Legislature(1997 - 1998)
02/12/1998 01:40 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
February 12, 1998
1:40 P.M.
TAPE HFC 98 - 29, Side 1
TAPE HFC 98 - 29, Side 2
TAPE HFC 98 - 30, Side 1
TAPE HFC 98 - 30, Side 2
CALL TO ORDER
Co-Chair Gene Therriault called the House Finance Committee
meeting to order at 1:40 p.m.
PRESENT
Co-Chair Hanley Representative Kelly
Co-Chair Therriault Representative Kohring
Representative Davies Representative Martin
Representative Davis Representative Moses
Representative Grussendorf Representative Mulder
Representative Foster was absent from the meeting.
ALSO PRESENT
Jeff Meucci, Mayor, City of Petersburg; Bob Doll, General
Manger, Alaska Marine Highway System, Department of
Transportation and Public Facilities; Berne Miller,
Executive Director, Southeast Conference; Bob Ward, City
Manager, Skagway; Bob Provost, Regional Director,
Inlandboatmen's Union; William Church, Division of
Retirement and Benefits, Department of Administration; Glen
Godfrey, Colonel, Alaska State Troopers, Department of
Public Safety.
The following testified via the teleconference network:
Larry West, Haines; Daisy Stevens, Administrative Liaison
Officer, Tanana Chiefs Council, Fairbanks; Craig Persson,
Public Safety Employees Association, Fairbanks; Jim Grimes,
Bristol Bay Native Association; Johnny Evans, Dillingham
Police Department; Chief Brent Moody, Dillingham Police
Department; John Waldron, Village Public Safety Officer,
Yakutat.
SUMMARY
HB 206 "An Act relating to credit under the Public
Employees' Retirement System for service as a
village public safety officer."
HB 206 was REPORTED out of Committee with a "do
pass" recommendation and a revised fiscal impact
note by the Department of Administration.
HB 328 "An Act making appropriations for continued
maintenance and operation of the Motor Vessel
Malaspina; and providing for an effective date."
HB 328 was Held in Committee for further
discussion.
HOUSE BILL NO. 328
"An Act making appropriations for continued maintenance
and operation of the Motor Vessel Malaspina; and
providing for an effective date."
JEFF MEUCCI, MAYOR, CITY OF PETERSBURG testified in support
of HB 328. He observed that, over the past three years,
Southeast Alaska communities have struggled to keep the
Alaska Marine Highway System operating with diminished state
dollars. He maintained that the Malaspina is a vital part
of the overall transportation system and is crucial to the
economic wellbeing of Southeast Alaska. He asserted that
operation of the Malaspina as a dayboat is the first stage
in a plan to improve the transportation system in Southeast
Alaska. He noted that the legislation has wide support in
Southeast Alaska. He stressed the need for dependable, safe
and economic travel within Southeast Alaska. He maintained
that the Alaska Marine Highway System should be treated the
same as roads or highways in other parts of Alaska.
In response to a question by Representative Martin, Mr.
Meucci stressed the legislation would be economical to the
local communities. He observed that large quantities of
seafood are transported out of Petersburg via the Alaska
Marine Highway System.
HOUSE BILL NO. 206
"An Act relating to credit under the Public Employees'
Retirement System for service as a village public
safety officer."
JOEL LOUNDSBURY, STAFF, REPRESENTATIVE PORTER testified in
support of HB 206. He read the sponsor statement (copy on
file). House Bill 206 would allow village public safety
officers (VPSO) to obtain retirement credit for service
rendered under the VPSO program. The eligible participant
could receive credit for up to 5 years of service in the
VPSO program.
WILLIAM CHURCH, RETIREMENTS SUPERVISOR, DIVISION OF
RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION
explained that participants would be required to pay the
full actuarial costs of benefits for the period of service.
Participants would buy the employee and employer portion.
The amount would be based on the benefit at the time of the
claim and the individual's vesting years' salary.
Co-Chair Hanley referred to the fiscal note by the
Department of Administration. He observed the bill is
estimated to have an unmeasureable impact on the Public
Employee Retirement System (PERS) funding ratio. There is
an increase to the unfunded liability of approximately $450
thousand dollars, which would result in an employer
contribution increase of approximately $40 thousand dollars
a year.
Mr. Church explained that the full actuarial cost is based
on the entire population that could be eligible to claim the
service. He noted that there are some individuals that will
not claim the service.
