Legislature(2013 - 2014)SENATE FINANCE 532

04/12/2013 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 90 SCHOOL DISTRICT EMPLOYEE HEALTH INSURANCE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 129 OIL & GAS EXPLORATION/DEVELOPMENT AREAS TELECONFERENCED
Moved CSHB 129(FIN) Out of Committee
+= HB 23 KNIK ARM BRIDGE AND TOLL AUTHORITY TELECONFERENCED
Heard & Held
+= SB 13 KNIK ARM BRIDGE AND TOLL AUTHORITY TELECONFERENCED
Heard & Held
+= HB 76 UNEMPLOYMENT; ELEC. FILING OF LABOR INFO TELECONFERENCED
Moved CSHB 76(FIN) Out of Committee
2d CS FOR HOUSE BILL NO. 23(RLS)                                                                                              
                                                                                                                                
     "An   Act  creating   the  Knik   Crossing  Development                                                                    
     Corporation as  a subsidiary corporation of  the Alaska                                                                    
     Housing Finance  Corporation and  relating to  bonds of                                                                    
     the Knik Crossing Development Corporation."                                                                                
                                                                                                                                
2:21:07 PM                                                                                                                    
                                                                                                                                
Vice-Chair   Fairclough  noted   that  there   were  varying                                                                    
opinions on  the audit  that was  before the  committee. She                                                                    
stated  that the  Division of  Legislative  Audit (DLA)  had                                                                    
full  support  from  legislative  auditors  and  had  worked                                                                    
within  the  parameters  that  had  been  requested  by  the                                                                    
legislature. She relayed  that the Knik Arm  Bridge and Toll                                                                    
Authority (KABATA)  board had worked diligently  to move the                                                                    
project  forward. She  offered support  for the  legislation                                                                    
and expressed an obligation to  protect the audit staff that                                                                    
had been working on behalf of the legislature.                                                                                  
                                                                                                                                
2:22:43 PM                                                                                                                    
                                                                                                                                
MICHAEL  FOSTER,   CHAIRMAN,  KNIK   ARM  BRIDGE   AND  TOLL                                                                    
AUTHORITY, introduced  his support staff. He  recognized the                                                                    
work  that  had been  done  by  the  DLA committee  and  the                                                                    
legislature  on  the  audit.   He  stated  that  KABATA  had                                                                    
concerns with the  models that were used in  the findings to                                                                    
predict  population  and  social  economic  and  demographic                                                                    
numbers.                                                                                                                        
                                                                                                                                
2:23:54 PM                                                                                                                    
                                                                                                                                
JUDY DOUGHERTY,  DEPUTY EXECUTIVE DIRECTOR, KNIK  ARM BRIDGE                                                                    
AND   TOLL  AUTHORITY,   gave  a   brief  overview   of  her                                                                    
credentials. She  relayed that  the audit had  found nothing                                                                    
wrong  with  the  Knik   Arm  Crossing  project  development                                                                    
process  or  governance  and no  problems  with  contracting                                                                    
practices.  She  said  that  a  DLA  auditor  had  testified                                                                    
earlier in the  week that KABATA'a draft  document could not                                                                    
be  audited  because  they  were   a  "moving  target."  She                                                                    
explained   that  in   accordance  with   standard  auditing                                                                    
practices  a  scope change  was  identified  and KABATA  was                                                                    
informed.  She asserted  that a  balanced accounting  of the                                                                    
general   risk/reward  calculus   of  and   availability  P3                                                                    
agreement  could  and  should  have  been  included  in  the                                                                    
report.  She  addressed  the issue  of  reasonableness.  She                                                                    
offered  that reasonableness  was what  had blown  the audit                                                                    
out of proportion  and damaged the progress  of the project.                                                                    
She opined that the  auditors contended that the assumptions                                                                    
made   for  the   project  model   were  not   supported  by                                                                    
independent sources.                                                                                                            
                                                                                                                                
