Legislature(2001 - 2002)

04/30/2002 01:36 PM Senate TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 271-MARINE AND RAIL TRANSPORTATION AUTHORITY                                                                    
                                                                                                                                
CHAIRMAN COWDERY announced SB 271 to be up for consideration.                                                                   
                                                                                                                                
SENATOR  WARD, sponsor  of SB  271,  moved to  adopt the  proposed                                                              
committee  substitute   (CS)  to   SB  271,  Version   C,  labeled                                                              
Utermohle,  4/19/02.  There  were  no  objections and  it  was  so                                                              
ordered [TAPING DIFFICULTIES].                                                                                                  
                                                                                                                                
He said  he thought it  is in the best  interests of the  State of                                                              
Alaska  to form  an authority,  give it  a half  million acres  of                                                              
ground and start  the ferry system on its way to  becoming a self-                                                              
sufficient  transportation system.  After talking  to members,  it                                                              
became clear  that combining  the Alaska  Railroad and  the Alaska                                                              
Marine  Highway System  (AMHS)  would not  happen  so a  committee                                                              
substitute was drafted to remove the Alaska Railroad.                                                                           
                                                                                                                                
MR. BOB DOLL, Director, Southeast Region, Department of                                                                         
Transportation and Public Facilities (DOTPF), said:                                                                             
                                                                                                                                
     The bill has two major impacts.  First, it creates a new                                                                   
     administrative  and  operating  regime  for  the  Alaska                                                                   
     Marine  Highway System.  That new  regime would  isolate                                                                   
     the  Marine  Highway  System  from  the  public  contact                                                                   
     process that  the department has  in place and  which we                                                                   
     believe should be maintained and strengthened.                                                                             
                                                                                                                                
     Secondly, it attempts to create  a funding mechanism for                                                                   
     the Marine Highway  through the sale of public  land. In                                                                   
     the  light of  these primary  impacts in  the bill,  the                                                                   
     department does not support SB 271.                                                                                        
                                                                                                                                
     With regard  to funding the  Marine Highway  through the                                                                   
     sale  of  land,  I'll  be  brief  since  that's  not  my                                                                   
     expertise.  Land located  along  the railroad  right-of-                                                                   
     way,  of course,  has an  inherent value  from the  fact                                                                   
     that it is  linked to a transportation method  that also                                                                   
     links  the  communities  along  the  way.  There  is  no                                                                   
     analogy for  the Marine Highway  System's routes.  It is                                                                   
     our understanding  that the  land contemplated  for sale                                                                   
     by  SB  271  is  already  available  for  sale.  We  are                                                                   
     skeptical that  SB 271 would create a market  for public                                                                   
     land  that  does  not  already exist.  If  the  land  in                                                                   
     question does,  in fact, find buyers, the  resource will                                                                   
     have a finite life that we'll  eventually find ourselves                                                                   
     in much the same circumstances as today.                                                                                   
                                                                                                                                
     Turning to the operating regime  for the Marine Highway,                                                                   
     there are a  number of issues that the bill  raises. The                                                                   
     first is that  the bill would remove the  Marine Highway                                                                   
     from the  Department of  Transportation. The  Department                                                                   
     is  the  logical  location  for  an  organization  whose                                                                   
     primary function  is to provide a public  transportation                                                                   
     system,  one  that is  responsive  to public  needs  and                                                                   
     imaginative  in meeting them.  The creation of  a Marine                                                                   
     Highway Authority will not improve  public access to the                                                                   
     Marine  Highway  operations   and  planning,  but  would                                                                   
     rather  isolate it  in its direction  from the  public's                                                                   
     influence.  We  believe  such  an isolation  is  not  in                                                                   
     Alaska's interest.                                                                                                         
                                                                                                                                
     Secondly,  the  bill  sets  up  a  new  competition  for                                                                   
     federal  funds, the  results of which  are difficult  to                                                                   
     predict.  Currently, the  Department is  by federal  law                                                                   
     the  conduit  by which  federal  highway  transportation                                                                   
     funds   are  allocated   to   the  state.   Within   the                                                                   
     Department, the  Marine Highway competes with  all other                                                                   
     transportation modes for the  use of those funds and, to                                                                   
     date,   the   Marine   Highway    has   competed   quite                                                                   
     successfully.  The  bill  provides  for  Marine  Highway                                                                   
     Authority  participation  in the  Department's  planning                                                                   
     process,  but the  Department would  have a  drastically                                                                   
     reduced  interest in  the operation  and maintenance  of                                                                   
     the Marine Highway System.                                                                                                 
                                                                                                                                