Co-Chair Hanley summarized that other state employees will
end up paying more to allow this group to buy their
retirement. Mr. Church was uncertain if there would be a
measurable cost.
Co-Chair Hanley noted that, if the full actuarial cost is
not covered, the system would not be as sound in the future.
He observed that each state employee could have his or her
contribution reduced by $2 dollars a year.
In response to a question by Representative Davies, Mr.
Church clarified that, under retirement law, a lifetime
actuarial reduction is calculated for an individual who has
claimed service and has indebtedness owed at retirement. If
the retirement value for the service is greater than the
lifetime actuarial reduction than it is to the member's
advantage to buy back their service. He clarified that
money paid into the retirement system is paid to the
beneficiaries upon the individual's death.
Representative Davies pointed out that some individuals
would pay the money in anticipation of 25 years of benefits,
but would not receive 25 years of benefits due to death. He
questioned if the cost is over estimated.
Mr. Church noted that costs are based on the interest
assumptions of the fund and mortality rates.
In response to a question by Representative Martin, Mr.
Church clarified that village public safety officers are not
state employees. They are under contract to Native
Corporations.
Representative Martin maintained that village public safety
officers deserve to be covered as employees of the state of
Alaska. He emphasized the danger of their job.
Mr. Church clarified that in order to claim five years of
service in the VPSO program an individual must first be
vested in the state retirement system. Officers can
purchase up to five years.
Co-Chair Therriault observed that the proposal is similar to
provisions for military service. He expressed concern that
Village public safety officers be encouraged to remain in
their positions. He provided members with an amendment
requiring that applicants have a minimum of three years
service in the VPSO program (copy on file). He noted that
military service is generally for a three-year term of duty.
In response to a question by Representative Davies, Mr.
Church explained that approximately 125 village public
safety officers would be eligible. He did not know if the
assumption concluded that all 125 would take advantage of
the provision. He noted that 8 of 10 VPSO contracts provide
some form of retirement. He noted that the Legislature does
not allow double dipping for military service.
JOHN WALDRON, VILLAGE PUBLIC SAFETY OFFICER, YAKUTAT
testified via teleconference in support of HB 206. He
maintained that village public safety officers are the rural
arm of the Department of Public Safety. Village public
safety officers handle limited law enforcement, fight fires,
do search and rescue, provide alcohol and drug enforcement
training in schools and are agents for the state medical
examiner. He noted that village public safety officers are
the lowest paid law enforcement officers in the state of
Alaska. He observed that most village public safety
officers have minimal retirement programs. He noted that
there are no geographical pay differentials for village
public safety officers living in rural areas. Overtime pay
is limited. His family is not covered by his health
insurance.
JIM GRIMES, VPSO PROGRAM MANAGER, BRISTOL BAY NATIVE
ASSOCIATION testified via teleconference in support of HB
206. He added that he is a retired State Trooper. He
stressed the importance of the VPSO program as a stepping-
stone to a career in law enforcement. He observed that
village public safety officers are not well paid. He noted
that village public safety officers receive credit with the
Alaska Police Standards Council for their time as a village
public safety officer.
Co-Chair Therriault asked if Mr. Grimes would support a
restriction allowing only those that move into law
enforcement to buy their retirement. Mr. Grimes stated that
he would support limitation to law enforcement, police or
fire service.
Representative Martin questioned why village public safety
officers are not state employees. Mr. Grimes spoke in
support of making village public safety officers state
employees. He noted that they are employees of one of the
ten Native Corporations. He noted that legislative action
would be needed to allow them to participate in PERS. He
observed that the State decided that it would be less
expensive to contract public safety officers with a
nonprofit corporation where they are only paid $12.50
dollars an hour.
Representative Davies stated that village public safety
officers could be hired through municipalities. Mr. Grimes
noted that a qualified municipality could hire half of the
12 village public safety officers in his region. He
emphasized that the Department of Public Safety does not
want to negotiate individual memorandums of agreements and
contracts with every village in the state.
JOHNNY EVANS, DILLINGHAM POLICE DEPARTMENT testified via
teleconference in support of HB 206. He maintained that
village public safety officers deserve more than they are
getting. Village public safety officers are unarmed and
have no backup. He observed that village public safety
officers handle domestic violence and alcohol related
crimes. They even handle felony crimes until the state
troopers arrive. He urged passage of the legislation.