2:25:45 PM                                                                                                                    
                                                                                                                                
Ms.  Dougherty  asserted  that 6  different  traffic  demand                                                                    
models had been completed  since 2005 that predicted traffic                                                                    
on  the  Knik  Arm  Crossing.  She  referred  to  "Knik  Arm                                                                    
Crossing, Traffic  Study FAQs"  (copy on file).  She pointed                                                                    
out to the  committee that Page 2 of  the document contained                                                                    
a table detailing the studies.  She relayed that the studies                                                                    
were performed for DOT's Highway  to Highway project and the                                                                    
AMATS  Metropolitan  Transportation   Plan  in  addition  to                                                                    
KABATA.  She asserted  that each  study had  been done  with                                                                    
their  own  set  of underlying  assumptions,  variables  and                                                                    
limitations;  each study  had indicated  that 4  lanes would                                                                    
likely be necessary on the  crossing on later than 2035. She                                                                    
said that each study had  study boundaries that included the                                                                    
crossing location  and assumed economic growth  in the lower                                                                    
Mat-Su  borough as  a result  of economic  "spill-over" from                                                                    
Anchorage  once the  crossing  was  constructed. She  shared                                                                    
that 3  of the studies could  have been used as  a basis for                                                                    
comparison analysis  by DLA or  a qualified  consultant. She                                                                    
felt that  the auditors  had dismissed  the studies  and had                                                                    
based their  conclusions on a  traffic model prepared  for a                                                                    
DOT project  located near Wasilla;  more than 30  miles from                                                                    
the  crossing location,  and the  study  boundaries did  not                                                                    
include the crossing location. She  said that the population                                                                    
and variables  used in  DLA's selected  model were  based on                                                                    
the  assumption  that  there  would  be  no  change  to  the                                                                    
traditional  population and  economic  growth  in the  lower                                                                    
Mat-Su  borough  as a  result  of  the bridge  opening.  She                                                                    
furthered that DLA's assumption  made no consideration for a                                                                    
change in  job growth or  population growth, and had  used a                                                                    
model that  predicted that there  would be 30  percent fewer                                                                    
jobs  in Port  Mackenzie than  ISER had  predicted would  be                                                                    
generated by  providing ferry service alone  at the crossing                                                                    
site.  She  contended that the audit findings  did not sound                                                                    
reasonable.  She  said that  the  crossing  project had  had                                                                    
traffic studies performed by 2  separate consultants who had                                                                    
arrived at similar  traffic volumes on the  bridge, but that                                                                    
the  information had  been  dismissed by  DLA  as not  being                                                                    
independent.  She thought  that varying  definitions between                                                                    
auditing   standards   and  professional   standards   among                                                                    
engineers  of  how  "independent  information"  was  defined                                                                    
could have  catered to  the problem.  She stressed  that the                                                                    
professional  engineering firms  that performed  the studies                                                                    
were  independent   and  had  no   reason  to   stake  their                                                                    
professional integrity  for the benefit of  KABATA. She said                                                                    
that the concerns  of the DLA auditor had  been addressed in                                                                    
one-on-one correspondence with  KABATA's traffic and revenue                                                                    
consultant who  provided insight to local  conditions of the                                                                    
project site and variances in population projections.                                                                           
                                                                                                                                
2:31:05 PM                                                                                                                    
                                                                                                                                
Ms. Dougherty cited Page 257  of the "Legislative Budget and                                                                    
Audit Committee  Report of the Department  of Transportation                                                                    
and  Public Facilities  Knik Arm  Bridge and  Toll Authority                                                                    
Knik Arm Crossing Project" (copy on file):                                                                                      
                                                                                                                                
     Since both  the transportation model and  the financial                                                                    
     model are computer based,  performing "what if" changes                                                                    
     in  underlying  assumptions  and data,  and  evaluating                                                                    
     their  effect   on  outcomes   should  not   be  overly                                                                    
     burdensome.                                                                                                                
                                                                                                                                
Ms.   Dougherty  relayed   that  KABATA   agreed  with   the                                                                    
statement.  She  said that  over  2,000  simulations of  key                                                                    
traffic control  revenue variables  had been performed  in 5                                                                    
year  increments and  used as  input to  the financial  risk                                                                    
analysis previously  presented by David Livingstone  of CITI                                                                    
Bank.  She  furthered that.  She  opined  that the  auditors                                                                    
failed to  recognize that the  traffic volumes  projected by                                                                    
DLA's  "what if"  scenario  had been  accounted  for in  the                                                                    
range  of   risk  analysis  when   the  risk   analysis  was                                                                    
evaluated.   She   asserted    that   KABATA's   consultants                                                                    
represented  the industry's  "who's  who" in  transportation                                                                    
engineering,   financing,    traffic   and    toll   revenue                                                                    
forecasting and  contract development legal support  and had                                                                    
been involved  in nearly  every successfully  delivered toll                                                                    
road financing P3 project in the country.                                                                                       
                                                                                                                                
