Legislature(2005 - 2006)HOUSE FINANCE 519

03/16/2006 01:30 PM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled But Not Heard
Scheduled But Not Heard
Moved CSHB 441(FIN) Out of Committee
Moved HCS CSSB 157(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
                   HOUSE FINANCE COMMITTEE                                                                                      
                       March 16, 2006                                                                                           
                          1:45 p.m.                                                                                             
CALL TO ORDER                                                                                                                 
Co-Chair Meyer  called the House Finance Committee  meeting to                                                                  
order at 1:45:36 PM.                                                                                                          
MEMBERS PRESENT                                                                                                               
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Beth Kerttula                                                                                                    
Representative Carl Moses                                                                                                       
Representative Bruce Weyhrauch                                                                                                  
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative  Norman Rokeberg;  Representative Bill  Thomas;                                                                  
Kate  Giard,  Chair,  Regulatory  Commission  of  Alaska;  Jim                                                                  
Posey,  Anchorage Municipal  Light and  Power, Anchorage;  Ian                                                                  
Fisk,  Staff, Representative  Thomas;  John Stone,  President,                                                                  
Alaska  Association   of  Harbor  Masters;  Kurt   Reynertson,                                                                  
Manager,   City    of   Seldovia;   John   Makinnon,    Deputy                                                                  
Commissioner, Transportation and Public Facilities.                                                                             
PRESENT VIA TELECONFERENCE                                                                                                    
Ted  Moninski,   Director  of   Regulartory  Affairs,   Alaska                                                                  
Communication   Systems;  Bill   Saupe,   AT&T  Alascom;   Dan                                                                  
Dieckgraeff,  Treasurer  of  Finance and  Rates,  Enstar;  Jim                                                                  
Rowe, Executive  Director, Alaska Telephone Association;  Alan                                                                  
Sorum, Valdez  Harbormasters; Gary  Hennigh, Manager,  City of                                                                  
King  Cove; Greg  Meissner,  Harbormaster,  City of  Wrangell;                                                                  
Valery  McCandeless, Manager,  City of  Wrangell; Alan  Sorum,                                                                  
Harbor Master,  City of Valdez;  Scott Ransom, Harbor  Master,                                                                  
City of Seward; Ray Majeski, City and Borough of Sitka.                                                                         
HB 441    "An  Act relating  to operating  or driving  a motor                                                                  
          vehicle, aircraft, or watercraft while under the                                                                      
          influence;   relating  to   mitigating  factors   in                                                                  
          sentencing;   amending  Rule  35,  Alaska  Rules  of                                                                  
          Criminal  Procedure; and providing for  an effective                                                                  
          CS  441 (FIN) was REPORTED  OUT of Committee  with a                                                                  
          Do  Pass   Recommendation  and  seven   zero  fiscal                                                                  
          notes:  four  new (ADM;  DPS;  HSS,  COR) and  three                                                                  
          previously published (ADMIN; Courts; LAW).                                                                            
CSSB 157(FIN)                                                                                                                   
          "An  Act relating to  the maximum annual  regulatory                                                                  
          cost   charge  collected   from  certain   regulated                                                                  
          public  utilities   and  pipeline  carriers  and  to                                                                  
          public  utility liability associated  with operating                                                                  
          certain   transmission  lines  under   a  Regulatory                                                                  
          Commission   of  Alaska  order  for  joint  use  and                                                                  
          interconnection;   and providing  for  an  effective                                                                  
          CSSB  157 (FIN) was  REPORTED OUT of Committee  with                                                                  
          Individual  Recommendations and one  new fiscal note                                                                  
          (HFC for DCED).                                                                                                       
HB 478    "An  Act relating to  the municipal harbor  facility                                                                  
          grant  program;   and  providing  for  an  effective                                                                  
          HB 478 was HEARD and HELD for further                                                                                 
HB 176    "An  Act  exempting  the  state  and  its  political                                                                  
          subdivisions from daylight saving time."                                                                              
          HB176 was SCHEDULED AND NOT HEARD.                                                                                    
HB 271    "An  Act relating  to  limitations  on overtime  for                                                                  
          registered  nurses  in health  care facilities;  and                                                                  
          providing for an effective date."                                                                                     
          HB271 was SCHEDULED AND NOT HEARD.                                                                                    
HOUSE BILL NO. 441                                                                                                            
"An Act  relating  to operating  or driving  a motor  vehicle,                                                                  
aircraft, or  watercraft while  under the influence;  relating                                                                  
to  mitigating  factors  in  sentencing;   amending  Rule  35,                                                                  
Alaska  Rules of  Criminal  Procedure;  and providing  for  an                                                                  
effective date."                                                                                                                
Representative  Stoltze   MOVED  to   ADOPT  Work  Draft   24-                                                                  
LS1295\F, Luckhaupt,  3/8/06.  There being NO  OBJECTIONS, the                                                                  
Committee Substitute was ADOPTED.                                                                                               
REPRESENTATIVE   NORMAN  ROKEBERG,  SPONSOR,   summarized  the                                                                  
