Legislature(2011 - 2012)BUTROVICH 205

03/08/2011 01:00 PM Senate TRANSPORTATION


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01:04:45 PM Start
01:05:02 PM SB37
01:46:31 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed from March 1 --
*+ SB 37 TRANSPORTATION INFRASTRUCTURE FUND TELECONFERENCED
Moved SB 37 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
           SB  37-TRANSPORTATION INFRASTRUCTURE FUND                                                                        
                                                                                                                                
1:05:02 PM                                                                                                                    
CHAIR KOOKESH announced the consideration of SB 37 relating to a                                                                
transportation infrastructure fund.                                                                                             
                                                                                                                                
1:05:15 PM                                                                                                                    
SENATOR JOE THOMAS, sponsor of SB 37 said this legislation seeks                                                                
to strengthen the Alaska transportation system. He spoke to the                                                                 
following sponsor statement:                                                                                                    
     Senate    Bill   37    proposes   to    establish   the                                                                    
     transportation infrastructure  fund within  the general                                                                    
     fund.  This fund  would help  to  levelize the  funding                                                                    
     streams for Alaska's  transportation infrastructure and                                                                    
     begin  to  get our  state  off  of  its boom  and  bust                                                                    
     spending    cycles.   SB    37   allows    our   state,                                                                    
     municipalities,  local   contractors  and  construction                                                                    
     workers  to  more  adequately plan  for  their  future,                                                                    
     strengthening Alaska's economy in the process.                                                                             
                                                                                                                                
     Six percent  of the  earnings from  this fund  would be                                                                    
     available  for appropriation  by  the legislature  each                                                                    
     year for capital projects  and major maintenance. These                                                                    
     projects would  undergo a prioritization  process based                                                                    
     on the  scoring of  a fund  council who  then recommend                                                                    
     projects  to the  legislature for  funding, similar  to                                                                    
     the  current  State   Transportation  Improvement  Plan                                                                    
     process.  In  addition   to  the  capitalization  money                                                                    
     revenue   from  the   motor  fuels   tax  and   vehicle                                                                    
     registration  fees will  also  be  appropriated to  the                                                                    
     fund. This funding  stream would begin to  chip away at                                                                    
     the  many backlogged  projects that  would open  up new                                                                    
     development   and   growth    opportunities   for   our                                                                    
     communities and state.                                                                                                     
                                                                                                                                
     As one  of the few states  in the nation with  no state                                                                    
     funded  transportation program,  SB 37  would begin  to                                                                    
     prepare  Alaska   for  decreased  federal   funding,  a                                                                    
     potentially detrimental reauthorization  of the federal                                                                    
     transportation  bill and  show  Congress that  Alaskans                                                                    
     are willing  to pay our own  way. While SB 37  does not                                                                    
     create  a  dedicated fund,  it  would  allow our  state                                                                    
     greater  flexibility in  maintaining and  expanding our                                                                    
     marine highways, airports and road system.                                                                                 
                                                                                                                                
     A state  transportation fund  is supported  by numerous                                                                    
     groups including the Alaska  State Chamber of Commerce,                                                                    
     the   Associated   General  Contractors,   the   Alaska                                                                    
     Trucking Association and the Alaska Municipal League.                                                                      
                                                                                                                                
1:07:09 PM                                                                                                                    
GRIER HOPKINS,  staff to Senator  Thomas, said the purpose  of SB
37 is  to build  new transportation infrastructure  statewide and                                                               
address  the nearly  $1 billion  backlog in  deferred maintenance                                                               
and  requested  projects.  He provided  the  following  sectional                                                               
analysis:                                                                                                                       
                                                                                                                                
Section  1  lays   out  the  legislative  intent,   which  is  to                                                               
appropriate  $1 billion  into  the transportation  infrastructure                                                               
fund once  it is  established. This fund  will reside  within the                                                               
general fund. The  earnings from this fund will  provide a stream                                                               
of revenue  for transportation  projects statewide.  He clarified                                                               
that SB 37 does not create a dedicated fund.                                                                                    
                                                                                                                                