2:33:39 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Fairclough remarked  that she  was Chair  of the                                                                    
Legislative Budget and Audit  (LB&A) Committee. She informed                                                                    
the  committee that  the  audit had  been  requested by  the                                                                    
previous LB&A chair.                                                                                                            
                                                                                                                                
2:34:30 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer wondered  when  the  auditors had  contacted                                                                    
KABATA for information about the project.                                                                                       
                                                                                                                                
Ms.  Dougherty replied  that she  was not  sure. She  stated                                                                    
that  management  letter  number  1  had  been  received  on                                                                    
February 1, 2013. She said  that the strong language used in                                                                    
the response to  the report was due to the  fact that KABATA                                                                    
had been rushed  in their response; they had  been given ten                                                                    
days  to respond  and the  legislative  session was  already                                                                    
underway. She  felt that there  was a lack  of understanding                                                                    
between KABATA and DLA.                                                                                                         
                                                                                                                                
2:35:39 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  felt that  the lack  of understanding                                                                    
stemmed from a different understanding of the P3 agreement.                                                                     
                                                                                                                                
Ms.  Dougherty thought  that there  was a  concern regarding                                                                    
"toll friction."  She said that  toll friction  could reduce                                                                    
the  traffic count  on a  bridge  because people  had to  be                                                                    
willing to  pay the  toll. She stated  that a  community was                                                                    
going to develop in the  Mat-Su quickly and that the borough                                                                    
had establish several pound sites in anticipation.                                                                              
                                                                                                                                
2:36:59 PM                                                                                                                    
Vice-Chair Fairclough  wondered if  the auditors  had access                                                                    
to the  P3 agreement.  She understood that  it had  not been                                                                    
finalized yet  and imagined that  it would be  difficult for                                                                    
an auditor  to audit  something that  was not  complete. She                                                                    
wondered what  additional information would have  been found                                                                    
by the auditor had the P3 agreement been complete.                                                                              
                                                                                                                                
2:37:35 PM                                                                                                                    
                                                                                                                                
Mr. Foster responded that KABATA  had provided the draft RFP                                                                    
and  draft  PPA  to  the   auditor.  He  relayed  that  both                                                                    
documents  had yet  to go  through final  review. He  shared                                                                    
that  the  governor  had  legal  consultants  reviewing  the                                                                    
document. He  said that he  told auditors that  the document                                                                    
was  confidential  because  KABATA was  engaged  in  ongoing                                                                    
procurement.                                                                                                                    
                                                                                                                                
2:39:02 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer handed the gavel to Vice-Chair Fairclough.                                                                       
                                                                                                                                
Vice-Chair   Fairclough    noted   that   the    draft   was                                                                    
confidential. She  was unsure  whether the  contractor would                                                                    
have been  provided anything in  the P3 agreement  that they                                                                    
could consider  as they  moved forward  with the  audit. She                                                                    
said that  the auditors  had returned  to the  committee and                                                                    
amended  the framework  of how  they would  go forward  with                                                                    
the audit.                                                                                                                      
                                                                                                                                
Mr.  Foster deferred  legal questions  to the  Department of                                                                    
Law.                                                                                                                            
                                                                                                                                
2:40:18 PM                                                                                                                    
                                                                                                                                
Ms. Dougherty  added that  there were  a number  of benefits                                                                    
and  risks associated  with the  general structure  of a  P3                                                                    
agreement that had not been reflected in the report.                                                                            
                                                                                                                                
2:40:43 PM                                                                                                                    
                                                                                                                                
Senator Olson noted several projects  that had been invested                                                                    
with millions  of dollars  and then  had been  abandoned. He                                                                    
wondered  how the  crossing project  differed. He  expressed                                                                    
concern that  if the  numbers were wrong  that the  State of                                                                    
Alaska would be left footing the bill.                                                                                          
                                                                                                                                