intent  of the  bill as conforming  and  updating statutes  to                                                                  
the therapeutic  court model  in the State  of Alaska  for the                                                                  
DUI or alcohol  related courts.   He noted the success  of the                                                                  
program,  as  well as  the  proposed  savings to  the  general                                                                  
fund.  He referred  to previous testimony citing  a ten to one                                                                  
savings ratio from  hard dollars to general fund  savings.  He                                                                  
observed  that   an  initial  review  of  the   pilot  program                                                                  
revealed a  two to one potential  savings, and submitted  that                                                                  
the  most  important  element  was  the  saving  of  lives  by                                                                  
successful rehabilitation.   He stated that the  first program                                                                  
would  begin in  Juneau,  and referred  any  questions to  his                                                                  
staff member, Heather Norbrega.                                                                                                 
Representative  Rokeberg  referenced  the  zero  fiscal  note,                                                                  
based  on   previously  authorized   expenditures  under   the                                                                  
initial bill of  HB 172, the initial DUI felony  court levels,                                                                  
and  subsequent  legislation  that  authorized  the  necessary                                                                  
positions.   There  has  been some  discussion  regarding  the                                                                  
national highway  safety funds.   He noted that $669  thousand                                                                  
had   been  received   from   the  National   Highway   Safety                                                                  
Transportation  Fund  with  the  adoption   of  the  mandatory                                                                  
seatbelt  law.     He  noted   that  some  confusion   existed                                                                  
regarding the local  State match of $344 thousand  in order to                                                                  
utilize  the appropriation.     He  concluded  that there  had                                                                  
been   issues  with   the   Public  Defender's   Office,   the                                                                  
Department  of   Law,  the  Department  of  Corrections,   the                                                                  
Courts, and other  issues of expense as a part  of the General                                                                  
Fund  appropriations.   He  noted  that newer  incoming  funds                                                                  
would  be  used   to  establish  new  programs,   such  as  in                                                                  
Fairbanks and Ketchikan.                                                                                                        
Representative  Weyhrauch asked whether  the bill  established                                                                  
a separate court.    Representative Rokeberg replied  that the                                                                  
program  initiated  a  court  within  a  court or  a  type  of                                                                  
process within  the district  and superior  court levels.   He                                                                  
noted that  it also  established a  statutory framework  which                                                                  
gave  judges  some  flexibility  in  granting   sanctions  and                                                                  
concessions to  program participants as long as  they meet the                                                                  
Representative  Joule  observed that  a recent  Alaska  Budget                                                                  
Report  indicated  budget changes  made  by the  Court  System                                                                  
sub-committee  and wondered  if they correlated  to the  bill.                                                                  
Representative  Rokeberg  stated  that  the  program  was  not                                                                  
affected  by budget  changes since  it carried  a zero  fiscal                                                                  
note. However,  he stressed that  in order for the  program to                                                                  
succeed,  it  required  not  only   policy  support  but  also                                                                  
financial  support by the  Legislature.   He stated that  they                                                                  
were currently  able to leverage  substantial federal  dollars                                                                  
by use of minimal  General Funds.  He noted historic  problems                                                                  
culturally  with  some  agencies  that did  not  support  such                                                                  
concepts, but acknowledged current progress.                                                                                    
1:53:14 PM                                                                                                                    
Vice-Chair Meyer     opened  the floor  to  public  testimony.                                                                  
There  being  no  comments  from  the   floor,  testimony  was                                                                  
invited via teleconference.   There being no comments,  public                                                                  
testimony closed.                                                                                                               
Representative  Foster MOVED  to REPORT  CS 441  (FIN) out  of                                                                  
Committee   with  individual   recommendations  and   attached                                                                  
fiscal notes.   There being NO OBJECTIONS, it  was so ordered.                                                                  
CS 441  (FIN) was  REPORTED OUT  of Committee  with a Do  Pass                                                                  
Recommendation  and seven  zero fiscal  notes: four new  (ADM;                                                                  
DPS;  HSS,  COR)   and  three  previously  published   (ADMIN;                                                                  
Courts; LAW).                                                                                                                   
CS FOR SENATE BILL NO. 157(FIN)                                                                                             
"An  Act  relating  to  the  maximum  annual  regulatory  cost                                                                  
charge collected  from certain regulated public  utilities and                                                                  
pipeline carriers  and to public utility liability  associated                                                                  
with operating  certain transmission lines under  a Regulatory                                                                  
Commission    of   Alaska    order   for    joint   use    and                                                                  
interconnection; and providing for an effective date."                                                                          
Representative  Stoltze   MOVED  to   ADOPT  Work  Draft   24-                                                                  
GS1138\I,  Wayne,  3/8/06.   There  being  NO  OBJECTION,  the                                                                  
