Legislature(2011 - 2012)BUTROVICH 205
02/14/2012 01:00 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB163 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 163 | TELECONFERENCED | |
SB 163-G.O. BONDS FOR PORTS
1:09:20 PM
CHAIR KOOKESH announced the consideration of SB 163, "An Act
providing for and relating to the issuance of general obligation
bonds for the purpose of paying the cost of municipal port
projects; and providing for an effective date."
1:09:43 PM
KAREN REHFELD, Director, Office of Management and Budget, said
she would provide an overview of the bill, including a sectional
analysis and the deputy commissioner would then discuss general
fund (G.O.) bonding and the fiscal note. She read the following
sponsor statement into the record:
Alaska's future rests on responsibly developing our
natural resources, and creating jobs and economic
opportunities for our families. The state of Alaska
has more miles of coastline than any other state in
the union. Combined with our remote location, Alaska's
economy is reliant on waterborne commerce to receive
the goods we use and to export the resources we
develop.
SB 163 authorizes the State of Alaska to sell $350
million in general obligation bonds to fund
infrastructure improvements for six port projects.
With our AAA bond rating, Alaska receives a favorable
interest rate on bond sales. With the current low cost
of borrowing, the state realizes a greater rate of
return on the general fund than it would have to pay
when borrowing funds through a general obligation bond
package.
The funds would be used to rehabilitate and expand six
projects throughout the state. These ports are located
in upper Cook Inlet, Bristol Bay, Kenai Peninsula, the
Yukon River Delta, and Ketchikan. Each of these
projects has a pivotal role in Alaska's economy.
Alaska is unique in its economic dependence on ports.
Very limited federal funding is available for port
infrastructure. The use of general obligation bonds
will help bring these projects to completion.
Governor Parnell is committed to working with the
Legislature to develop Alaska's infrastructure. These
projects will promote economic growth within their
region, and to the economy of Alaska.
MS. REHFELD provided a sectional analysis for SB 163:
Section 1 describes the amount and the purpose of the
general obligation bonds. The purpose is to provide
funding to pay for the cost of design and construction
of identified municipal port projects. The principal
amount of the bonds to be sold is not to exceed
$350,000,000 and must be ratified by a majority of
voters in the state. The bonds shall be issued under
the provisions of AS 37.15.
Section 2 establishes the Port Project Fund. If the
voters approve the bonds, a special fund for the state
shall be established that will be known as the 2012
Port Project Fund. The fund shall include the proceeds
from the sale of the bonds, but will not include the
accrued interest and premiums.
Section 3 establishes how the funds will be awarded to
the individually identified projects. The amount of
$350,000,000 will be appropriated from the 2012 Port
Project Fund to the Department of Commerce Community
and Economic Development to be awarded as grants under
AS 37.05.315 (Grants to Municipalities).
Section 4 appropriates $2,965,000 from the general
fund to the state bond committee to pay expenses
associated with the issuance of the bonds. The amount
authorized and expended in this section will be
reimbursed to the state general fund from the proceeds
of the sale of the bonds. (Estimate $900.00 in bond
issuance cost in FY2013 - see fiscal note)
Section 5 establishes the lapse, redemption, and
reimbursement of the appropriations in Section 3.
Unexpended and unobligated balances of the
appropriations are appropriated to the statebond
committee to redeem bonds sold. Amounts expended from
the state general fund related to pay redemption costs
shall be reimbursed to the general fund to the extent
the money is not needed to redeem the bonds.
Section 6 establishes the ballot question that will be
asked of voters to approve the general obligation
bonds for the specified purpose.
Section 7 establishes an immediate effective date.
MS. REHFELD stated that the Governor is committed to working
with the Legislature to develop Alaska's infrastructure and
promote economic growth statewide.
1:12:59 PM
SENATOR MENARD asked why just the $400 million was listed in the
ballot proposition and not the individual projects.