     I have  real concerns about  the continued ability  of a                                                                   
     Marine Highway Authority to  compete for federal funding                                                                   
     in  a department  from which  it has  been severed.  The                                                                   
     bill  does  nothing  to  change   the  Marine  Highway's                                                                   
     dependence  upon legislative  support  for its  mission.                                                                   
     Even if  the funding scheme  for land sales  were wildly                                                                   
     successful, approval  by the legislature would  still be                                                                   
     required for  the annual [indisc.]  and for most  of the                                                                   
     remaining  functions  now  performed   with  legislative                                                                   
     authorization. Its employee  organizations would bargain                                                                   
     collectively with a board of  directors, but the outcome                                                                   
     would still require ratification  by the legislature. It                                                                   
     is  not apparent  to us  how the  Marine Highway  System                                                                   
     would  benefit  from  an  isolation   of  the  executive                                                                   
     functions   while   preserving    intact   its   current                                                                   
     relationship with the legislature.                                                                                         
                                                                                                                                
     In   summary,  Mr.   Chairman,  we   believe  that   the                                                                   
     relocation of the Marine Highway  under a Marine Highway                                                                   
     Authority would  degrade rather than improve  the marine                                                                   
     highway   needs  of  Alaskans.   It  will  not   improve                                                                   
     [indisc.]  nor improve the  system's ability to  attract                                                                   
     and  retain the  competent and  dependable employees  it                                                                   
     requires. Further,  it will weaken the  Marine Highway's                                                                   
     ability  to  compete  with federal  funding  and  create                                                                   
     tensions among  transportation objectives, which  do not                                                                   
     now  exist. Thank  you for  your attention  and I'll  be                                                                   
     happy to address any questions the committee may have.                                                                     
                                                                                                                                
CHAIRMAN COWDERY asked if this bill passes, whether the resources                                                               
it generates will go to the Marine Highway System.                                                                              
                                                                                                                                
MR. DOLL replied that he thought that was the intention.                                                                        
                                                                                                                                
CHAIRMAN COWDERY asked him if the Marine Highway System is                                                                      
healthy enough that it does not need any new sources of dollars.                                                                
                                                                                                                                
MR. DOLL replied, "We've always had a requirement to appear                                                                     
before the legislature for public funding, yes."                                                                                
                                                                                                                                
CHAIRMAN COWDERY  asked whether  he would he  support the  bill if                                                              
the Marine Highway System was removed from the executive budget.                                                                
                                                                                                                                
MR. DOLL replied  that he would have to examine the  outcome as he                                                              
wasn't sure of all of the implications.                                                                                         
                                                                                                                                
SENATOR ELTON said he was interested  in Mr. Doll's comments about                                                              
the sale  of land being  inadequate to  sustain the operations  of                                                              
the Marine Highway  System. He said he didn't see  anything in the                                                              
bill  that  addresses the  sale  of  land  other than  giving  the                                                              
Authority  the ability  to turn  land  back to  the Department  of                                                              
Natural Resources for sale with the  proceeds of the sale going to                                                              
the original land  owner, not to the Authority. He  asked Mr. Doll                                                              
or the sponsor to point out the provision  that allows the sale of                                                              
land to generate funds for the Authority.                                                                                       
                                                                                                                                
MR. DOLL replied  that he was relying on AS 37.14.570  on page 20.                                                              
He thought that was what that fund was intended to do.                                                                          
                                                                                                                                
SENATOR WARD said that is correct; that is the intention.                                                                       
                                                                                                                                
SENATOR ELTON said  the section that provides  for the Acquisition                                                              
and Management of Property on page  6, line 15, of Version C gives                                                              
the Authority  the ability  to purchase  property in AS  19.55.230                                                              
when  it addresses  the disposal  of land  or rights  in land.  It                                                              
says:                                                                                                                           
                                                                                                                                
     The  Authority  may  vacate   land  or  rights  in  land                                                                   
     acquired  for  the  Alaska   Marine  Highway  System  by                                                                   
     executing   and  filing  a   deed  in  the   appropriate                                                                   
     recording district. Upon vacating,  title reverts to the                                                                   
     person's  heirs, successors  or assigns  in whom it  was                                                                   
     vested  at the  time of  the taking.  The Authority  may                                                                   
     also transfer land not considered  necessary for the use                                                                   
     by the  Alaska Marine Highway  System to the  Department                                                                   
     of Natural  Resources for disposal with the  proceeds of                                                                   
     disposal credited  to the funds from which  the purchase                                                                   
     of the land was originally made.                                                                                           
                                                                                                                                