Mr.   Foster   responded  that   there   was   a  need   for                                                                    
infrastructure  in  the  area.  He  stated  that  the  Point                                                                    
Mackenzie area was  looking to incorporate and  would be the                                                                    
4th largest city in the state.  He said that the increase in                                                                    
traffic in  the area reflected  the real need  for increased                                                                    
infrastructure in the area. He  warned that not building the                                                                    
bridge could result in an  estimated $3 billion plus in Glen                                                                    
Highway improvements. He stressed that  all the areas in the                                                                    
Mat-Su were  expected to  grow in  population in  the future                                                                    
and that the crossing would  be the best plan to accommodate                                                                    
the increase.                                                                                                                   
                                                                                                                                
2:47:38 PM                                                                                                                    
                                                                                                                                
Senator Olson remarked  that the money for  the bridge could                                                                    
be going towards  education. He argued that  people who were                                                                    
independent of the audit and  the legislature were coming up                                                                    
with  numbers  that  were  one-third   of  what  KABATA  had                                                                    
presented. He  noted that on  April 2, 2013, Mr.  Foster had                                                                    
testified  that the  Highland Area  in 1985  was 33,000;  in                                                                    
2010 the number  increased to 53,000. He pointed  out to the                                                                    
committee that that  was not a doubling of  the numbers, but                                                                    
was 63 percent  more. He furthered that  the numbers offered                                                                    
by KABATA  for 2035  showed the area  at 110,000,  which was                                                                    
more than double  the current number. He  felt that KABATA's                                                                    
projections  presented serious  problems. He  said that  the                                                                    
people contracted by KABATA to  come up with the numbers had                                                                    
a reputation of being overly optimistic in their estimates.                                                                     
                                                                                                                                
Mr. Foster  rebutted that he  did not believe that  that was                                                                    
true.                                                                                                                           
                                                                                                                                
2:49:49 PM                                                                                                                    
                                                                                                                                
Senator  Dunleavy believed  that  this was  one  of the  few                                                                    
projects  that   he  could   guarantee,  with   100  percent                                                                    
certainty, that once  completed would be used.  He said that                                                                    
the use would be continual and  growing. He quoted Page 1 of                                                                    
the audit:                                                                                                                      
                                                                                                                                
     The risks  and rewards in  totality as outlined  in the                                                                    
     P3  agreement  could  not   be  evaluated  because  the                                                                    
     agreement  has not  been finalized  and  is subject  to                                                                    
     further changes.                                                                                                           
                                                                                                                                
Senator Dunleavy relayed that he  did not fault the auditors                                                                    
for their methodology.  He did not believe  that the project                                                                    
should  be  likened  to the  failed  projects  mentioned  by                                                                    
Senator Olson. He  wondered what could be  otherwise done to                                                                    
serve the growing  area; would it be more  cost effective to                                                                    
build more lanes instead. He  did not believe that there was                                                                    
any question  about whether  there would  be traffic  on the                                                                    
bridge.                                                                                                                         
                                                                                                                                
2:52:53 PM                                                                                                                    
                                                                                                                                
Senator Hoffman directed attention to Page 19:                                                                                  
                                                                                                                                
     In  August 2012,  KABATA management  submitted a  TIFIA                                                                    
     loan  request   for  $500  million  at   a  49  percent                                                                    
     participation rate  in eligible  costs. In a  letter to                                                                    
     KABATA, dated  September 25, 2012, the  Federal Highway                                                                    
     Administration  (FHWA)  pended  reviewing  the  request                                                                    
     stating that:                                                                                                              
                                                                                                                                
                                                                                                                                
          compelling     justification"    for     providing                                                                    
          assistance  above   a  33   percent  participation                                                                    
          level.                                                                                                                
                                                                                                                                
Senator  Hoffman   continued  to  Page  27,   "Findings  and                                                                    
Recommendations."  He  felt   that  the  legislature  should                                                                    
address  the  findings.  He wondered  whether  KABATA  would                                                                    
address the findings as the  project moved forward. He noted                                                                    
that there was one recommendation:                                                                                              
                                                                                                                                