MS. REHFELD replied the individual projects are identified
through both the capital appropriation bill and in the
supporting information in the voter information pamphlet. She
confirmed that the individual projects were not enumerated in
the question that goes before the voters.
SENATOR MENARD stated objection to that.
MS. REHFELD suggested that Legislative Legal may have
recommendations about how to specifically enumerate the
projects.
1:14:32 PM
ANGELA RODELL, Deputy Commissioner, Division of Treasury,
Department of Revenue (DOR), stated:
Projects that have long lives and benefit multiple
generations should be financed over the course of
their respective lives. Port improvement projects such
as those proposed in SB 163 have long lives and
benefit multiple generations.
This bill would authorize the issuance of $350 million
in general obligation debt. General obligation debt is
backed by the full faith, credit, and resources of the
state. We currently have approximately $628 million in
general obligation bonds outstanding. The state has
the resources and capacity to take on the proposed
additional debt.
Currently, interest rates are at historic lows. This
has allowed us to take advantage of the market and
reduce our debt-service obligations. In January of
2012, we sold $175.56 million of general obligation
refunding bonds with more than $26 million of the 2012
bonds sold to Alaskan residents. And we used the
proceeds to refund $191.4 million of bonds that had
been issued back in 2003. This transaction had an all-
in true interest cost of 1.24 percent and saved the
state an estimated $27 million net present value.
This transaction demonstrates the attractiveness of
Alaska's general obligation paper and also the current
low cost of borrowing in the tax exempt market. Any
new debt issued will have a debt service structured to
provide a low cost of funds and a level burden on
future state budgets. As we move forward with the
proposed legislation, we will work closely with you to
ensure all the projects meet the necessary tests for
tax exemption and can take advantage of these low
rates.
In November 2010, Moody's Investor Service raised the
state's general obligation rating to AAA. This was
followed by S&P raising our rating to AAA this past
December. A triple A rating is the highest investment
grade rating achievable, and it expresses an opinion
of the rating agency as to the ability of the state to
honor its long-term, unsecured financial obligations
and contracts.
In reviewing our rating, Fitch, Moody's, and S&P will
be looking to the final dollar amount issued and the
overall plan of finance in conjunction with other
state issues, such as revenues, expenses, and other
commitments such as the PERS and TRS unfunded
liability.
We have provided a fiscal note which assumes the
voters will approve $350 million in general obligation
bonds. We are required by federal tax law to track all
funds to final expenditure, and to ensure that all
funds are spent within the date of issuance. In order
to comply with these requirements, we have assumed
that the bonds would be issued in multiple tranches,
giving an opportunity for funds to be spent before
additional debt is incurred. We assumed the first
issuance would come in February 2013 following the
November 2012 election. Debt repayment would begin in
fiscal year 2014.
The costs associated with issuing the bonds, including
underwriting, ratings, legal counsel, financial
advisors, marketing and disclosure services,
administration and printing for a $350 million bond
program would total approximately $2.965 million. The
higher amount is needed to address the need for
multiple bond issuances, to accommodate a wide array
of what are anticipated to be long-life projects, the
fact that there will be a combination of both AMT and
non-AMT bonds sold and at current market costs for
underwriting both AMT and non-AMT paper.
1:19:02 PM
STEVE RIBUFFO, Interim Director, Port of Anchorage, provided a
summary of services offered at the port. The port provides about
90 percent of the merchandise for 85 percent of Alaska's
populated areas, operates as a fuel hub, serves as a U.S.
Department of Defense designated national strategic seaport, and
as the gateway and economic engine for commerce in the state.
MR. RIBUFFO described some port expansion project facts. The
port has been in operation for over 50 years and the facilities
are in a deteriorated and vulnerable condition. The expansion
will create two new barge berths, two new ship berths and larger
spacing between berths. Additional benefits include improved
seismic capacity and access to 65 acres of commercial/industrial
land. Military deployments will also be better facilitated.