He thought  that meant that  if they  dispose of land,  they don't                                                              
have access to the proceeds from the disposal of it.                                                                            
                                                                                                                                
SENATOR WARD responded:                                                                                                         
                                                                                                                                
     If  they give  the  land to  the Department  of  Natural                                                                   
     Resources to  sell it, it's  credited to the  funds from                                                                   
     which  the purchase  of land  was  originally made  that                                                                   
     would revert  back to the  original fund that  is within                                                                   
     the Authority's  jurisdiction to spend. That  is the way                                                                   
     the drafter said  to do this. That's the  procedure that                                                                   
     you actually  go through  in order  to get the  proceeds                                                                   
     back into the fund that the  Authority has the authority                                                                   
     over  to extend.  That absolutely  was  the intent.  The                                                                   
     intent  was  to  give  a  half  million  acres  to  this                                                                   
     Authority  and for them  sell it,  lease it, barter  it,                                                                   
     exchange  it, chop trees  down on it,  pave over  it, do                                                                   
     whatever they  want, but to start deriving  some kind of                                                                   
     income off of the half million acres.                                                                                      
                                                                                                                                
SENATOR ELTON asked Mr. Doll what  the relationship is now between                                                              
the  Marine Highway  System and  the national  highway system  and                                                              
whether  the   state  could   be  in   danger  of  severing   that                                                              
relationship by the establishment of an authority.                                                                              
                                                                                                                                
MR. DOLL replied:                                                                                                               
                                                                                                                                
     Each   state   highway   agency,   the   Department   of                                                                   
     Transportation   in   our   case,   is   the   federally                                                                   
     statutorily  required  channel   through  which  federal                                                                   
     transportation funds  flow. The only exception  is where                                                                   
     there may be a local municipal  transportation authority                                                                   
     of which Anchorage  is the only example in  Alaska. That                                                                   
     relationship  would  not  be  disturbed,  but  the  bill                                                                   
     attempts to  assert the interests of the  Marine Highway                                                                   
     by making  very specific  the Authority's  participation                                                                   
     in the Department's  planning process, which  of course,                                                                   
     also includes  programming funds.  Thus far that  system                                                                   
     has worked  quite well,  in my  view. The Department,  I                                                                   
     think has  been generous with regard to  federal highway                                                                   
     funds and maintaining particularly  in recent years when                                                                   
     we've had  to go to a great  deal of effort to  keep the                                                                   
     ships regulatorily  compliant. A  lot of money  has gone                                                                   
     into that process.                                                                                                         
                                                                                                                                
     If the Authority  is set up as a separate  agency within                                                                   
     the  state, and  if the  department has  no interest  or                                                                   
     concern  for its  operation,  I'm apprehensive  that  in                                                                   
     some   future   relationship   the  interests   of   the                                                                   
     Department and  the Marine Highway will be  reflected in                                                                   
     a  degree to  which it  supports the  division of  those                                                                   
     federal  funds throughout  the  state.  And, of  course,                                                                   
     there's  always competition  for  those  funds. Now  the                                                                   
     department  has an  interest in how  the Marine  Highway                                                                   
     operates.  If   we  separate  that,  I   honestly  can't                                                                   
     forecast  what  that  would  produce. I  know  that  the                                                                   
     competition for highway, bridge  and tunnel construction                                                                   
     is real and the requirements  throughout Alaska. What it                                                                   
     would be in the future is really  difficult to forecast.                                                                   
                                                                                                                                
SENATOR WARD asked  Mr. Doll if his concern is that  this bill may                                                              
cause a reduction in federal contributions  and support because of                                                              
the separation.  He said  that is the  opposite of what  he thinks                                                              
would  happen. He  thinks it  would be  very good  for the  Marine                                                              
Highway  System to  be an  entity of  its own  and to  be able  to                                                              
compete in that  process. For the last five years  it has appeared                                                              
to him  that the  Marine Highway  System needs  a better  standing                                                              
within DOTPF's discussion of priorities.                                                                                        
                                                                                                                                
MR. DOLL replied:                                                                                                               
                                                                                                                                