Committee Substitute was ADOPTED.                                                                                               
1:57:24 PM                                                                                                                    
KATE GIARD,  CHAIR, REGULATORY COMMISSION OF  ALASKA testified                                                                  
regarding  the  bill.    She indicated  that  the  bill  would                                                                  
provide   a   funding   mechanism   for   the   purchase   and                                                                  
implementation  of data  systems  that  would allow  regulated                                                                  
utilities and pipeline companies  in Alaska access to a secure                                                                  
web-based RCA  portal, through which  all day to  day business                                                                  
transactions could  be performed electronically.   The project                                                                  
was  valuated by  a  user utility  committee  and underwent  a                                                                  
public process  with the RCA  in 2004/05, and is  supported by                                                                  
utilities  companies as  a positive  move  for the  regulatory                                                                  
environment  in the  State.   She  noted that  the bill  would                                                                  
increase utility  cost for consumers  by approximately  $1 per                                                                  
year,  since the  costs were  spread  over a  very large  rate                                                                  
base.  She  requested that the Committee pass  the legislation                                                                  
as a good policy for Alaska.                                                                                                    
Representative Hawker     asked about the AIDEA  receipts as a                                                                  
funding  source.   Ms. Gaird  noted that  these were  actually                                                                  
Regulatory Cost Charge (RCC)  receipts.  Representative Hawker                                                                  
proposed  that  the fiscal  note  be  changed to  reflect  the                                                                  
correction in the funding source.                                                                                               
Vice-Chair Meyer opened the floor to public testimony.                                                                          
TED  MONINSKI,   DIRECTOR  OF   REGULARTORY  AFFAIRS,   ALASKA                                                                  
COMMUNICATION  SYSTEMS,  testified  via  teleconference.    He                                                                  
noted  that ACS  was supportive  of  RCA plans  to update  its                                                                  
internal case  management systems,  and strongly  supports its                                                                  
plans to create  an electronic filing capability  and enhanced                                                                  
searchable data system.                                                                                                         
2:00:49 PM                                                                                                                    
Mr. Moninski noted  his experience in the  field, representing                                                                  
public utilities  before the  RCA, and  stressed the  value of                                                                  
automating  the operations  of  these agencies.   He  outlined                                                                  
ACS's  experience  with  the  Federal  Communications  System,                                                                  
implementing tools for efficiency  such as its EDOC system and                                                                  
various searchable data bases.   He proposed that such systems                                                                  
would ultimately pass benefits on to utility customers.                                                                         
2:02:12 PM                                                                                                                    
Mr.  Moninski also  expressed  concern  about whether  certain                                                                  
modules  of  the  system  would  not  be  implemented  if  not                                                                  
adequately  funded.     He  noted   the  importance   of  such                                                                  
efficiency   tools,   while   acknowledging  the   impact   on                                                                  
consumers,  and  the  importance  to  carefully  evaluate  any                                                                  
increased rates.   ACS recommended  that that  Legislature and                                                                  
RCA work  together to ensure  a real  rate of return  on rate-                                                                  
payers'  investment.    He  proposed  that  once  the  funding                                                                  
increased over  a two year period  - and stated support  of an                                                                  
increase  of the  RCA  cap to  $1.9  for two  years  - it  may                                                                  
generate an  amount of  funding that  allowed consumers  to be                                                                  
refunded  rate increases.   He urged  legislators to  consider                                                                  
this forward thinking legislation.                                                                                              
2:04:17 PM                                                                                                                    
BILL SAUPE,  AT&T ALASCOM, testified  via teleconference.   He                                                                  
stated  that he  has worked  with  the Anchorage  law firm  of                                                                  
Ashburn and  Mason, representing utility companies  before the                                                                  
RCA since  1985.   He stated that  AT&T Alascom  believed that                                                                  
the  proposed  $3  million increase  in  the  Regulatory  Cost                                                                  
Charge  was the  most reasonable  means to  upgrade the  RCA's                                                                  
computer systems.                                                                                                               
Mr. Saupe  noted their understanding  that the funds  would be                                                                  
administered  by  a  users  committee,  made  up  of  a  broad                                                                  
spectrum   of    utility   industry   and    public   interest                                                                  
representatives.    The  committee  would work  to  create  an                                                                  
improved computer system  to allow for a searchable  data base                                                                  
as well as other improvements  to the agency's efficiency, and                                                                  
quality of its orders.  He also  surmised that it would save a                                                                  
great  deal of  money in  terms of  time savings.   He  raised                                                                  
concern that if  implemented in stages, there was  a risk that                                                                  
some aspects would  not be completed.  He  also suggested that                                                                  