Last fall the Municipality of Anchorage (MOA) signed a new
agreement with the Maritime Administration to hand over all
contracting, design and construction activity to the MOA or its
designee by May 31, 2012. The agreement formalized an oversight
committee that meets weekly. The U.S. Army Corps of Engineers is
providing a third-party review of the construction done to date
and a review of the design to guide the project moving forward.
The piecemeal funding that the project has received in the past
has allowed it to move forward, but has proved to be extremely
inefficient. To successfully move forward controlling costs and
exploiting economies of scale, the project needs total up-front
funding. The MOA made an annual request to the Legislature for
$350 million to fund for this project, and while the money in SB
163 is generous and substantial, it will not complete the Port
of Anchorage project.
MR. RIBUFFO concluded that Alaska is a maritime state, and while
ports play an essential and critical role, they are often
overlooked. SB 163 is encouraging in that it provides critical
funding to improve Alaska's port infrastructure.
1:26:24 PM
CHAIR KOOKESH asked what was needed to complete the project and
did he anticipate that the MOA would return to the Legislature
to ask for more money.
MR. RIBUFFO replied the total need is $350 million.
SENATOR HUGGINS pointed out that the cost estimate for the port
was in excess of $1 billion before it was pared back [to include
just the north end.]
MR. RIBUFFO agreed.
1:27:35 PM
JOE PERKINS, Executive Project Manager, Port MacKenzie Rail
Extension, Matanuska-Susitna Borough, said this extension would
connect Port MacKenzie facilities with the existing railroad
located in Houston. He reviewed the work done on the project
last year. The Surface Transportation Board (STB) released the
final environmental impact statement on March 25, 2011 and
approved the 32 mile extension to Houston. The final record of
decision (ROD) was released with an effective date of December
23, 2011, and a contract to build the embankment for the first
five miles of the rail extension was awarded to Bristol
Construction. Part of that $17 million contract was to complete
the one mile bimodal loop, and construct an access road to the
University of Alaska property.
The total cost estimate for the rail extension is $272.5
million, $92.5 million of which was previously appropriated.
With the $110 million grant proposed in SB 163, there will still
be need for $70 million to complete the final seven or eight
miles of rail. He emphasized that the schedule for completing
the project would be totally dependent on additional funding.
1:37:26 PM
SENATOR MENARD asked if the loop would have a 100 car train.
MR. PERKINS said yes, and continued to explain that it will be
the first bulk materials loading facility in Alaska. In
addition, spur lines will come off the rail at the port to
support activities such as fuel storage.
CHAIR KOOKESH asked the testifiers to limit their testimony to
what is covered in the bill.
1:38:58 PM
JIM HUNT, City Manager, City of Seward, stated that he was
testifying to highlight the Coastal Villages Home Porting
Project. He related that for more than two decades the City of
Seward has invested in the Seward Marine Industrial Center
(SMIC). A little over a year ago the Coastal Villages Region
Fund (CVRS) asked the city to partner in an effort to relocate
the fleet's homeport from Seattle to Seward.
CHAIR KOOKESH asked if this fleet was one of the CDQ [Community
Development Quota] fishing groups.
MR. HUNT said yes; the CVRS is the largest of the six CDQ
fishing groups. It is currently homeported in Seattle and has a
$20 million annual economic impact in moorage, vender support,
and maintenance. The fleet was looking for an ice-free port, an
uplands base, and rail and air access. Seward had everything
CVRS needed and a partnership was formed. This will have a
positive impact on not just Seward but also Anchorage, the
peninsula, and all of Southeast.
CHAIR KOOKESH asked how the $10 million would be used.
MR. HUNT replied the funds will be used to provide a breakwater,
docks and additional infrastructure to serve the CDQ fleet and
other customers.