BRENT MOODY, CHIEF, DILLINGHAM POLICE DEPARTMENT testified
via teleconference in support of HB 206. He helped to run
the VPSO program for Tlingit and Haida. He asserted that
village public safety officers deserve the legislation. He
stated that the legislation should be limited to law
enforcement or fire service. He observed that he hires
village public safety officers as policemen. Out of 7
officers in Dillingham, 3 were village public safety
officers.
In response to a question by Co-Chair Therriault, Chief
Moody noted that the VPSO officers that he has employed have
had 1 to 5 years' experience. He stated that a one-year
requirement would be acceptable. He stressed that village
public safety officers are the law enforcement heroes of the
state of Alaska.
DAISY STEVENS, ADMINISTRATIVE LIASION OFFICER, TANANA CHIEFS
COUNCIL (TCC), FAIRBANKS testified in support of HB 206.
She is a former VPSO coordinator for TCC. She urged passage
of the legislation.
CRAIG PERSSON, PUBLIC SAFETY EMPLOYEES ASSOCIAITON,
FAIRBANKS testified in support of HB 206. He emphasized
that the legislation is an incentive for village public
safety officers that want to continue their law enforcement
careers. He did not object to limiting the legislation to a
police officer, fire fighter or correctional officer. He
did not object to a one-year limitation.
In response to a question by Co-Chair Therriault, Mr.
Persson stated that Village public safety officers should be
able to count years that were applied to another retirement
system for PERS credit.
Co-Chair Therriault noted that military personnel cannot buy
military service if they are already getting a retirement
from the United States government for the same five years.
GLEN GODFREY, COLONEL, ALASKA STATE TROOPERS, DEPARTMENT OF
PUBLIC SAFETY testified in support of HB 206. He was
involved in the creation of the VPSO program while he was
stationed in Bethel in 1979. He stressed that the VPSO
program is a tremendous asset to the citizens of Alaska and
the Alaska State Troopers. He acknowledged the high
turnover rate in the program. He noted a progression from
VPSO officer - to municipal police officer - to the Alaska
State Troopers. He did not object to a one-year
requirement.
Colonel Godfrey observed that the original intention of the
VPSO program was to hire people from a community to provide
law enforcement to their constituents. He acknowledged that
there are many non-native VPSO officers. Some villages have
found that it is a problem for individuals to be law
enforcement officers in their own communities. He supported
restricting the program to individuals continuing in a
public safety field. He did not support restrictions on
"double dipping".
In response to a question by Representative Martin, Colonel
Godfrey observed that of 79 Alaska State Trooper field
positions:
- 26 were VPSO officers for 5 - 18 years
- 3 were VPSO officers for 18 years,
- 1 was a VPSO officer for 17 years,
- 1 was a VPSO officer for 15 years,
- 1 was a VPSO officer for 12 years,
- 1 was a VPSO officer for 11 years,
- 4 were VPSO officers for 9 years,
- 3 were VPSO officers for 8 years,
- 1 was a VPSO officer for 7 years,
- 6 were VPSO officers for 6 years, and
- 5 were VPSO officers for 5 years.
Representative Martin questioned if the legislation would
encourage Native Corporations to drop their retirement
plans.
(Tape Change, HFC 98 - 29, Side 2)
Co-Chair Therriault explained that the intent of his
proposed amendment is to allow officers that are not vested
in their VPSO retirement system to count their time in PERS.
Officers that are vested in a VPSO retirement plan would not
be allowed to count the same years in the state system.
Representative Davis asked if the legislation would
discourage retention of VPSO officers. He noted the need to
encourage VPSO officers to remain in their positions.
Colonel Godfrey stressed that the best way to attract
officers is by providing role models. He stated that VPSO
officers cannot be expected to last on the job for 15 - 20
years. He stated that it is natural for good officers to
progress to another police department or the Alaska State
Troopers.
Co-Chair Therriault provided members with Amendment 1. He
amended Amendment 1 to reference the definition of a police
officer or fire fighter under AS 39.25.200(28).
Co-Chair Therriault MOVED to ADOPT Amendment 1.
Representative Davies OBJECTED. He clarified that five years
of an individual's vested years in PERS would have to be as
a police officer or fire fighter.