     Recommendation No. 1                                                                                                       
                                                                                                                                
     Knik Arm Bridge and  Toll Authority (KABATA) management                                                                  
     should revise  traffic and toll revenue  projections to                                                                  
     address deficiencies.                                                                                                    
                                                                                                                                
     The  audit  of  key  assumptions  and  inputs  used  in                                                                    
     KABATA's  transportation  modeling  process  identified                                                                    
     several   deficiencies   regarding  the   validity   of                                                                    
     assumptions and  inputs used as a  basis for projecting                                                                    
     toll revenues. Deficiencies are as follows.                                                                                
                                                                                                                                
                                                                                                                                
          projected  for 2035  were  overly optimistic  when                                                                    
          compared to the household  growth rates and levels                                                                    
          projected by  University of Alaska's  Institute of                                                                    
          Social  and  Economic  Research  and  the  State's                                                                    
          Department  of  Labor and  Workforce  Development.                                                                    
          The  discrepancy  stems   from  KABATA's  economic                                                                    
          growth  rate projections  in  the Point  MacKenzie                                                                    
          region, specifically in  the Port MacKenzie (Port)                                                                    
          area.                                                                                                                 
                                                                                                                                
                                                                                                                                
          percent  is significantly  higher than  the actual                                                                    
          growth   rate  of   2.5  percent   based  on   the                                                                    
          Department    of    Transportation   and    Public                                                                    
          Facilities'  traffic counts.  The differences  are                                                                    
          partially  caused  by  the anticipated  growth  in                                                                    
          population and  employment in the  Point MacKenzie                                                                    
          area.                                                                                                                 
                                                                                                                                
                                                                                                                                
          traffic is unsupported.                                                                                               
                                                                                                                                
                                                                                                                                
          commercial  vehicle traffic  for the  KAC is  high                                                                    
          compared  to actual  traffic  count  data for  the                                                                    
         Glenn Highway which indicates a split of                                                                               
          4.9 to  6.6 percent. KABATA's 12  percent split is                                                                    
          based on  DOTPF's 2003 through 2006  traffic data.                                                                    
          Since then,  DOTPF has  improved its  traffic data                                                                    
          collection methodology and  now reports much lower                                                                    
          traffic  count  splits  that  better  reflect  the                                                                    
          actual  count  between   personal  and  commercial                                                                    
          vehicles.                                                                                                             
                                                                                                                                
                                                                                                                                
          employment  level   of  14,337   is  significantly                                                                    
          higher  than the  level  noted  in the  Matanuska-                                                                    
          Susitna  Borough  plan  of 4,515.  A  majority  of                                                                    
          KABATA's   employment   (13,828)   is   based   on                                                                    
          projected  Port  economic   development  which  is                                                                    
          inconsistent  with  the  Port's  master  plan  and                                                                    
          regulations.                                                                                                          
                                                                                                                                
     All  of   the  above   concerns  have  the   effect  of                                                                    
     overstating traffic  volume. Overstated  traffic volume                                                                    
     in  KABATA's   modeling  process  has  the   effect  of                                                                    
     overstating projected toll revenues.                                                                                       
                                                                                                                                
Senator Hoffman highlighted:                                                                                                    
                                                                                                                                
     The Federal Highway Administration's (FHWA) guidelines                                                                     
     for P3s20 state:                                                                                                           
          Inaccurate    or    overly   optimistic    traffic                                                                    
          projections and  underestimated project  costs can                                                                    
          lead to  the development  of pro  forma financials                                                                    
          that  appear to  justify the  investment decision,                                                                    
          but  that  do  not reflect  the  project's  actual                                                                    
          ability   to  repay   debt  or   to  meet   equity                                                                    
          investor's return requirements.                                                                                       
                                                                                                                                
     Under  KABATA's  planned  P3  arrangement,  lower  than                                                                    
     expected toll  revenues would necessitate the  need for                                                                    
     additional  funding as  availability  payments must  be                                                                    
     paid to the private partner  regardless of how much the                                                                    
     bridge is used.                                                                                                            
                                                                                                                                