1:45:33 PM
DANIEL J. O'HARA, Mayor, Bristol Bay Borough, Naknek, AK, said
the $10 million grant will be used to refurbish an existing 30-
year-old steel pile dock. This project will cost $16 million of
which the borough has $6 million. He noted that phase 1 was
completed in 2011. It was a $10 million, 200-foot interlocking
steel dock project of which the borough contributed $2.5
million.
He referred to a handout that had photos and information about
the Port of Bristol Bay and explained the process for
accommodating large fleet activities. He highlighted that 85
percent of what happens in Bristol Bay moves across this dock.
He stated that if the bond goes forward, the borough would
probably be ready in 2013. It's an ice-free dock.
SENATOR HUGGINS said he wanted to pass along that whenever
Bristol Bay residents mentioned Mr. O'Hara, the reference was
always complimentary.
1:53:15 PM
DAVE KIFFER, Mayor, Ketchikan Gateway Borough, Ketchikan, AK,
stated strong support for SB 163, particularly the provision
that helps to fund the construction of the Alaska Marine Highway
System (AMHS) Ward Cove Dock improvements. This facility will
meet the requirements for AMHS vessel layup. There is also
interest in this being a joint-use facility to accommodate
continued home porting of the National Oceanic and Atmospheric
Administration (NOAA) vessel Fairweather in Ketchikan. The
project makes sense and the borough assembly last night
reaffirmed support of the project.
1:55:28 PM
MICHAEL NEUSSL, Deputy Commissioner for Marine Operations,
Department of Transportation and Public Facilities (DOTPF), said
he oversees the Alaska Marine Highway System. He confirmed that
DOTPF supports the Ward Cove Dock improvement, and provided a
brief history of the project. He explained that the $10 million
will help fund the marine facility in the Ward Cove area.
1:58:29 PM
CHRISTINE KLEIN, Chief Operations Officer, Calista Corporation,
Anchorage, AK, stated that she was speaking on behalf of the
Marshall Port and access road and in support of the Emmonak Port
at the mouth of the Yukon River.
She said the Marshall Port and access road project has been
entered in the Capital Project Submission and Information System
(CAPSIS) and could be placed in either the capital or bond
program, but the preference is for it to be in the capital
program, because the rock aggregate is needed for a number of
projects in the Yukon Delta. The current cost of the project is
$11.6 million. It would be located three miles downstream of
Marshall and would have a port facility, dock, two-acre staging
area, and a five-mile road to the quarry at Pilcher Mountain.
She said the community of Marshall has committed to maintain and
operate both the road and port facilities. A separate road
linking the village to the port would be paid for with Indian
Reservation Roads funds.
MS. KLEIN related that quality materials are needed for this and
other projects and are scarce in this region. Aggregate is
currently barged from Nome, which adds 20 percent to all
projects. A middle Yukon port is also needed for fuel deliveries
and materials staging and transfer. She continued to detail
various projects in the region that would make use on the in-
region quarry.
2:05:07 PM
CHAIR KOOKESH said the project will remain in the CAPSIS program
with the understanding that the finance committee will consider
it further when it considers SB 163.
2:05:33 PM
PAT BRANSON, Mayor, City of Kodiak, asked the committee to amend
SB 163 to include the city's top priority project to replace
Pier 3. This is a critical piece of infrastructure that sustains
the greater local economy. It is a main cargo pier and the only
facility that has the capacity to accommodate deep-draft vessels
and containerized cargo. The existing pier will be at the end of
its design life in 4-5 years. The replacement costs are
estimated to be $33 million, but are dependent on the type of
structure selected. This year the city will complete
geotechnical work and a wave motion study to determine the
appropriate structure type.
2:07:50 PM
At ease.
2:11:51 PM
CHAIR KOOKESH reconvened the meeting and explained that there
was a committee substitute (CS) and one amendment for the
committee to consider. It would also hear from the City of
Kotzebue. He stated his intention was to move the bill after the
committee took these two actions. He said that a good many
communities had contacted his office asking to be included in
the bond package, and it was his belief that the finance
committee should make those determinations.