Representative Davies spoke against the amendment. He
stressed that the amendment would limit the possible career
choices of a VPSO officer. He observed that a public
official could not buy his VPSO service. He emphasized that
99 percent of the cost is paid by the individual not the
state of Alaska. He stressed that VPSO officers are under-
paid.
Representative Martin spoke against the amendment. He
observed that there is no restriction for buy back of
military service.
Representative Davis noted that teachers transfer time
within the same occupation. Private teaching service can be
transferred to the state Teachers Retirement System.
Representative Davies noted that there is no restriction on
the purchase of municipal service under PERS.
Representative Kelly pointed out that the question is
whether the intent is to create an incentive or an award.
He spoke against the amendment.
Co-Chair Therriault noted that there is a natural
progression in law enforcement. He stated that he would
like to encourage a continuation in law enforcement.
Representative Davies stressed that the intent of the
legislation is to reduce the turnover rate of VPSO officers.
He did not think that the intent was to encourage transfer
to the upper ranks. He maintained that the "primary purpose
of the bill is to look at a class of citizens that are
serving us very well and to figure out someway to add some
incentive to become a VPSO in the first place."
Representative Martin agreed that the intent is to encourage
participation in the VPSO program.
A roll call vote was taken on the motion.
IN FAVOR: Kohring, Mulder, Davis, Therriault
OPPOSED: Grussendorf, Kelly, Martin, Moses, Davies, Hanley
Representative Foster was absent from the vote.
The MOTION FAILED (4-6).
Co-Chair Therriault provided members with Amendment 2 (copy
on file). He amended Amendment 2 by changing 3 years to one
year. Amendment 2 would clarify that: "An employee is not
entitled to credited service for employment as a village
public safety officer unless the employee was employed as a
village public safety officer for at least one year."
Co-Chair Therriault MOVED to ADOPT Amendment 2. There being
NO OBJECTION, the motion was adopted. There being NO
OBJECTION, it was so ordered.
Co-Chair Therriault MOVED to ADOPT Amendment 3. Amendment 3
would add a new subsection to read: "An employee is not
entitled to credited service under this section if the
employee is entitled to receive retirement benefits from
another employer for the same service."
Representative Davies OBJECTED. Co-Chair Therriault noted
that the language is similar to restrictions of credited
military service.
Representative Davies stressed that village public safety
officers deserve the additional benefit. He noted that the
majority of the cost would be born by the officer. There is
a small cost to the state of Alaska.
Representative Davis spoke against the amendment.
A roll call vote was taken on the motion.
IN FAVOR: Kelly, Kohring, Martin, Mulder, Hanley, Therriault
OPPOSED: Moses, Davies, Davis, Grussendorf
Representative Foster absent from the vote.
The MOTION PASSED (6-4).
Co-Chair Hanley questioned the fiscal impact. He suggested
that the fiscal note should reflect the fiscal impact.
Mr. Church clarified that any cost would be born by the
employer.
Representative Davies requested that the impact of Amendment
3 be taken into account by the fiscal note. He added that
some reduction should be taken to reflect the expectation
that not everyone that is eligible would take advantage of
the program.
In response to a question by Representative Martin, Mr.
Church observed that the actuarial account is 98 percent
funded.
Co-Chair Hanley noted that the amount of the indebtedness is
equal to the full actuarial cost of providing benefits based
on the service.
Mr. Church clarified that the full actuarial cost is
determined on an individual basis based on the individual's
age and their salary in their vesting years.
Co-Chair Hanley observed that the fiscal note assumes that
the individual does not cover the full cost.
Mr. Church reiterated that the there will always be some
margin of additional cost.
Representative Davies summarized that the full actuarial
cost is based on the assumption that individuals will remain
in the system. The legislation allows employees to select
in the future. The selection will be based on the benefit
to the individual. The actuarial cost is based on
calculations further back in time. The actual cost is based
on a future self-selection.
Mr. Church stressed that the employee would be vested in
PERS. Previous VPSO service could be purchased. They would
add to their credited service. There is a lifetime
adjustment on any indebtedness owed at retirement.
Co-Chair Hanley noted that a determination is made at the
time an individual purchases their previous service. He did
not understand what would result in the additional cost
outlined in the fiscal note.