     In  recognition  of  the   risk  that  overstated  toll                                                                    
     revenues  pose  to  the   State,  we  recommend  KABATA                                                                    
     management   revise  the   traffic  and   toll  revenue                                                                    
     projections to address noted concerns.                                                                                     
                                                                                                                                
Senator Hoffman  stated that  as a  legislator he  could not                                                                    
ignore the recommendations of DLA.  He queried the timeframe                                                                    
for the KABATA board to  address the deficiencies as pointed                                                                    
out by the audit.                                                                                                               
                                                                                                                                
Ms.  Dougherty responded  that the  bullet  points had  been                                                                    
addressed in  the KABATA response  to the  preliminary audit                                                                    
report.  She noted  that three  of the  bullets specifically                                                                    
referenced  the Point  Mackenzie  area she  did not  believe                                                                    
that the model  used by the auditor addressed  the influx of                                                                    
traffic and economic  growth that would be  generated by the                                                                    
project.                                                                                                                        
                                                                                                                                
2:57:46 PM                                                                                                                    
                                                                                                                                
Mr.  Foster   furthered  that   KABATA's  response   to  the                                                                    
preliminary report could be found on Page 211 of the audit.                                                                     
                                                                                                                                
2:58:28 PM                                                                                                                    
                                                                                                                                
Senator Bishop echoed the comments  made by Senator Hoffman.                                                                    
He believed  that all  involved parties  needed to  agree on                                                                    
the  cost scheduling  numbers in  order for  the project  to                                                                    
move forward.                                                                                                                   
                                                                                                                                
2:59:18 PM                                                                                                                    
                                                                                                                                
Senator  Olson  remarked  that the  proposed  area  for  the                                                                    
project had a  history of expensive and  unused projects. He                                                                    
noted  that  the audit  had  highlighted  that if  the  toll                                                                    
revenues  were  lower  than expected,  the  state  would  be                                                                    
required   to  make   payments  to   the  private   partners                                                                    
regardless of how much the bridge was used.                                                                                     
                                                                                                                                
Mr. Foster replied in the affirmative.                                                                                          
                                                                                                                                
Senator Olson contended that there  was no reason to support                                                                    
a project that  was driven by suspect numbers.  He asked Mr.                                                                    
Foster  if  the  speculation   concerning  the  numbers  was                                                                    
reasonable.                                                                                                                     
                                                                                                                                
Mr.  Foster  agreed  that the  residents  of  Alaska  should                                                                    
evaluate  every proposed  project.  He  denied any  ulterior                                                                    
motive on behalf  of KABATA to move the  project forward. He                                                                    
offered that  the decision about  whether the  project would                                                                    
move forward should be made  by the state. He explained that                                                                    
KABATA's job was to provide information to the legislature.                                                                     
                                                                                                                                
3:02:10 PM                                                                                                                    
                                                                                                                                
Mr. Foster  referred to Page  37 of the audit  report, which                                                                    
contained  a table  that compared  the LB&A  numbers to  the                                                                    
KABATA population/traffic financial  model. He asserted that                                                                    
the  auditor's model  did not  consider the  impacts of  the                                                                    
crossing.                                                                                                                       
                                                                                                                                
3:04:28 PM                                                                                                                    
                                                                                                                                
Senator Olson stated  the state did not  have the population                                                                    
to generate  the tolls  that would pay  for the  project. He                                                                    
understood  that KABATA  had been  turned down  4 times  for                                                                    
low-interest federal loans.                                                                                                     
                                                                                                                                
Mr.  Foster  replied  that  letters  of  interest  had  been                                                                    
submitted 4 times.  He said that at the  time of application                                                                    
the project  had not been a  mature as it was  currently. He                                                                    
stated that  there were now  more federal  dollars available                                                                    
and the  chances of some  of them reaching the  project were                                                                    
improved.                                                                                                                       
                                                                                                                                
3:06:58 PM                                                                                                                    
                                                                                                                                
Senator  Dunleavy   commented  that   approximately  360,000                                                                    
people were  using the  one major  road in  the area  of the                                                                    
proposed  project. He  reiterated that  the bridge  would be                                                                    
used immediately  upon completion.  He stated that  having a                                                                    
large project that paid for  itself was a worthwhile concept                                                                    
to  explore. He  suggested that  all of  the major  projects                                                                    
executed by the state should pay for themselves.                                                                                
                                                                                                                                