     My concept of  how things are working at  the moment are                                                                   
     that when I come to the commissioner  with a requirement                                                                   
     for a federal project and when  we study them within the                                                                   
     total DOT context, we represent  those as transportation                                                                   
     projects  for which the  Department is responsible.  The                                                                   
     Department  has  an  interest  in how  well  the  Marine                                                                   
     Highway  operates…  Every  one of  those  incentives  to                                                                   
     provide  adequate  funding  for the  Marine  Highway  is                                                                   
     present and we take advantage  of that. If we change the                                                                   
     circumstances  so  that  the  Department  is  no  longer                                                                   
     responsible for the Marine Highway's  operation, I'm not                                                                   
     sure  how powerful  my arguments  would be  and I'm  not                                                                   
     sure how powerful  the arguments of the  Authority would                                                                   
     be  given the  fact  that the  Department  is no  longer                                                                   
     responsible for its operation.                                                                                             
                                                                                                                                
SENATOR WARD  said just for the  record, most of the  language for                                                              
the Authority  in the bill was  completely gleaned out  of Senator                                                              
Taylor's bill.                                                                                                                  
                                                                                                                                
SENATOR  TAYLOR  asked  Mr. Doll  to  characterize  the  financial                                                              
success of  the Railroad and the  Marine Highway over the  last 10                                                              
years. He asked Mr. Doll why the  Railroad has been successful and                                                              
the Marine Highway has been an "abject failure."                                                                                
                                                                                                                                
MR. DOLL  said he wasn't  qualified to  comment on the  Railroad's                                                              
success, but its reputation is very  good, but it also has a great                                                              
many assets  that it capitalizes on  - not the least of  which are                                                              
all  the  cruise  ship  docks  that   it  utilizes.  There  is  no                                                              
comparable  real  estate asset  available  to the  Marine  Highway                                                              
System.                                                                                                                         
                                                                                                                                
SENATOR TAYLOR  asked him if he  knew what the  railroad's primary                                                              
assets are from which its profits come.                                                                                         
                                                                                                                                
MR. DOLL replied that he had no idea.                                                                                           
                                                                                                                                
SENATOR  TAYLOR said  it  is all  land. He  said  the Senate  just                                                              
passed  a bill extending  some of  the railroad's  leases from  35                                                              
years to  55 years, because  the people  who lease land  from them                                                              
want to lease it for a longer period.                                                                                           
                                                                                                                                
MR. DOLL replied:                                                                                                               
                                                                                                                                
     You're  well aware  that land alongside  a railroad  has                                                                   
     inherent  value. There is  no comparable land  available                                                                   
     to anybody else in Alaska. The  Railroad is capitalizing                                                                   
     on the  fact that its  land lies along a  communications                                                                   
     link that  links community  centers, population  centers                                                                   
     as well  as being available  to the transportation  link                                                                   
     itself. There is no comparable land available to us.                                                                       
                                                                                                                                
     I don't  know, and  I'm not prepared  to suggest  to the                                                                   
     committee  that I  know how much  revenue this  proposal                                                                   
     would  generate. I have  no way  of estimating that  and                                                                   
     I've not seen any estimates of it.                                                                                         
                                                                                                                                
     I'm  only   suggesting  that   the  concept  that   some                                                                   
     substitute  for  legislative  funding  can be  found  to                                                                   
     operate the Marine Highway is,  I think, speculation and                                                                   
     I would  not like to see  a situation develop  where the                                                                   
     legislature believes it has  a substitute for GF funding                                                                   
     for the Marine Highway and in  fact that does not exist.                                                                   
     I would like  to have the continued  legislative support                                                                   
     that  we've  had  in  the  past  and  I  don't  think  a                                                                   
     substitute exists for that in  the potential for sale of                                                                   
     raw land throughout Alaska.                                                                                                
                                                                                                                                
SENATOR  ELTON asked,  regarding the  original question  regarding                                                              
the federal  funding, if the AMHS  has an ability to work  with an                                                              
authority or is its ability in distributing  federal funds limited                                                              
to  working   with  the   Department  of   Transportation   or  an                                                              
organization such as AMATS.                                                                                                     
                                                                                                                                
MR. DOLL  replied that the  federal statutory requirement  is that                                                              
they operate through  the state highway agency. They  would not be                                                              
able to deal directly with the Marine Highway Authority.                                                                        
                                                                                                                                