2:12:35 PM
SENATOR HUGGINS asked if any of the grant recipients knew
whether or not the existence of a coastal zone management
program was vital to their particular project.
2:13:01 PM
KAREN REHFELD said all the projects listed in the bill are
existing projects so it was unlikely that there would be issues
with or without coastal zone management.
2:13:25 PM
CHAIR KOOKESH asked for a motion to adopt the \M committee
substitute (CS).
SENATOR THOMAS moved to adopt CS for SB 163, labeled 27-
GS2769\M, as the working document.
CHAIR KOOKESH announced that without objection, version M was
before the committee. It adds the City of Kotzebue to the list
of grant recipients. He asked Senator Olson and Mr. Martin for
their statements.
2:14:11 PM
SENATOR DONNY OLSON stated that ports are important to rural
Alaska. He deferred to Mr. Martin to explain the specific
request in version M.
DEREK MARTIN, Manager, City of Kotzebue, Kotzebue, AK, said the
city had been lobbying for the Cape Blossom deep-water port for
more than 40 years. The U.S. Army Corps of Engineers completed
the first study on this project in 1973 and since then there
have additional studies to include road, airport relocation and
Roads to Resources from Kotzebue to Chicago Creek, Kiana,
Noorvik and Selawik. Most recently, Cape Blossom has been
identified as a possible terminal for the Ambler mining
district.
Large ocean-going vessels currently must anchor 15 miles
offshore in Kotzebue Sound and lighterage vessels carry fuel and
cargo thorough a shallow channel to shore. This adds between 20
percent and 30 percent to the overall costs. The city works
closely with all entities in Kotzebue and they have all
submitted letters of support, recognizing the need to lower the
cost of living and increase economic development opportunities.
Shell Oil and ConocoPhillips have also indicated a desire to use
the Cape Blossom Port if and when it is built. He detailed
further efforts to promote and get ready for this project. He
concluded that this deep-water port will have many advantages
for the entire region. The estimated cost is $60 million and
with other monies, the $50 million in the proposed amendment
might be sufficient.
SENATOR THOMAS commented that the Russian tanker Renda that
delivered fuel to Nome recently must be relatively small
compared to the vessels that have to anchor 15 miles offshore in
Kotzebue Sound. He asked if more of the larger ships are to be
anticipated if the Ambler mining district is developed.
MR. MARTIN replied they believe that Cape Blossom will be able
to accommodate vessels that draw 35 feet.
SENATOR THOMAS asked which vessels currently anchor offshore and
require lightering barges.
MR. MARTIN said the Northland and Crowley barges all require
lighterage services to deliver general cargo, including fuel,
freight, vehicles, and building materials.
SENATOR EGAN asked if periodic dredging is anticipated.
MR. MARTIN replied not at this point; the most recent NOAA study
indicated that dredging was not necessary.
2:22:32 PM
SENATOR THOMAS asked if another channel had been identified that
did not anticipate dredging, and it that was the case, he
questioned why it took so many years to find it.
MR. MARTIN said the Bathymetric map that NOAA presented most
recently indicates there is a channel that runs from out in
Kotzebue Sound to the deep water port [at Cape Blossom]. He
referred to a handout and directed attention to the last page on
maps and figures.
2:23:17 PM
SENATOR OLSON added that Kotzebue is a number of miles from Cape
Blossom and the deep channel runs from there straight out to
where large vessels currently anchor. The idea is to construct
an eight mile road between Kotzebue and Cape Blossom.
2:24:17 PM
CHAIR KOOKESH clarified that Senator Thomas's motion was to
adopt version M and asked for a motion to adopt the proposed
amendment to include on page 2, following line 22: "City of
Kotzebue - Cape Blossom Deep Water Port $50 million."
2:24:45 PM
CHAIR KOOKESH observed that there was a motion to adopt the
amendment, and asked if there was objection. Seeing no
objection, he asked Senator Olson to proceed.