3:08:46 PM                                                                                                                    
                                                                                                                                
Senator  Olson  reiterated that  if  there  were lower  than                                                                    
expected toll  revenues then  the state  would have  to make                                                                    
the inevitability payments to  private partners, leaving the                                                                    
state on the hook for billions of dollars.                                                                                      
                                                                                                                                
Mr.  Foster  replied  that  there  were  sideboards  on  the                                                                    
project which would keep the cost to the state down.                                                                            
                                                                                                                                
3:10:48 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough quoted Pages 19 - 20 of the audit:                                                                        
                                                                                                                                
                                                                                                                                
     justification" for providing assistance above a 33                                                                         
     percent participation level                                                                                                
                                                                                                                                
                                                                                                                                
     $150 million reserve fund is  appropriated by the State                                                                    
     or  it becomes  clear that  the funding  is "reasonably                                                                    
     likely" to be appropriated.                                                                                                
                                                                                                                                
                                                                                                                                
She  noted  that  the auditors  had  attempted  to  provided                                                                    
checks  and  balances  to guide  the  project  forward.  She                                                                    
queried the consequence of not  acting on the project during                                                                    
the current legislative session.                                                                                                
                                                                                                                                
Mr. Foster  responded that KABATA  would still  move forward                                                                    
with the  RFP process and  the PPA agreement. He  added that                                                                    
there  were permits  that were  being  finalized. He  shared                                                                    
that if the legislation did  not pass the project would fall                                                                    
further down  the Transportation Infrastructure  Finance and                                                                    
Innovation  Act (TIFIA)  list. He  thought that  the project                                                                    
could be  viable for the federal  funds in a year,  but that                                                                    
would be  dependent on how  much of the money  was allocated                                                                    
within the  next year. He  said that there was  no guarantee                                                                    
that  the legislation  would put  us in  the TIFIA  pot, but                                                                    
that  it could  move the  state  closer. He  noted that  the                                                                    
state  had  been invited  to  submit  the application  which                                                                    
meant that Alaska was in line for the federal funding.                                                                          
                                                                                                                                
3:14:41 PM                                                                                                                    
                                                                                                                                
Mr. Foster  shared that  if the  legislation was  not passed                                                                    
KABATA would continue to move forward.                                                                                          
                                                                                                                                
3:16:35 PM                                                                                                                    
                                                                                                                                
Senator Dunleavy  wondered about plans to  upgrade the Glenn                                                                    
Highway.                                                                                                                        
                                                                                                                                
Mr.  Foster  replied that  there  was  three mile  expansion                                                                    
currently occurring, funded by a general obligation bond.                                                                       
                                                                                                                                
3:16:59 PM                                                                                                                    
                                                                                                                                
Senator Dunleavy asked  if a toll was being  charged for the                                                                    
Glenn Highway expansion.                                                                                                        
                                                                                                                                
Mr.  Foster  replied  that  a toll  could  not  be  required                                                                    
because the road  was built using federal  highway money. He                                                                    
said that  the Glenn  Highway could be  tolled but  it would                                                                    
require a dedicated  lane; the commuter must  have an option                                                                    
if the road is constructed with federal dollars.                                                                                
                                                                                                                                
Vice-Chair Fairclough returned the gavel to Co-Chair Meyer.                                                                     
                                                                                                                                
3:17:37 PM                                                                                                                    
                                                                                                                                
SB  13  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2d  CS HB  23  (RLS) was  HEARD and  HELD  in committee  for                                                                    
further consideration.                                                                                                          
                                                                                                                                
3:19:00 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:30:15 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
SB 13 30068 - DOTPF KABATA Final Digest.pdf SFIN 4/12/2013 1:30:00 PM
SB 13
SB 13 KABATA Audit Conclusions Findings and Recommendations.pdf SFIN 4/12/2013 1:30:00 PM
SB 13
SB 13 KABATA Audit.pdf SFIN 4/12/2013 1:30:00 PM
SB 13
SB 13 Traffic Study FAQ April 2013 (2)1.pdf SFIN 4/12/2013 1:30:00 PM
SB 13