SENATOR ELTON  said he remembered  discussions about  the railroad                                                              
and that  its profit center  is the leases  that it has  for fiber                                                              
optics. He said one way he would  view this bill more favorably is                                                              
to allow the  lease for the submarine fiber optic  cable to revert                                                              
to the  Marine Highway  Authority. Then they  would have  taken an                                                              
initial  step toward financial  viability  for the Marine  Highway                                                              
System.                                                                                                                         
                                                                                                                                
CHAIRMAN COWDERY  said he  didn't agree that  their profit  is the                                                              
fiber optics  lease. In  his town, the  whole Ship Creek  basin is                                                              
owned  by  the  railroad  and they  lease  land.  He  thought  the                                                              
railroad's biggest revenue source is the real estate it owns.                                                                   
                                                                                                                                
SENATOR WARD said when the Railroad  was originally transferred to                                                              
the State from  the federal government, land for  tracks and close                                                              
to  the tracks  was  transferred along  it.  An additional  47,000                                                              
acres that  was transferred  was not near  the Railroad;  it owned                                                              
the land to supplement its operation.  The location of the 500,000                                                              
acres given  to the  Authority will not  make any difference.  The                                                              
Authority could  do whatever  it wanted to  do with its  land. The                                                              
Railroad's land is the reason it is making a profit this year.                                                                  
                                                                                                                                
SENATOR  TAYLOR  asked Mr.  Doll  what the  AMHS  would  do if  it                                                              
doesn't do  this. He  thought the AMHS  is in desperate  condition                                                              
now.                                                                                                                            
                                                                                                                                
MR. DOLL replied:                                                                                                               
                                                                                                                                
     I don't believe  there is any substitute  for dollars to                                                                   
     operate   a   ferry   system    and   I   believe   that                                                                   
     administrative  restructuring is going  to get  us where                                                                   
     we need to go. The Department  is working diligently and                                                                   
     successfully to reduce the cost  of operating the Marine                                                                   
     Highway System and I think at  the same time improve the                                                                   
     service  to riders.  I  also believe  that  there is  no                                                                   
     substitute for  money to keep the system  going. I'm not                                                                   
     a fiscal  expert, but I  recognize that support  for the                                                                   
     Marine Highway  in terms of  funding has certainly  been                                                                   
     declining and  the situation that the  Senator describes                                                                   
     is  doubtlessly true.  The Department  will continue  to                                                                   
     work hard  to reduce  the cost  of operating the  system                                                                   
     and improve their service to  its passengers and I think                                                                   
     the  remaining issues  are  exactly what  we're  talking                                                                   
     about here.                                                                                                                
                                                                                                                                
SENATOR TAYLOR  asked if land isn't  a stable way for the  AMHS to                                                              
acquire an income  stream, what Mr. Doll would suggest  to them as                                                              
policy  makers to  set up to  provide  the AMHS with  the type  of                                                              
stable income stream it needs.                                                                                                  
                                                                                                                                
MR. DOLL  replied that  there were  various proposals for  raising                                                              
money and  he wasn't qualified to  comment on them. He  would have                                                              
no way  of knowing  if it's  likely that  substantial funds  would                                                              
come from  the proposed projects.  He thought the AMHS  will still                                                              
need the support of the legislature  to get the kind of funding it                                                              
needs.                                                                                                                          
                                                                                                                                
SENATOR TAYLOR  asked Mr.  Doll if  he read  anything in  the bill                                                              
that said  the legislature would  not still have an  obligation to                                                              
support the AMHS until this proposal was running.                                                                               
                                                                                                                                
MR. DOLL replied that he didn't have  any anticipation of that. He                                                              
wouldn't want  anyone to conclude  that because the land  was made                                                              
available and  if it didn't  bring in  the funds that  were needed                                                              
that the  legislature had washed  its hands of that  concern. That                                                              
would be an unfortunate outcome.                                                                                                
                                                                                                                                
SENATOR TAYLOR said they had never  done that with the University,                                                              
the Railroad  or the  Mental Health Trust  lands. Over  the years,                                                              
there has been no indication that that would happen.                                                                            
                                                                                                                                
SENATOR WARD  added that he talked  to former Senator  Lloyd Jones                                                              
who  is now  affiliated with  the  Transportation Committee  under                                                              
Congressman Don Young and both of  them have assured him that this                                                              
process is not  only something that is being done  in some places,                                                              
but it's a completely appropriate  one and wouldn't affect federal                                                              
funding.                                                                                                                        
                                                                                                                                