any surplus would be passed back  to the consumers in savings.                                                                  
He proposed  that they  ensure that  Regulatory Commission  of                                                                  
Alaska increase be sufficient  to provide adequate funding for                                                                  
the entire project developed by the user committee.                                                                             
2:07:27 PM                                                                                                                    
DAN DIECKGRAEFF,  TREASURER AND MANAGER OF  FINANCE AND RATES,                                                                  
ENSTAR  NATIONAL GAS  COMPANY,  testified via  teleconference.                                                                  
He noted his  experience with the company and  the spectrum of                                                                  
his company's service in Alaska.                                                                                                
2:09:21 PM                                                                                                                    
Mr.  Dieckgraeff  stated  that   Enstar  supported  the  RCA's                                                                  
initiative to  update its information  systems and to  fund it                                                                  
with the  proposed two-year limited  increase in the RCC.   He                                                                  
indicated the  advantages for  the utility companies,  such as                                                                  
tracking  of  cases  and cost  of  cases,  making  information                                                                  
available  faster  and  easier,  and savings  in  storage  and                                                                  
filing.     He  concluded  that   it  was  important   to  his                                                                  
corporation that  RCA have the  necessary funding  to complete                                                                  
all aspects of the project.                                                                                                     
2:10:54 PM                                                                                                                    
Mr. Dieckgraeff recounted a  recently completed project during                                                                  
which historical information had  been added into a data base,                                                                  
similar to the  system proposed by the Commission.   He stated                                                                  
his belief that this would be a very helpful system.                                                                            
2:11:39 PM                                                                                                                    
JIM  POSEY,  MANAGER,  ANCHORAGE MUNICIPAL  LIGHT  AND  POWER,                                                                  
ANCHORAGE, testified  in support  of the bill.   He  noted the                                                                  
complicated nature  of dealings  with the Commission  in terms                                                                  
of  filing  documents  and information.    He  confirmed  that                                                                  
having  a  simultaneous  filing of  information  would  enable                                                                  
communication  with regulators, noting  that recent  filing of                                                                  
information  had decreased the  amount of  time spent  in such                                                                  
2:14:43 PM                                                                                                                    
JIM ROWE,  EXECUTIVE DIRECTOR,  ALASKA TELEPHONE  ASSOCIATION,                                                                  
testified  via teleconference  in support  of the increase  in                                                                  
the  RCC   charge  for  the   reasons  outlined   by  previous                                                                  
Mr. Rowe noted that in rural  areas, the FCC electronic filing                                                                  
has saved  a great deal  of time.   He suggested that  for the                                                                  
Regulatory  Commission of  Alaska  to have  the  same type  of                                                                  
filing system would be of similar  benefit.  He noted that all                                                                  
of his directors  supported the legislation for  its potential                                                                  
increase in efficiency.  He read  a note from an employee with                                                                  
Matanuska  Telephone Association.   The  letter expressed  the                                                                  
lessening burden of filing through  new FCC electronic system,                                                                  
but  asked about  the extent  of  document filing.   Mr.  Rowe                                                                  
concluded  that such efficiency  would  pass along savings  to                                                                  
2:18:23 PM                                                                                                                    
Representative Stoltze  asked whether  there was a  point when                                                                  
accumulated regulatory  charges might comprise more  than half                                                                  
of a service  rate, and if in such cases  this might represent                                                                  
a concern of public policy.                                                                                                     
Mr.  Rowe  acknowledged that  half  of  the companies  in  his                                                                  
membership   were  cooperatives,   and  were  experiencing   a                                                                  
significant amount  of service charges.  He  acknowledged that                                                                  
these breakout  charges were not  formerly seen on  bills, but                                                                  
that total customer charges may not actually have increased.                                                                    
2:19:36 PM                                                                                                                    
He  acknowledged that  network  access fees  had been  reduced                                                                  
recently  at  the  request  of cooperatives.    He  noted  the                                                                  
perception that some  local phone calls were  "free", and that                                                                  
in fact charges were sometimes not what they appeared.                                                                          
2:21:01 PM                                                                                                                    
Representative Stoltze    noted  the  improvements   in  phone                                                                  
There  being no  further  public testimony,  Vice-Chair  Meyer                                                                  
closed public testimony.                                                                                                        
Representative Kerttula   asked regarding Sections  3 and 6 of                                                                  
the bill,  regarding retroactivity and liability  for damages.                                                                  
She  wished to  ensure that  she did  not have  a conflict  of                                                                  
interest,  since her family  had a  current law suit  pending.                                                                  