1:08:04 PM                                                                                                                    
Section  2 states  that the  vehicle registration  fees that  are                                                               
collected will be deposited into this new fund.                                                                                 
                                                                                                                                
Section 3  describes how  the fund will  operate and  the funding                                                               
mechanisms, which  are the motor  fuel tax,  vehicle registration                                                               
fees,  the  original $1  billion  appropriation,  and any  future                                                               
appropriations.  The commissioner  of the  Department of  Revenue                                                               
(DOR) will invest the fund to  return a minimum of six percent on                                                               
a five-year  average and  report the  return at  the end  of each                                                               
fiscal year.  These transportation  projects are  loosely defined                                                               
and can  include trails, boat launches,  recreational facilities,                                                               
airports,  roads, and  marine ports.  Up  to ten  percent of  the                                                               
earnings could  go toward federal  matches. The  advisory council                                                               
that's  established consists  of  eight members  as follows:  the                                                               
chairs  of the  House and  Senate transportation  committees; the                                                               
commissioner   of  Department   of   Transportation  and   Public                                                               
Facilities or his/her designee; a  public member from each of the                                                               
four  judicial  districts  each  of whom  are  appointed  by  the                                                               
governor for  a staggered four-year  term; and one  public member                                                               
appointed by the governor.                                                                                                      
                                                                                                                                
Section   4  deals   with  reimbursements   to  municipally-owned                                                               
airports. Currently 60 percent of  the proceeds from the taxes on                                                               
aviation can be refunded to the municipality.                                                                                   
                                                                                                                                
Section 5  lays out the  marine tax carve-out; these  funds would                                                               
go into a special watercraft  fuel tax account within the general                                                               
fund.                                                                                                                           
                                                                                                                                
Section 6  lays out the  partial exemption  of the fuel  tax when                                                               
it's used  to operate an  internal combustion engine that  is not                                                               
operated on public ways.                                                                                                        
                                                                                                                                
Section 7 lays out the fuel  reimbursements that will be paid out                                                               
of the fund.                                                                                                                    
                                                                                                                                
Section 8  tells DOTPF  to develop criterion  that is  similar to                                                               
the Statewide  Transportation Improvement Program  (STIP) process                                                               
for long-range planning.                                                                                                        
                                                                                                                                
Section 9  deals with the  public disclosure that  the lieutenant                                                               
governor will develop and supervise.                                                                                            
                                                                                                                                
Section 10 repeals [AS 43.40.010(g) and 43.40.010(j).]                                                                          
                                                                                                                                
Sections  11-14  lay  the  groundwork  for  transitioning  toward                                                               
having the fund.                                                                                                                
                                                                                                                                
1:12:34 PM                                                                                                                    
MR. HOPKINS cited the extensive  list of companies, associations,                                                               
and   individuals  statewide   that  have   voiced  support   for                                                               
transportation funds.                                                                                                           
SENATOR  MENARD  asked  if  other   states  have  passed  similar                                                               
legislation and if the funds had proved successful.                                                                             
                                                                                                                                
MR. HOPKINS said the bill  packets contain a research report from                                                               
the National Council of State  Legislatures (NCSL) describing how                                                               
each state  funds its transportation  system. It points  out that                                                               
Alaska  is  the  only  state   that  doesn't  have  an  exclusive                                                               
dedication of fuel  tax revenue for highway  purposes. The Alaska                                                               
Constitution  doesn't  allow funds  to  be  dedicated. While  all                                                               
states  are falling  behind on  transportation upkeep,  Alaska is                                                               
potentially  in  a  worse  position  now  that  SAFTEA-LU  [Safe,                                                               
Accountable,  Flexible, Efficient  Transportation  Equity Act:  A                                                               
Legacy for  Users] is due for  reauthorization. Currently there's                                                               
more support  for urban centers  as opposed to more  rural areas.                                                               
This  portends trouble  for  Alaska since  it  receives about  80                                                               
percent   of  its   transportation  funding   from  the   federal                                                               
government.                                                                                                                     
                                                                                                                                