TAPE 02-19, SIDE B                                                                                                            
                                                                                                                              
MR.  LAUREN GEHRHART,  Executive  Director, Southeast  Conference,                                                              
said they  were formed  in 1958  to promote  the formation  of the                                                              
Alaska Marine Highway  System. He said they recently  became aware                                                              
of  the changes  in the  bill and  are concerned  that caution  is                                                              
taken  with  how the  Authority  would  be  formed. They  want  an                                                              
opportunity to talk with the sponsors  about it. No one knows what                                                              
kind of a revenue stream could be  anticipated out of 500,000-acre                                                              
land grant.                                                                                                                     
                                                                                                                                
He also thought  that other efficiencies could  still be explored.                                                              
He  told the  committee  that the  Southeast  Conference had  been                                                              
tracking these issues closely over  the last few years and decided                                                              
recently  it  should attempt  to  perform  its  own study  of  the                                                              
problems  and potential  solutions.  The Conference  has  obtained                                                              
grant  money  and is  engaged  in a  study  process  right now  to                                                              
identify  all  different  kinds of  ferry  operations  around  the                                                              
world,  primarily  in the  U.S.  They  want  to learn  from  other                                                              
people's experiences  what might adopt  best to this  region. They                                                              
expect to  have preliminary findings  by the middle of  next month                                                              
and  hope to  provide the  next legislature  and  governor with  a                                                              
detailed analysis and recommendations.                                                                                          
                                                                                                                                
SENATOR  WARD asked  him how  long  his organization  has been  in                                                              
existence.                                                                                                                      
                                                                                                                                
MR. GEHRHART replied that it was  founded in 1958 in Petersburg by                                                              
civic leaders who saw a need for a marine highway.                                                                              
                                                                                                                                
SENATOR  WARD asked  if  the  Southeast Conference  supported  the                                                              
marine highway  authority bills sponsored by former  Senator Lloyd                                                              
Jones or Senator Robin Taylor.                                                                                                  
                                                                                                                                
MR. GEHRHART  replied  that he didn't  know for  certain if  those                                                              
bills were  supported by the Conference.  They have paid  a lot of                                                              
attention  to the problems  it has  experienced  over the last  16                                                              
years. He stated, "The way the system  was designed in 1962 seemed                                                              
to  work  just  fine then.  Obviously,  our  needs  have  changed,                                                              
situations  have changed,  funding  is different.  So  we need  to                                                              
address that."                                                                                                                  
                                                                                                                                
SENATOR  WARD  said  he  was  not   familiar  with  the  Southeast                                                              
Conference and he  didn't ride the Marine System  any more than he                                                              
had to, but he  said this is the same authority  bill as the other                                                              
two.  He  thought  there  was  a  philosophical  difference  about                                                              
whether the  AMHS should  remain a line  item agency or  become an                                                              
Authority  with  500,000  acres   in  addition  to  other  revenue                                                              
streams. He asked  Mr. Gerhardt if he saw a bright  future for the                                                              
Marine Highway System the way it is now.                                                                                        
                                                                                                                                
MR. GERHARDT replied:                                                                                                           
                                                                                                                                
     I think  our organization  is on  record supporting  the                                                                   
     Marine  Highway  System,  because   it  is  our  highway                                                                   
     system.  The  issue  about   this  particular  piece  of                                                                   
     legislation -  I know there  are some changes  in what's                                                                   
     shown here  as the  organizational structure and  that's                                                                   
     very important  to us. I know that there  were issues in                                                                   
     the prior  bills just how  this body is constituted  and                                                                   
     what their authority  is. The new wrinkle  that you have                                                                   
     here  obviously is  the  land grant,  which  I think  is                                                                   
     innovative  thinking. I'm glad  to see people  trying to                                                                   
     solve  the issue of  the recurring  budget problems  the                                                                   
     system faces.  To answer your question about  the future                                                                   
     of the Marine  Highway System, yes we have  concerns. We                                                                   
     know that  it's a  struggle every  year to get  adequate                                                                   
     funding  to operate the  system and  we know that  there                                                                   
     are efficiencies  that can be  realized by some  changes                                                                   
     perhaps.  We are very  concerned though,  that we  would                                                                   
     make sure  what we would come  up with here  would truly                                                                   
     fix the system  and doesn't end up spinning  it off into                                                                   
     the nether world.                                                                                                          
                                                                                                                                
SENATOR WARD asked if he was opposed  to the Marine Highway System                                                              
becoming an  authority if  it could be  set up  in a manner  he is                                                              
comfortable with.                                                                                                               
                                                                                                                                