Ms. Gaird  confirmed that  the retroactivity  only deals  with                                                                  
damages after December 1, 2004.                                                                                                 
2:22:40 PM                                                                                                                    
Representative Kerttula   asked if  the state of  Alaska would                                                                  
become liable if damages were awarded.                                                                                          
Ms.  Giard  explained  that  the  amendment  resulted  from  a                                                                  
Regulatory  Commission  of  Alaska   order  requiring  MEA  to                                                                  
provide  service  to  the Alaska  intertie  in  the  Matanuska                                                                  
valley.   She explained that the  MEA was the only  utility in                                                                  
this  area  using  its  own  facilities  to  provide  its  own                                                                  
intertie service.  The RCA ordered  the utility to provide the                                                                  
service at 138  kilovolts, and the utility's design  was for a                                                                  
lower power production  level. She proposed  that this section                                                                  
of the  bill was  in the public  interest, because  it exempts                                                                  
MEA from  liability should  any harm  result from  running the                                                                  
line at this reduced level.                                                                                                     
2:24:23 PM                                                                                                                    
Representative Kerttula   followed up and Ms.  Giard confirmed                                                                  
that  the  state  of Alaska  has  assumed  liability  for  any                                                                  
plaintiff damages.                                                                                                              
Representative  Kertulla wished  to ensure  that no  sovereign                                                                  
unity or  waiver would be put  forward.  Ms. Giard  noted that                                                                  
the bill  had been evaluated  by Legislative Budget  and Audit                                                                  
and the  Attorney General's office  when it had been  heard in                                                                  
Senate  Finance the  previous year.   She noted  that at  that                                                                  
time,  no discussion  occurred  around  the  possibility of  a                                                                  
plaintiff not being able to seek recovery.                                                                                      
2:25:20 PM                                                                                                                    
Representative Kerttula   expressed  her dissatisfaction  with                                                                  
the directness  of this  response, and  stated that  she would                                                                  
follow up with the Attorney General's office.                                                                                   
Representative Chenault asked if  the Regulatory Commission of                                                                  
Alaska had  already been  out for bid  on the project,  and if                                                                  
the funds were truly adequate to provide the proposed system.                                                                   
Ms. Giard  explained that that  system was comprised  of three                                                                  
primary  components:   first building  the system  core of  an                                                                  
electronic  case  management   system;  a  content  management                                                                  
system which  will maintain  data for a  goal of  seven years,                                                                  
allowing companies  to research  data for  that time;  and the                                                                  
ability of  the utilities  and pipeline  companies to  use the                                                                  
web  interface  to  file with  the  Regulatory  Commission  of                                                                  
Alaska and eliminate paper filing.                                                                                              
2:27:54 PM                                                                                                                    
Ms.  Giaird noted  that she  had originally  estimated a  $1.5                                                                  
million budget  on the project.   She went on to  explain that                                                                  
utilities during  public process  indicated that this  was not                                                                  
sufficient.  A  utility  user  committee  was  formed,  and  a                                                                  
conceptual  budgeting process  ensued, developing  a range  of                                                                  
budgets between $890  thousand and $2.2 million.   Within that                                                                  
process,  the committee  added  the ability  for companies  to                                                                  
view  old data,  relying on  pictures  of data  that had  been                                                                  
taken in  past years,  something not  included in  the current                                                                  
funding.  She  noted that utilities had expressed  a desire to                                                                  
compile  historical information  into  searchable  data.   She                                                                  
reiterated that this  historical research was not  part of the                                                                  
currently proposed funding.                                                                                                     
In  response  to  a  follow   up  question  by  Representative                                                                  
Chenault, Ms.  Giard confirmed  that she was  comfortable with                                                                  
the  proposed  funding level  of  $1.5  million to  build  the                                                                  
three-part core system.                                                                                                         
2:30:36 PM                                                                                                                    
Ms. Giard  noted that  the second phase  of the  project would                                                                  
require  a range of  $.5 million  to $1.0  million to  convert                                                                  
historical information into searchable  data.  She stated that                                                                  
this funding was  contained in the version of  the bill passed                                                                  
by  the Senate  Committee, but  not in  the current  Committee                                                                  
Substitute.     She  stated   that  while   there  was   every                                                                  
opportunity  for  utilities  to   return  and  request  future                                                                  
increases of  the RCC, it  was not likely  that the  RCA would                                                                  