Co-Chair Therriault noted that the a new fiscal note would
be prepared to reflect adopted amendments. Representative
Davies reiterated that the fiscal note should address
Amendment 3 and the assumption of how many are expected to
take advantage of the provision.
Representative Martin MOVED to report CSHB 206(FIN) out of
Committee with the accompanying revised fiscal note.
HB 206 was REPORTED out of Committee with a "do pass"
recommendation and with a revised fiscal impact note by the
Department of Administration.
HOUSE BILL NO. 328
"An Act making appropriations for continued maintenance
and operation of the Motor Vessel Malaspina; and
providing for an effective date."
BOB DOLL, GENERAL MANGER, ALASKA MARINE HIGHWAY SYSTEM,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES testified
in support of HB 328. Mr. Doll read from his prepared
statement to the House Finance Committee. He noted that
the timing of this improved service was prompted in
large part by two imperatives, which required prompt
action. The first was the need to publish the summer
1998 schedule no later than early January. Earlier
publication was desirable, but at the latest, the
schedule had to be available for the travel trade shows
which take place following the holidays. The
advertisers who had purchased space in the schedule
book, the show attendees, and individual travelers
depend upon early publication in order to make their
plans. Schedules were to be provided to the printer on
September 7th, but events following the Prince Rupert
blockade caused a delay. The schedule is now available.
Mr. Doll noted that the second requirement was to
provide for the contingency that the introduction of
the M/V Kennicott might be delayed or interrupted by
the kinds of breakdowns typical of a new ship. In the
spring of 1997 the Marine Highway Advisory Board had
cited a requirement for a backup ship. "We agreed that
a backup ship was needed. The logical ship for that
purpose, and the only one with a capability approaching
that of Kennicott, is the Malaspina. Neither of the
other mainline ships has the speed or capacity to meet
the backup requirement, and in any case, both would be
fully employed on other demanding routes."
Mr. Doll observed that: "Like all of our ships,
Malaspina must hold a US Coast Guard Certificate of
Inspection, issued each year. The Certificate in the
case of the Malaspina expired on 31 October. If she is
to operate at all in 1998, either as a temporary
replacement for the Kennicott or in the Lynn Canal, she
must be dry-docked and inspected. In addition, her
engines and generators have reached their maximum
operating hours and require overhaul. We have already
begun this work, which is not intended to do anything
more than to make it legally possible for her to carry
passengers in 1998."
Mr. Doll stressed that a significant, capital asset
would not earn any income in the summer of 1998 if the
Malaspina was not required as a substitute for the
Kennicott and she were left alongside the pier. He
asserted that: "The most prudent choice of a site for
the Malaspina to operate this summer is the Lynn Canal,
where her revenues can be maximized. That choice is
based on the results of studies, which show a 7.3
annual growth rate in the Juneau-Skagway city pair.
The same studies show that, in calendar year 1995,
ridership wholly within Lynn Canal exceeded 96,000
passengers and 27,000 vehicles, and generated nearly
$3.4 million in revenue. Additional traffic demand
to/from ports of call south of Juneau generated an
additional 43,000 passengers and more than 11,000
vehicles, adding another $1.7 million in marginal fare
revenue attributable to the Lynn Canal segments of
these trips. Operating seven days per week this
summer, I believe the Malaspina can pay her way. She
will bring to the Marine Highway something that it has
not had until now; daily, predictable service, on a
high-demand route. Passengers, and their servicing
travel agents, will be confident that they can move
north or south in the Lynn Canal every day, at
reasonable hours. Daily service will help move, to
areas north of Juneau, those visitors who, each year,
spend some $7.4 million in the Interior and northern
regions and $11.4 million in Southcentral. The small
business, "Mom and Pop," owners who depend upon those
summer travelers will be among the beneficiaries. It's
the kind of service that individuals and businesses
served by the Marine Highway have been seeking for
years. Now the opportunity is in our grasp."
Mr. Doll noted that: "Earlier efforts to develop a
Lynn Canal service had foundered on the issue of labor
agreements. While we were not successful in reducing
manning levels as much as had once been hoped, we were
able to obtain agreement that if the ship's hotel
services did not earn revenue adequate to justify the
initial employment levels, those shipboard positions
might be reduced proportionally. In other words, we
are able to monitor revenue and if that income is not
sufficient, adjust the crew level in the hotel area."