MR. GEHRHART  replied that they are  not opposed to  anything that                                                              
will address their  problems. In their study,  they are attempting                                                              
to determine  whether an authority  or some other  structure would                                                              
better address them.                                                                                                            
                                                                                                                                
SENATOR WARD asked what other structures he had come up with.                                                                   
                                                                                                                                
MR. GEHRHART replied that the study is ongoing.                                                                                 
                                                                                                                                
SENATOR  WARD said  he  had been  studying  this  for five  years.                                                              
People had been  taking money out of the fund and  now it is gone.                                                              
He maintained,  "This might  not be the  right answer,  but nobody                                                              
else has come up  with one including your group that  is now going                                                              
to study it a little more…"                                                                                                     
                                                                                                                                
SENATOR ELTON  said he wanted to  put the sponsor more  at ease on                                                              
this and said:                                                                                                                  
                                                                                                                                
     The  Southeast   Conference   has  done  an   absolutely                                                                   
     incredible  job  in  bringing  all  of  the  communities                                                                   
     together  in Southeast  Alaska on issues  as diverse  as                                                                   
     the Southeast  Regional Transportation Plan,  education,                                                                   
     fishing issues, a lot of the  economic issues that drive                                                                   
     this.   And   I  can   assure   the  members   of   this                                                                   
     committee…about the integrity  and the work ethic of the                                                                   
     Southeast Conference.  I don't think that  their purpose                                                                   
     in  reviewing the  system  that we  have  now and  other                                                                   
     models  that  could be  applied  to the  Marine  Highway                                                                   
     System is  simply an effort  to produce another  report,                                                                   
     because  this   is  an  organization  that   is  results                                                                   
     oriented  and I've got  an awful lot  of comfort  in the                                                                   
     notion that whatever  they propose is going  to be taken                                                                   
     seriously  be people who  depend on this  transportation                                                                   
     system.                                                                                                                    
                                                                                                                                
SENATOR ELTON  asked Ms.  Carroll if land  that was available  for                                                              
the trust was open to public selection  and, if so, what amount of                                                              
interest  has been  expressed by  the  public in  lands that  have                                                              
sufficient value to enhance the Marine Highway.                                                                                 
                                                                                                                                
MS. CAROL CARROLL, Department of  Natural Resources (DNR), replied                                                              
that all of the  land that the state owns has  been classified and                                                              
what  is  classified  as  available   for  different  purposes  is                                                              
certainly available  for people to come to the state  and say they                                                              
would like to lease it or hold a timber sale.                                                                                   
                                                                                                                                
SENATOR ELTON  asked what  kind of public  interest DNR  gets from                                                              
people who want  access to those lands. He asked  if the Authority                                                              
controlled those  lands, would there  be a higher  public interest                                                              
in the use of them than with DNR.                                                                                               
                                                                                                                                
MS.  CARROLL  said as  she  understands it,  if  there  is a  good                                                              
prospect for something, that activity  would be taking place right                                                              
now.                                                                                                                            
                                                                                                                                
SENATOR TAYLOR asked what the average  price per acre was for land                                                              
that had been sold by the State of Alaska since statehood.                                                                      
                                                                                                                                
MR. BOB LOEFFLER, Director, Division  of Mining, Lands, and Water,                                                              
replied  a rough  estimate  is $750  and  a lot  of  that land  is                                                              
extremely remote.                                                                                                               
                                                                                                                                
SENATOR TAYLOR said that goes all  the way back to when lands were                                                              
sold at a 50% discount etc.                                                                                                     
                                                                                                                                
MR. LOEFFLER  said he  didn't believe that  was correct,  but that                                                              
figure  included lands  sold since  1980.  He offered  to get  the                                                              
committee better information.                                                                                                   
                                                                                                                                
SENATOR TAYLOR  asked if  DNR just  had a land  sale on  Prince of                                                              
Wales and what the price per acre was.                                                                                          
                                                                                                                                
MR. LOEFFLER said he would have to look up that information.                                                                    
                                                                                                                                
SENATOR TAYLOR  said he thought the  lots were 2.5 to 3  acres and                                                              
some sold for over $40,000, about  $15,000 per acre. He said using                                                              
an  average of  $10,000 per  acre  times 500,000  acres equals  $5                                                              
billion. He  remarked, "That probably  wouldn't be enough  the way                                                              
our current  ferry system  is operating.  I think  they could  run                                                              
that stuff  down a rat  hole and still  be trying to  sell ferries                                                              
two years later…"                                                                                                               
                                                                                                                                