1:16:10 PM                                                                                                                    
SENATOR MENARD  asked the sponsor  if the Knik Arm  Crossing toll                                                               
bridge was  part of  the conversation  for developing  this fund.                                                               
She noted  that Wilber  Smith Associates  estimated that  by 2019                                                               
the  toll bridge  would generate  about $40  million in  Title 23                                                               
money.                                                                                                                          
                                                                                                                                
SENATOR  THOMAS replied  he didn't  recall having  a conversation                                                               
that considered what might come from tolls.                                                                                     
                                                                                                                                
SENATOR MENARD  said she  brought it up  because she  and Senator                                                               
Huggins are very involved in that project.                                                                                      
                                                                                                                                
1:17:02 PM                                                                                                                    
CHAIR KOOKESH  agreed that  it might  be a good  idea to  look at                                                               
that because the  toll bridge money either goes  into the general                                                               
fund  or some  fund  for transportation.  He  then cautioned  the                                                               
sponsor against opting for an  advisory board because those don't                                                               
have teeth. The marine transportation  advisory board (MTAB), for                                                               
example,  doesn't have  the authority  to make  decisions at  the                                                               
board level to  tell the Department of  Transportation and Public                                                               
Facilities what direction  it wants to go in terms  of the marine                                                               
highway system.                                                                                                                 
                                                                                                                                
SENATOR THOMAS acknowledged the suggestion.                                                                                     
                                                                                                                                
JOHN   MACKINNON,   Executive    Director,   Associated   General                                                               
Contractors  (AGC)   of  Alaska,   stated  that   a  state-funded                                                               
transportation program is critical  to address the transportation                                                               
needs  of Alaska  and this  bill contains  most of  the essential                                                               
elements.  First,   it  provides  substantial,   predictable  and                                                               
regular state  funding. The idea is  to use motor fuel  taxes and                                                               
vehicle registration  fees. This  will be  more palatable  to the                                                               
public because  there's a  connection to  what they're  used for.                                                               
Another  essential  element  that's  described  in  the  bill  is                                                               
programmatic development  so the money  can be allocated  as it's                                                               
needed. This is  very efficient. The final element  that the bill                                                               
describes is prioritization of projects  based on need and facts,                                                               
not  politics.  This  will  help   avoid  the  kind  of  planning                                                               
processes that  are not  the most efficient  use of  the public's                                                               
money.                                                                                                                          
                                                                                                                                
1:23:30 PM                                                                                                                    
SENATOR MENARD asked  if he would give examples  of projects that                                                               
weren't an efficient use of the public's money.                                                                                 
                                                                                                                                
MR.   MACKINNON  said   the   1998-2004   T-21  federal   highway                                                               
authorization  required spending  a minimum  of $40  million over                                                               
six  years on  transportation  enhancements like  bike paths  and                                                               
trails. During  that time the  state spent $160 million  on those                                                               
things. While  all the projects  were good, that  additional $120                                                               
million could  have been put  to better use  for the state  if it                                                               
had  gone  toward  things like  safety  improvements,  congestion                                                               
relief, or new roads.                                                                                                           
                                                                                                                                
1:25:09 PM                                                                                                                    
JERRY  BURNETT, Deputy  Commissioner of  Treasury, Department  of                                                               
Revenue (DOR), stated that DOR  will handle the money in whatever                                                               
manner  the Legislature  chooses,  but the  proposed six  percent                                                               
real rate  of return  on the investments  is a  concern. Assuming                                                               
three  percent inflation,  DOR would  need to  invest for  a nine                                                               
percent return. To achieve that  in the current capital market it                                                               
would probably  be necessary  to rely  on highly  volatile exotic                                                               
investments. Trying to achieve a  five percent payout methodology                                                               
would allow DOR to invest with far less risk to the state.                                                                      
                                                                                                                                
SENATOR  THOMAS said  he appreciates  the comments  and he  would                                                               
look into it.                                                                                                                   
                                                                                                                                