Mr. Doll pointed out that the Malaspina labor agreement
is the first example of a labor-management document
that does not increase shipboard labor costs in the
entire history of the Alaska Marine Highway System, and
perhaps in the history of the state of Alaska. The
agreement creates an ongoing relationship between
shipboard manning and the vessel's success as a
business venture. He stressed that this is a rare
provision, which establishes a relationship between the
profitability of a Marine Highway operation and the
number of jobs it supports.
Mr. Doll asserted that the Malaspina labor agreement is
unique. It is intended only for the special
circumstances surrounding the Malaspina in the Lynn
Canal setting. He maintained that it is in the best
interests of the State to encourage imaginative
approaches to labor issues and to welcome the
profitability concepts embodied in the proposed
Malaspina operations.
Mr. Doll observed that the Malaspina/Lynn Canal
proposal provides an opportunity to test, at minimum
cost, one approach to a possible future System, namely
the "dayboat." "If our operational experience so
indicates, it is possible that the Malaspina could be
replaced by a purpose-built ship, one designed for the
Lynn Canal and offering even greater economic
advantages. The conceptualization and design of that
ship could be accomplished using the data we have
gained from operating the Malaspina for a time in this
role. This proposal will collect real data, in a
controlled environment, in a kind of clinical setting."
Mr. Doll concluded after reviewing recent studies of
the Alaska Marine Highway System operations that a
dayboat makes both economic and operational sense.
In summary, the Malaspina/Lynn Canal proposal offers an
opportunity to:
- Obtain maximum use of a capital asset.
- Provide long-sought daily service on a heavy
demand route.
- Establish a profit-related basis for AMHS
operations.
- Implement an innovative, lower-cost labor
agreement.
- Test and evaluate the potential for dayboat
operations.
- Operate the ship on a revenue-neutral basis.
Mr. Doll acknowledged concerns regarding the proposal.
He emphasized that the proposal is consistent with the
legislature's stated objectives to reduce AMHS costs
while augmenting service. "Those objectives cannot be
met unless we alter our current operating concepts.
The Malaspina/Lynn Canal proposal can point the way to
the future. I hope the legislature will make a start
in that direction by approving this legislation and I
look forward to cooperating with both houses as you
examine this proposal."
(Tape Change, HFC 98 -30, Side 1)
LARRY WEST, HAINES testified in support of HB 328. He
stressed that the use of the Malaspina as a dayboat would
provide significant opportunities to generate additional
revenues.
BERNE MILLER, EXECUTIVE DIRECTOR, SOUTHEAST CONFERENCE
testified in support of HB 328. He observed that the
municipalities and chambers or commerce of Southeast Alaska
formed the Southeast Conference over 40 years ago to support
the creation of the Alaska Marine Highway System. He
emphasized that the Alaska Marine Highway System has become
the lifeblood of Southeast Alaska's economic and social well
being. He maintained that it would be irresponsible not to
keep the Malaspina as a backup to the Kennicott ferry until
the Kennicott is reliably in service. He asserted that
keeping the Malaspina in service represents a prudent use of
a valuable resource. The use of the Malaspina would help
meet transportation needs that are going unmet during a time
of economic vulnerability and uncertainty. He emphasized
that the Alaska Marine Highway System cannot stand the kind
of schedule chaos that would result if the Kennicott were to
drop out of service. He noted that coastal communities have
long been clamoring for better service. Hr observed that
there is a bottleneck in North Lynn Canal. He noted that
Commissioner Perkins stated that he would be willing to keep
the Malaspina operating as a dayboat in Lynn Canal for a
period of time. He referred to remarks by Mr. Doll. Mr.
Doll stated that he would try to keep the Malaspina as a
dayboat, providing that it is revenue neutral. Mr. Doll
also indicated his intent to stop the service if it turns
out to be a "revenue hemorrhage".
Mr. Miller observed that Mr. Doll estimates that there would
be a $1.1 million dollar operating deficit for the summer of
1998. Mr. Miller expressed confidence that the operating
deficit could be eliminated by the end of the summer. He
suggested that it would be better to run the Malaspina and
earn revenue while the ship remains a backup of the
Kennicott. He pointed out that summer travelers are leery
of the Alaska Marine Highway System after the Canadian
blockade. He stressed that schedule stability needs to be
maximized. He concluded that the operation of the Malaspina
is a bold experiment that will take cooperation and
creativity. He stressed that the experiment can be
terminated with minimum loss.