He  asked Mr.  Loeffler to  explain the  difference in  management                                                              
style between  the lands  DNR managed  for over  30 years  for the                                                              
University of Alaska  and the $1.5 million made off  of it and the                                                              
over $45  million the  University  has made off  exactly the  same                                                              
land  using its  management style  in  about the  last nine  years                                                              
since they took it over.                                                                                                        
                                                                                                                                
MR.  DICK MYLIUS,  Resource  Assessment and  Development  Manager,                                                              
DNR, explained  that the  University had a  windfall and  that was                                                              
revenue that was almost entirely  from state lands, not University                                                              
lands.                                                                                                                          
                                                                                                                                
SENATOR TAYLOR noted  that that timber was cut off  of state land,                                                              
which  is the  same land  Senator Ward  is talking  about in  this                                                              
bill. The  land was turned over  to the University and  they chose                                                              
to harvest the timber and make money off of it.                                                                                 
                                                                                                                                
MR.  MYLIUS responded  that they  had very  extensive harvests  in                                                              
that area before,  during and after that sale, but  it's not under                                                              
his division.                                                                                                                   
                                                                                                                                
SENATOR  WARD  moved  to  pass  CSSB  271(TRA),  Version  C,  from                                                              
committee with individual recommendations.                                                                                      
                                                                                                                                
SENATOR ELTON  objected and said  that he wasn't arguing  that the                                                              
problems  facing  the  Marine  Highway   System  and  all  of  our                                                              
transportation systems are not significant, however:                                                                            
                                                                                                                                
     It's a lack of money to do the  maintenance, which means                                                                   
     that we don't do deferred maintenance,  which means that                                                                   
     we're doing the most expensive  maintenance of all. It's                                                                   
     not  a  problem  that's unique  to  the  Marine  Highway                                                                   
     System and I  guess that when people say,  'If not this,                                                                   
     what?' my suggestion is that  we spend the money we need                                                                   
     to  do to  maintain our  transportation  infrastructure.                                                                   
     We're  not doing  it with  harbors, we're  not doing  it                                                                   
     with ports, we're  not doing it with the  Marine Highway                                                                   
     System, we're not doing it with  our roads and highways.                                                                   
     So the  problem faced  by the  Marine Highway System  is                                                                   
     not unique.  I guess the only  other thing that  I would                                                                   
     say is  that after an hour  of testimony, we've  come up                                                                   
     with  a different  way of  managing  our Marine  Highway                                                                   
     System and  I'm much more comfortable with  the approach                                                                   
     that's  being adopted  by  the Southeast  Conference.  I                                                                   
     guess the last thing that I  want to say is I think I've                                                                   
     heard some comments here that  cast aspersions on to the                                                                   
     managers  that   may  even  suggest  that   the  present                                                                   
     managers  of the  Marine  Highway System  are  perfectly                                                                   
     capable  of tossing  away  $1 billion  and  I find  that                                                                   
     suggestion offensive  and I don't think it's  true and I                                                                   
     think that if  that's the basis upon which  this bill is                                                                   
     going to  move forward, it's  the wrong reason  for this                                                                   
     bill to move forward.                                                                                                      
                                                                                                                                
SENATOR WARD said he thought this  was a good bill and he wouldn't                                                              
care  if all  the people  that currently  run  the Marine  Highway                                                              
System were  appointed by the governor  to run the  new authority.                                                              
He didn't think that was the point. He noted:                                                                                   
                                                                                                                                
     The  point is  we need  to separate  the Marine  Highway                                                                   
     Authority away  from the current position that  it is as                                                                   
     a  line  item agency  and  we need  to  give it  a  half                                                                   
     million  acres  and  more  for a  land  base  and  other                                                                   
     things…                                                                                                                    
                                                                                                                                
SENATOR WARD  called for a  roll call vote  on his motion  to move                                                              
CSSB 271(TRA) from committee.  SENATORS  WARD, TAYLOR, WILKEN, and                                                              
COWDERY voted in favor; SENATOR ELTON voted against.                                                                            
                                                                                                                                
SENATOR ELTON moved for reconsideration.                                                                                        
                                                                                                                                
SENATOR WARD  noted that the committee  would have to  rescind its                                                              
action.                                                                                                                         

Document Name Date/Time Subjects