BARBARA  HUFF-TUCKNESS,  Director, Governmental  and  Legislative                                                               
Affairs, Teamsters  Local 959, stated  that local  959 represents                                                               
about 8,000 working  and retired teamsters in  every industry but                                                               
fishing and they  support SB 37 and its concept.  The state would                                                               
be very remiss if didn't  proactively plan the future funding for                                                               
its  transportation  needs,  she  said.  The  reauthorization  of                                                               
SAFTEA-LU has  everyone rightfully concerned about  the potential                                                               
loss of federal  funds. SB 37 is a proactive  approach to address                                                               
this issue at the state level.                                                                                                  
                                                                                                                                
1:28:57 PM                                                                                                                    
JOHN  DUFFY, representing  himself,  said he's  been involved  in                                                               
transportation  planning and  project  development and  financing                                                               
for  many years,  primarily when  he was  working for  the Mat-Su                                                               
Borough. The  primary benefit of  this long overdue bill  is that                                                               
it  will  create a  stable  capital  fund  and replace  the  over                                                               
reliance on  federal dollars. It  will also provide  stability to                                                               
long-term  capital  improvement  planning. Placing  all  existing                                                               
transportation-related  fees  and  taxes into  this  fund  is  an                                                               
excellent  idea, he  said.  The proposal  provides  a good  nexus                                                               
between facility  costs and revenue  sources and is in  tune with                                                               
the results  of many  national surveys.  These have  found strong                                                               
support for transportation  fees and taxes that  are dedicated to                                                               
transportation  purposes.  As  proposed, the  regionally  diverse                                                               
advisory  council   will  provide  recommendations   of  proposed                                                               
capital  transportation projects  using objective  criteria as  a                                                               
means of  ranking. These investments  should be  made objectively                                                               
and with  as much  transparency as  possible. SB  37 accomplishes                                                               
these goals.                                                                                                                    
                                                                                                                                
In  2008 the  Mat-Su Borough,  the Alaska  Municipal League,  and                                                               
DOTPF completed  a study of  the transportation funding  needs of                                                               
the state and recommended creating  an Alaska transportation fund                                                               
similar to the  one described in SB 37. He  agrees that the funds                                                               
should be used for capital  investments only but he believes that                                                               
the  amount available  on an  annual basis  is on  the low  side,                                                               
particularly when  considering the  large cost  of transportation                                                               
improvements.                                                                                                                   
                                                                                                                                
WALT WREDE, City  Manager, City of Homer, said  the city strongly                                                               
supports  passage of  SB  37  for the  reasons  that the  sponsor                                                               
highlighted in  his opening statement. He  thanked Senator Thomas                                                               
for  bringing  the  bill  forward.  It  will  provide  tremendous                                                               
benefit to the City of Homer and other communities in Alaska.                                                                   
                                                                                                                                
1:33:50 PM                                                                                                                    
RACHAEL  PETRO,  President  and  CEO,  Alaska  State  Chamber  of                                                               
Commerce,  said  the  Chamber   represents  hundreds  of  diverse                                                               
businesses  and  thousands  of working  Alaskans.  Transportation                                                               
infrastructure has  long been an  important issue to  members and                                                               
the Chamber  has made  the creation  of an  Alaska transportation                                                               
infrastructure  fund one  its  top  three legislative  priorities                                                               
this   year.  Investing   in  transportation   infrastructure  is                                                               
critical  for  the long  term  growth  of Alaska's  economy.  The                                                               
current  infrastructure is  dilapidated  and  lacks a  consistent                                                               
funding  mechanism   to  address  the  billions   of  dollars  of                                                               
multimodal needs.  New transportation  infrastructure development                                                               
will   provide  access   to   resources,   reduce  barriers   for                                                               
communities  to participate  in the  economy, and  it will  allow                                                               
safe and  more efficient transportation  for all  Alaskans. State                                                               
highway and  airport infrastructure is largely  funded by federal                                                               
dollars  and those  are under  threat  of significant  reduction.                                                               
Additionally,  there  are  no  consistent  federal  programs  for                                                               
harbors and ports, both of which are critical in Alaska.                                                                        
                                                                                                                                