make such a request.                                                                                                            
2:31:41 PM                                                                                                                    
Representative  Kelly speculated that  a future  request might                                                                  
be made for the  second phase of the project.   He pointed out                                                                  
that he had met with the Commissioner  on this issue to ensure                                                                  
that  future   projects  might  receive  consideration.     He                                                                  
proposed   that  the   project   may  then   be  extended   if                                                                  
Commissioner  Giard  stated  that   utilities  would  need  to                                                                  
approach the legislature  for such action, and  noted that the                                                                  
RCA was  scheduled to sunset, and  would not be likely  to ask                                                                  
the administration to sponsor a future bill.                                                                                    
2:33:18 PM                                                                                                                    
Representative Foster     MOVED to  REPORT  CS SB  157 out  of                                                                  
Committee with individual recommendations  and attached fiscal                                                                  
notes.  There being NO OBJECTIONS, it was so ordered.                                                                           
CSSB 157 (FIN)  was REPORTED OUT of Committee  with Individual                                                                  
Recommendations and one new fiscal note (HFC for DCED).                                                                         
HOUSE BILL NO. 478                                                                                                            
"An  Act  relating  to the  municipal  harbor  facility  grant                                                                  
program; and providing for an effective date."                                                                                  
MOVED to ADOPT Work Draft 24-LS1694\I, Cook, 3/15/06                                                                            
Representative   Stoltze  MOVED   to  ADOPT  Work   Draft  24-                                                                  
LS1694/I,  Cook,  3/15/06.  There   being  NO  OBJECTION,  the                                                                  
Committee Substitute was ADOPTED.                                                                                               
2:35:38 PM                                                                                                                    
REPRESENTATIVE  BILL THOMAS, SPONSOR,  stated that this  was a                                                                  
companion bill  to SB 291 (Sen. Steadman).  He  noted that the                                                                  
bill had  been introduced to respond  to the State  process of                                                                  
transferring  harbors   to  municipalities,  and   discovering                                                                  
funding  shortfalls  needed  to  complete  necessary  repairs.                                                                  
The  bill   developed  through   comments  from  the   Alaskan                                                                  
Association  of Harbormasters  throughout Alaska.    The  bill                                                                  
will create  a harbor  facility grant  fund, using funds  such                                                                  
as fisheries  business tax or fuel  tax and other taxes.   The                                                                  
Department  of  Administration  would administer  the  grants.                                                                  
He pointed  out the requirement  of a  50/50 grant match  from                                                                  
municipalities,  requiring  commitment  on  the  local  level.                                                                  
The  funding would  provide  repair  or major  maintenance  in                                                                  
communities,  and  be  limited  to  one  grant  per  year  per                                                                  
facility.  Some communities  may  have more  than one  harbor,                                                                  
but would be limited to a $5 million aggregate cap.                                                                             
2:38:08 PM                                                                                                                    
Representative  Thomas noted  that to qualify  for a grant,  a                                                                  
municipality   must  demonstrate   the   ability  to   operate                                                                  
independently  of state  aid  in the  future,  and noted  that                                                                  
several   communities   were   making   this   adjustment   by                                                                  
increasing   harbor  rates.      He  pointed   out  that   new                                                                  
construction  received  the  lowest priority  in  the  project                                                                  
list.   The  proposed  effective date  of the  legislation  is                                                                  
July 1, 2006.                                                                                                                   
2:39:33 PM                                                                                                                    
IAN FISK,  STAFF, REPRESENTATIVE  THOMAS, noted the  change in                                                                  
the grammer on  Page 2, line 14, from "should  be" to "is". He                                                                  
also noted  that on lines 19 to  23, language was  inserted to                                                                  
clarify  the  types  of  funds  that could  be  used  for  the                                                                  
municipal  match,  especially   the  shared  portions  of  the                                                                  
fisheries  business tax.   He also pointed  out that  language                                                                  
regarding  municipal  revenue  sharing  was also  included  in                                                                  
case those  monies became  available in  the future.  He noted                                                                  
that previous  language  added by the  Community and  Regional                                                                  
Affairs Committee  had prohibited  any state funds  from being                                                                  
used in the municipal  match, and stated the Sponsor's  desire                                                                  
that certain state funds be excepted.                                                                                           
2:40:52 PM                                                                                                                    
Representative   Kerttula  observed  that  Page   3,  line  5,                                                                  
limited municipalities  to only one grant.  She  asked if this                                                                  
referred  to   just  this  program,   or  any  programs,   and                                                                  
suggested the need for a technical amendment.                                                                                   
Mr.  Fisk responded  that this  limitation  pertained only  to                                                                  
the  program,   and  conceded  that  an  amendment   might  be                                                                  