Co-Chair Hanley noted that customers will be displaced
from the Malaspina if it is taken off day service to
replace the Kennicott.
Mr. Miller observed that if the Malaspina is used to
replace the Kennicott that there are other ships in
North Lynn Canal to accommodate some of the
displacement.
Co-Chair Hanley pointed out that the Malaspina cannot
stop in Prince Rupert.
BOB WARD, CITY MANAGER, SKAGWAY testified in support of HB
328. He referred to a letter from the Mayor of Skagway to
Senator Mackie. He noted that the city of Skagway expressed
interest in the operation of the Malaspina as a dayboat.
The city of Skagway offered to berth the Malaspina for free
during the winter. Mr. Ward acknowledged that a winter
berth in Skagway would not offer as good a deal as the city
originally anticipated. He emphasized that the message is
that the community and region is interested and willing to
look at ways to reduce the fiscal impact to the state of
Alaska. He stressed that independent travel to Skagway is
diminished. He maintained that consistent day travel would
increase individual travelers, which spend more money in
Alaskan communities.
Co-Chair Therriault asked if Mr. Ward had an interest in
whether the service is provided by the state of Alaska or
private enterprise. Mr. Ward replied that he is more
interested in the service than who provides the service. He
expressed concern that private enterprise would only provide
summer service, which contributes the greatest revenues.
The Alaska Marine Highway System would loose summer revenues
and be forced to provide more expensive winter service.
BOB PROVOST, REGIONAL DIRECTOR, INLANDBOATMEN'S UNION OF THE
PACIFIC (IBU) testified in support of HB 328. He noted that
he has extensive experience working on ferries. He
emphasized that the IBU is committed to making the operation
of the Malaspina in the Upper Lynn Canal work. The Alaska
Marine Highway System and the IBU agreed to specific
contractual accommodations that allow the state of Alaska to
operate the Malaspina more cost effectively. Some savings
are the result of day operation. He noted that sick
employees can get off on a daily basis without costing a
whole week of work. He asserted that the Malaspina would
prove to be a valuable asset to the Alaska Marine Highway
System. He maintained that operation of the Malaspina would
result in expanded fleet operation, better service and less
general fund monies needed for operations. Mr. Provost
expressed certainty that the operation would be successful.
In response to a question by Co-Chair Hanley, Mr. Provost
reviewed concessions by the union. He observed that if
someone is sick or takes vacation under normal provisions
they would be gone for a whole week. Under the agreement,
employees can take a single day off. Under federal laws
merchant seamen must be paid for the entire voyage if they
are injured on the vessel. A dayboat would reduce pay to
injured employees. He observed that wages of sick or
injured employees that are not replaced are normally split
between the other employees on duty that cover for the
injured or sick employee. Under the agreement the Alaska
Marine Highway System can operate for 24 hours without
paying replacement wages. He observed that, under normal
provisions, employees with seniority can be flown to the
port of origin. He noted that the agreement restricts
employees from being flown at state expense to begin work on
the Malaspina. Juneau will be the Malaspina's homeport.
Co-Chair Therriault asked for a written list of the
contractual concessions. Representative Martin asked what
concessions are made for delays and what are the overtime
limitations on 40-hour workweek. He also asked for more
information on the benefits of daily leave evaluations.
Mr. Provost explained that the crew would maintain the
current week on/week off schedule. Personnel will be
utilized at night to clean the ship. He emphasized that it
is easier and more efficient to clean the ship without
passengers. Crew will work an 84 hour week of seven,
twelve-hour days. Crew do not receive overtime.
In response to a question by Representative Mulder, Mr.
Provost clarified that work goes on around the clock. The
Coast Guard requires a certain number of deck hands and
engine room personnel to be on board at all time. Steward
hours would be altered to correspond to the hours passengers
are on board. Most stewards would work from 7 a.m. to 10
p.m. Some cleaning would occur at night.
In response to a question by Co-Chair Hanley, Mr. Provost
noted that discussions occurred regarding the elimination of
hotel services. He maintained that the hotel service would
be profitable. Crew specifically related to hotel service
would be eliminated if hotel service is not profitable. The
method of evaluation has not been determined. He observed
that daily service of the Malaspina would continue until
September 1998, unless it is extended. He emphasized that
hotel service could be evaluated from week to week.
