The existing
program sunsets on December 31, 2008; HB 321 would extend it
to 2011. Mr. Fisk outlined changes in the bill relative to
the existing statute. The bill includes a new section that
allows processors to get a predetermination from the
Department of Revenue of eligibility for credit. There is
also a change on page 2, line 11-12, which allows certain
types of conveyors to qualify for the credit. The bill will
not be retroactive and the equipment must be used
specifically for adding value to the fish. Mr. Fisk
reiterated that the sponsor strongly supports renewing the
program to help the industry.
10:31:03 AM
Senator Olson wondered what benefit this bill would have to
the Community Development Quota (CDQ) processors in rural
Alaska. Mr. Fisk responded that Ocean Duties Seafood has
testified in strong support for this bill. This bill will
benefit all salmon processors.
Co-Chair Stedman remarked that there have been discussions
about the conveyor belts issue for some of the higher end
value-added products. He explained that conveyor belts for
these products have to be improved and are more expensive
therefore there has been a rewrite on the credit bill. The
clear intent of the bill is not to have the standard
conveyor mechanisms within all the fish processing plants
available for credit.
10:32:14 AM
Co-Chair Hoffman questioned if it was known what type of
exposure would be made if the conveyor belts were included.
Mr. Fisk responded that the average cost to these units is
$20,000; the credit plan would make it $10,000. In 2005, the
Department of Revenue, which oversees this program, denied
applications for eleven conveyors that did not qualify under
the original bill.
10:33:11 AM
MARY MCDOWELL, VICE-PRESIDENT, PACIFIC SEAFOOD PROCESSORS
ASSOCIATION, explained that the Pacific Processors is a
trade association of seafood processors operating in Alaska.
Three Pacific Seafood Processors Association (PSPA) members
with locations in Valdez, King Cove, Port Moller,
Dillingham, Ketchikan, Naknek, Sitka, Kodiak, and Togiak
have been using this product development tax credit to
expand the goals of the program. This includes developing
and expanding new and value-added salmon products. This
program has helped Alaska's salmon products keep pace with
evolving consumer demands and competitiveness in the world
market. Ms. McDowell referenced letters from companies on
how they have used this tax credit (copies on file). She
remarked that the legislature structured this program
tightly which has been helped its success, but there is more
to be done to remain competitive. One large impediment
facing seafood processors is the high cost of energy. Ms.
McDowell noted that most operators work in rural Alaska
where the energy costs are the highest. The tax credit
program provides the incentive to encourage the companies to
move ahead with new plans that might otherwise be postponed.
The fishermen, communities, and the state benefit from these
incentives. Ms McDowell believed this would assure that
Alaska products stay completive in the world market.
10:37:02 AM
Co-Chair Stedman mentioned HB 321 has been refined and
reworked previously in committee. Senator Elton commented
that he was a member of the Salmon Industry Legislative Task
Force five years ago which included harvesters, community
members, processors, and legislators. This Task Force moved
the process throughout Alaska to help craft the proposal for
this extension. Senator Elton remarked that he could not
remember a single person who opposed the tax credit. Co-
Chair Stedman referred to one fiscal note for $7,000.
Senator Elton MOVED to report out of committee with attached
fiscal note and individual recommendations.
HB 321 MOVED to report out of Committee with the
accompanying fiscal note and individual recommendations.
10:39:29 AM
SENATE BILL NO. 216
"An Act designating the Alaska Highway and portion of
the Richardson Highway as the Purple Heart Trail."
SENATOR JOHNNY ELLIS, bill sponsor, spoke in support of SB
216. This legislation, to establish the Purple Heart Trail,
honors Alaska veterans. He indicated that the idea was
brought to him by a veterans advocate, Ron Siebels. Senator
Ellis pointed out that there are 100,000 active duty
military personnel who consider themselves Alaskans. He
reported that forty two states have designated all or parts
of their interstate highway system as part of the Purple
Heart Trail. The proposal is to designate part of the Alaska
Highway which was built by the U. S. Army during World War
II. Senator Ellis mentioned that large signs would be placed
at Delta Junction, Fairbanks, Tok, and the Canadian Border,
with smaller signs at mid-points between. There would also
be three pullouts with informational displays to educate the
public and visitors. Senator Ellis emphasized that there is
no known objection to this proposal. Co-Chair Stedman
mentioned one fiscal note for $150,000 for the installation
of the signs. Senator Ellis continued that there are letters
of support from other veteran's organizations on file.
KURT SMITH, STATE TRAFFIC AND SAFETY ENGINEER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC SAFETY, supported the bill and
intends to install signs that appropriately honor Purple
Heart recipients.
RON SIEBELS, MILITARY ORDER OF THE PURPLE HEART, ANCHORAGE
(TESTIFIED VIA TELECONFERENCE), supported the SB 216. He
mentioned the widespread support for the Purple Heart Trail
throughout the State of Alaska including the Governor, local
officials, the cities along the route, and Alaska citizens.
He believed it was important for Alaska to visibly show to
the world that it cares about its veterans. Mr. Siebels
reiterated that the Purple Heart Trail already exists in
forty two states plus Guam and he hopes Alaska will not be
the last state to participate. Mr. Siebels believed the
Purple Heart Trail would honor Alaska's veterans and promote
a warm welcome to the visitors to the state who have been
Purple Heart recipients. He emphasized that this is just a
word designation; it will not change any road numbers or any
road names.
10:45:37 AM
Co-Chair Hoffman MOVED to report SB 216 out of Committee
with the individual recommendations and accompanying fiscal
note.
SB 216 MOVED to report out of Committee with the individual
recommendations and accompanying fiscal note.
ADJOURNMENT
The meeting was adjourned at 10:47 AM
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