Representative  Kerttula asked for  the reason of  the program                                                                  
limitation  to  one  grant.    Mr.  Fisk  responded  that  the                                                                  
program  was  limited  to  address  the  deferred  maintenance                                                                  
needs carrying  over from the State  transfer.  He  noted that                                                                  
they wished  to ensure  that a municipality  was able  to meet                                                                  
those needs not properly addressed by the State.                                                                                
2:42:54 PM                                                                                                                    
Representative   Hawker  observed   that  if  one   grant  was                                                                  
received,  another  grant could  not be  obtained.   He  asked                                                                  
hypothetically  if  during  a granting  period,  all  requests                                                                  
except  one  were  minimally  funded,  this  would  leave  all                                                                  
funding available  for the unfunded project in  the subsequent                                                                  
year.   Representative  Thomas stated that  projects would  be                                                                  
prioritized   by  community   need.     He  noted  that   some                                                                  
communities  had more  than one  harbor, and  could apply  for                                                                  
one  harbor per  year.   He conceded  that  some projects  may                                                                  
have  to wait  a few  years to  receive funding.  He gave  the                                                                  
example of  Yakutat, when a  transferred harbor experienced  a                                                                  
shortfall  in  maintenance  funding.    Representative  Hawker                                                                  
acknowledged  the  intent,  but  suggested  more work  on  the                                                                  
language to close a potential loophole.                                                                                         
Vice-Chair  Meyer expressed  his intent  to HOLD  the bill  in                                                                  
order to receive more testimony and potential amendment.                                                                        
Representative  Kelly asked if the list of transferred  habors                                                                  
was all-inclusive.   Representative Thomas replied  that there                                                                  
could be other  harbors being transferred this  year that were                                                                  
not yet on the list.                                                                                                            
2:47:15 PM                                                                                                                    
JOHN STONE,  PRESIDENT, ALASKA  ASSOCIATION OF HARBOR  MASTERS                                                                  
AND PORT  ADMINISTRATORS  testified in  support and  gratitude                                                                  
for  the  bill.   His  organization  represents  27  municipal                                                                  
harbor systems  throughout the state.  He noted  that they had                                                                  
been working  on this  problem for many  years.  He  expressed                                                                  
support  of the  bill  and the  matching  grant  program.   He                                                                  
noted  that  he  had  provided  the  committee   with  written                                                                  
comments (copy on file.)                                                                                                        
Mr.  Stone pointed  out  that  much  of the  harbor  structure                                                                  
being  transferred to  municipalities  had been  built in  the                                                                  
1960's through  1980's.  He showed  the Committee  an outdated                                                                  
power cable from  Harris Harbor in Juneau that  fed 40, 30-amp                                                                  
shore  power  services.    The cable  was  indicative  of  the                                                                  
electrical  code of the  1960's. He compared  it to the  newly                                                                  
installed  cable.    He emphasized  the  expense  involved  in                                                                  
trying to recapitalize the infrastructure.                                                                                      
Mr. Stone referred  to a question about page 3,  regarding the                                                                  
one-time grant.   He explained  that the intent of  the Harbor                                                                  
Masters was to  ensure that grants were used for  rebuilding a                                                                  
facility on a one-time basis.                                                                                                   
2:52:26 PM                                                                                                                    
Representative   Kelly  asked  about   the  transfer   of  the                                                                  
facilities  and the  amount of  funding  that accompanied  the                                                                  
transfer.   Mr. Stone  replied that the  purpose was  to bring                                                                  
the harbors  to good condition.   He  stated that the  funding                                                                  
was far short  of what was needed  to restore facilties,  even                                                                  
in terms  of   code requirements.    He also  noted that  user                                                                  
needs  had  also  changed,  with  larger   float  systems  now                                                                  
required.   The money  provided  was only one  quarter to  one                                                                  
third of what the communities actually needed.                                                                                  
Representative  Kelly  asked how  the  amount  of funding  had                                                                  
been  determined.   Mr. Stone  replied that  the formula  used                                                                  
was consistent, but overall quite low.                                                                                          
Representative   Holm  asked   whether,   when  the   transfer                                                                  
occurred,  there was  a  misunderstanding  about the  facility                                                                  
requirements.   Mr. Stone stated  that the money was  intended                                                                  
to restore facilities  to good condition, but  it that it fell                                                                  
far  short.   He suggested  that this  may  have been  because                                                                  
many  facilities  were  at  the  end  of  their  useful  life,                                                                  
requiring  more  than  simply  maintenance.  He also  noted  a                                                                  
difference  in   code,  rather  than  a  depreciation   of  an                                                                  