Mr. Doll noted that the Alaska Marine Highway System needs
approximately $30 million dollars in deferred maintenance.
Co-Chair Hanley questioned if the legislation is revenue
neutral. Mr. Doll noted that the original objective was to
operate the Malaspina 4-days a week with a bare bones crew.
The Department of Transportation and Public Facilities was
unable to obtain labor agreements to implement a 4-day
schedule. In order to generate the maximum ridership, the
Department of Transportation and Public Facilities intends
to market and publicize day service of the Malaspina. The
Department intends to have the minimum crew necessary for
operations. A labor management committee meeting would be
held the end of June to review room and cafeteria sales.
Revenue estimates are based on previous operations. It is
difficult to determine how much will be saved by the labor
concessions. There will be a reduction of 11 positions.
There will be no cost to fly crew to or from Juneau.
Co-Chair Therriault noted that two boats would stop in
Juneau on a number of days. Mr. Doll emphasized that the
operation of the Malaspina is uncertain. Passengers on the
mainliners that also stop in Juneau would have embarked
south of Juneau. He noted that adjustments will have to be
made if the Malaspina is not operating in the summer of
1998. If the Malaspina continues operations in the summer
of 1999, the Kennicott and the Columbia would be the only
other boats providing service from Juneau. Fifteen of the
38 positions on the Malaspina would be related to hotel
service.
Representative Martin clarified that it would cost $32.5
dollars to travel one-way. He referred to the fiscal note.
Mr. Doll explained that the Malaspina would operate for 18.1
weeks. Many of the costs are for the entire year. He
expressed hope that a successful summer operation could
result in extended operation of the Malaspina 4 days a week
during the rest of the year. There will be costs associated
with mooring the ship. There will also be some employee
costs regardless of operation.
Co-Chair Hanley noted that there is an estimated service
demand of 96,000 passengers annually in the Lynn Canal with
a 5 - 7 percent annual growth. He asked what percentage of
the passenger increase would be due to increased service.
He noted that there would be a decrease in passengers on
some of the other vessels. He asked if the net cost of
reduce ridership of other vessels as been included in
revenue estimates.
(Tape Change, HFC 98 - 30, Side 2)
Co-Chair Hanley referred to the Alaska Marine Highway System
Fund summary. He expressed concern that the Fund is being
reduced. He observed that there is an approximately $30
million dollar annual state subsidy in addition to revenues
earned by the system. The estimated 1999 Fund balance is
$34 million dollars. The balance was $44 million dollars in
1997. He observed that the endowment principle is being
reduced.
Co-Chair Therriault asked if negotiations occurred for
operations without hotel service. He questioned the level
of demand for hotel service.
Mr. Doll noted that the Department began negotiations with a
proposal for the lowest possible crew. Figures demonstrated
that there is a demand for greater service. The agreement
is based on an estimation of what crew is actually required
to provide a minimum level of hotel services. There is an
opportunity to lower service to the level of actual demand.
Co-Chair Therriault suggested that service be specialized on
different boats. Mr. Doll pointed out that it would be
difficult to market which boats have services. Co-Chair
Therriault noted that some boats already have different
level of services. Mr. Doll observed that all but 3 boats
provide a full range of services.
Representative Davies noted that a potential market would
not be developed if service is not available. He suggested
that a passenger that is getting up at 5 a.m. may want
cafeteria service.
Co-Chair Therriault pointed out that if the number of people
booking rooms is low that the service will be reduced. He
noted that people will have made reservations for a ship
they thought provided rooms.
Mr. Doll anticipated that some rooms would be sold on board
at a discount.
Co-Chair Therriault asked how many additional positions will
be associated with the operation of the Malaspina. Mr. Doll
noted that there would be no additional positions in the
terminals. There may be a little overtime in terminal
operations. An auditor position is the only new position
that would be added.
Co-Chair Therriault asked for the amount of maintenance
money spent on the Malaspina over the last year. Mr. Doll
explained that the only maintenance funds applicable to the
legislation would be $750 thousand dollars to restore the
ship's certificate and the amount proposed as a capital
expenditure of $2.4 million dollars. The capital expense
does not include any remodeling on the ship. The ship has
had little maintenance since the previous year.
HB 328 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 4:09 p.m.
House Finance Committee 18 2/12/98
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