SENATOR OLSON stated that and in the last several weeks the
Coast Guard Cutter Healy and the Russian tanker Renda delivered
fuel to ice-bound Nome. He deferred to Mayor Michels to provide
further explanation for the $50 million Port of Nome
improvements.
2:25:55 PM
DENISE MICHELS, Mayor, City of Nome, stated support for SB 163
and [the amendment] to add $50 million to extend the causeway at
Nome 800-1,000 feet to reach deep water. She emphasized the need
to develop the infrastructure to help meet the demands of
opening the Arctic and to extend the existing facilities in
Nome. While air is the most reliable year-around transportation,
Nome is the hub for ocean shipping during the summer months. It
also serves as the short-term solution for a deep draft port to
supplement development activities that are occurring now and in
the future. She detailed recent activities in and around the
port. She said the peak time of activity is when vessels are
journeying through to explore the Outer Continental Shelf (OCS),
and traffic is increasing.
She said the city also supports the Governor's western access
transportation corridor from the Interior to Western Alaska.
This route would tie in needed infrastructure to allow resources
to be stored in Nome and barged out. The city also continues to
lobby the Coast Guard to consider Nome as a seasonal port
operating location. She concluded by voicing support for all
port requests from Ketchikan to Barrow.
2:32:16 PM
CHAIR KOOKESH stated for the record that the amendment was 27-
GS2769\A.1. Seeing no objection, he announced that [Amendment 1]
was adopted.
SENATOR OLSON thanked the committee for recognizing the need to
include port improvements at both Nome and Kotzebue.
SENATOR KOOKESH closed public testimony and announced his
intention to move the bill. It goes to finance next and that
committee has the expertise to consider whether or not to
include additional port project requests in the bill. He asked
for a motion to move the bill, as amended.
2:33:12 PM
SENATOR THOMAS moved to report CS for SB 163, 27-GS2769\M as
amended, from committee with individual recommendations and
attached fiscal note(s).
SENATOR HUGGINS objected to comment. He said he'd support the
bill but in the last hour and one half the committee increased
the size of the bond by 25 percent. The additional projects
might be the most important on the list, he didn't know. But he
did know that at some point there would be a tipping point and
nobody would get anything. Maybe that's good too, he said,
because that would save a whole lot of money.
SENATOR HUGGINS removed his objection.
2:34:42 PM
SENATOR MENARD stated that she did not want the Governor to
become uncomfortable with additions to the bill to the point
that it jeopardized the projects that he wanted in the bill in
the first place.
CHAIR KOOKESH commented that reducing Anchorage's grant by 50
percent would put things in good shape. The rest of the state
needs to be considered and he appreciated that Nome and Kotzebue
were included. $310 million was allocated to Anchorage and the
Mat-Su Borough and $40 million went to the rest of Alaska. "This
is an appropriate step and I'm very comfortable with doing
this," he stated.
CHAIR KOOKESH announced that without objection CSSB 163(TRA)
moved from the Senate Transportation Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Port of Anchorage Information.pdf |
STRA 2/14/2012 1:00:00 PM |
Port of Anchorage SB 163 |
| Alaskas Lifeline- Port of Anchorage Cargo Distribution.pdf |
STRA 2/14/2012 1:00:00 PM |
Alaska Lifeline SB 163 |
| Sectional Analysis SB 163.pdf |
STRA 2/14/2012 1:00:00 PM |
SB 163 |
| SewardProjectSB163.pdf |
STRA 2/14/2012 1:00:00 PM |
SB 163 |
| CommitteeSubstituteForSB163.pdf |
STRA 2/14/2012 1:00:00 PM |
SB 163 |
| Sponsor Statementsb163.pdf |
STRA 2/14/2012 1:00:00 PM |
SB 163 |
| secondAmendmentSB169.pdf |
STRA 2/14/2012 1:00:00 PM |
SB 169 |