1:36:15 PM                                                                                                                    
WHITNEY   BREWSTER,  Director,   Division   of  Motor   Vehicles,                                                               
Department  of  Administration,  said  the  DMV  doesn't  have  a                                                               
position on the  bill, but she would point out  that the DMV uses                                                               
program  receipts to  operate and  deposits any  excess into  the                                                               
general fund. SB  37 would require most of the  fees collected by                                                               
the DMV  to be deposited  into the  transportation infrastructure                                                               
fund and  it provides no  funding mechanism  for the DMV.  If the                                                               
bill  is implemented  as currently  written, the  DMV would  need                                                               
about $229,000 in general funds  on an annual basis for operating                                                               
and future capital requests.                                                                                                    
                                                                                                                                
DAVE  TALERICO, Mayor,  Denali  Borough,  said SB  37  will be  a                                                               
tremendous help to  Alaska's economy in the future  since much of                                                               
the  economy  is  based  on  the  transportation  infrastructure.                                                               
Future improvements to airports,  ports, harbors, and the highway                                                               
system will  allow municipalities to enhance  emergency response,                                                               
which is particularly important to Alaska residents.                                                                            
                                                                                                                                
1:39:11 PM                                                                                                                    
JACK SHAY, Board Member, Alaska  Municipal League (AML), said the                                                               
AML represents about  98 percent of the population  of the state.                                                               
Transportation  is vital  to  this  state and  the  AML has  long                                                               
supported  creating  a  transportation  infrastructure  fund.  He                                                               
thanked the sponsor; the legislation is on the right track.                                                                     
                                                                                                                                
TOM GEORGE,  Alaska Regional Representative, Aircraft  Owners and                                                               
Pilots Association (AOPA),  said AOPA has about  4,800 members in                                                               
Alaska  who  use  aircraft  for  everything  from  recreation  to                                                               
business  transportation. AOPA  supports the  concept of  a state                                                               
funded  transportation program  as  described by  SB 37.  Capital                                                               
programs  for the  aviation  system in  Alaska  are typically  95                                                               
percent federal dollars with the  state paying only five percent.                                                               
The FAA  reauthorization program - including  airport funding, is                                                               
currently being debated in Washington  D.C. and there are efforts                                                               
to reduce  the overall funding  in that program so  state support                                                               
is  clearly  needed. Because  federal  funding  can have  strings                                                               
attached,  it  can be  less  expensive  for  DOTPF to  provide  a                                                               
facility than to follow all the federal process and standards.                                                                  
                                                                                                                                
MR. GEORGE  cautioned the committee  to not only create  a state-                                                               
funded program but  also to look carefully at the  details on how                                                               
the  program is  defined because  it needs  to complement  rather                                                               
than just  supplement the  federal funding  sources. Furthermore,                                                               
this should  not take pressure  off the state to  adequately fund                                                               
the   maintenance  and   operation  of   existing  transportation                                                               
facilities.                                                                                                                     
                                                                                                                                
1:43:14 PM                                                                                                                    
WILLARD DUNHAM,  Mayor, City  of Seward, said  he is  speaking in                                                               
strong support  of SB 37.  The state has  long been amiss  in not                                                               
having  a transportation  fund and  it  will suffer  badly if  it                                                               
doesn't  step up  and  show  that it  isn't  always dependent  on                                                               
others. Federal SAFTEA-LU dollars may  end and the state needs to                                                               
have some backup plan before that  happens. This bill is a way to                                                               
do that.                                                                                                                        
                                                                                                                                
CHAIR KOOKESH closed  public testimony and asked the  will of the                                                               
committee.                                                                                                                      
                                                                                                                                
1:46:11 PM                                                                                                                    
SENATOR  THOMAS  moved  to  report  SB  37  from  committee  with                                                               
individual  recommendations and  attached  fiscal note(s).  There                                                               
being no  objection, SB 37  moved from the  Senate Transportation                                                               
Standing Committee.                                                                                                             

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