Representative  Holm  asked if  the intent  was  to build  new                                                                  
facilities.    Mr.  Stone  confirmed  that this  may  be  what                                                                  
occurs,  although various  communities will  try to  refurbish                                                                  
as they can.  Representative  Holm expressed concern  over the                                                                  
matching funds,  and wondered if  a better formula was  now in                                                                  
place to  determine the amount  of funding needed.   Mr. Stone                                                                  
explained  that  a  consulting  engineer  would  be  hired  to                                                                  
develop a cost estimate to be used to apply for the grant.                                                                      
Representative  Kerttula asked how  much funding per  year was                                                                  
spent by the City  and Borough of Juneau to maintain  harbors,                                                                  
and  how much  would be  saved by  the State  by  transferring                                                                  
this  maintenance to  communities.    Mr.  Stone replied  that                                                                  
the  operating  cost  for  maintaining  the  float  system  in                                                                  
Juneau was  approximately $2 million  a year.   Representative                                                                  
Kerttula observed  that this did  not cover all of  the costs,                                                                  
and only represented one community.                                                                                             
2:59:45 PM                                                                                                                    
Representative  Kelly asked how  it could be prevented  that a                                                                  
grant  accompanying  a  transfer   was  not  being  wasted  on                                                                  
maintenance  that would eventually  be replaced in  a rebuild.                                                                  
Mr. Stone  stated that  DOT would  watch for  this during  the                                                                  
grant  process, but  that  in each  case the  most  economical                                                                  
rebuild would be considered.                                                                                                    
3:01:01 PM                                                                                                                    
KURT  REYNERTSON,  MANAGER,  CITY OF  SELDOVIA,  testified  in                                                                  
support of the  legislation.  He noted that they  had recently                                                                  
passed  a   resolution  through   their  city  council.     He                                                                  
explained that  when they took  over from harbormasters,  they                                                                  
received  $2.6 million from  the State.   After an  engineer's                                                                  
estimate  of  $3.4   million,  they  discovered   an  $800-900                                                                  
thousand shortage  in order to provide good harbor  standards.                                                                  
He  stated   that  this  amount   was  insurmountable   for  a                                                                  
community  of their size.   He commented  that the bill  would                                                                  
help to provide needed municipal services.                                                                                      
3:02:55 PM                                                                                                                    
Representative   Kelly   asked  if   the   $2.6  million   for                                                                  
refurbishment  was included in the  amount for the  rebuild of                                                                  
the  harbor.      Mr.  Reynertson  replied   that  engineering                                                                  
designs cost  approximately $250  thousand, and the  remaining                                                                  
funding  would  be  utilized to  complete  the  actual  harbor                                                                  
3:03:50 PM                                                                                                                    
GARY  HENNIGH,  MANAGER,  CITY  OF KING  COVE,  testified  via                                                                  
teleconference.  He expressed  support  for the  bill and  for                                                                  
the harbormasters  for their work on the topic.   He explained                                                                  
that  their  community  was one  of  the  first to  take  over                                                                  
management  of their  harbor from  the State.   He noted  that                                                                  
the management  has been more difficult than anticipated.   He                                                                  
explained  that the harbor  was in  poor condition,  affecting                                                                  
the  local  residents  who use  the  harbor.   He  stated  his                                                                  
opinion  that  dedicating  the  fisheries  tax  as  a  funding                                                                  
source  was a  good idea.  He  noted that  between  $4 and  $5                                                                  
million had  been paid  into harbor  repair by local  fishers.                                                                  
He observed  that linking  this income  to solving the  harbor                                                                  
problem  spoke   well  of  legislators   working  with   local                                                                  
harbormasters.   He  suggested that  on page  2, lines 17  and                                                                  
18,  language be  changed  so that  State Revenue  funds  from                                                                  
revenue  sharing or  a legislative  grant could  be used  as a                                                                  
match.  He suggested  that these sources of municipal  funding                                                                  
would  be  driven  predominately   by  oil  and  gas  revenues                                                                  
experienced by other areas of the state.                                                                                        
3:07:41 PM                                                                                                                    
He also  suggested that  on Page 3,  lines 1  and 2, to  add a                                                                  
provision  allowing  those  communities  that  first  accepted                                                                  
harbor  transfers receive  a small  "head  start" in  applying                                                                  
for funds,  allowing for  some portion of  the funding  in the                                                                  
first  two years to  be set  aside for  communities which  had                                                                  
initially taken  over harbor management.   He emphasized  that                                                                  
in past  years, DOT  had no formula  to assist  municipalities                                                                  
in determining  the amount  needed to bring  the harbor  up to                                                                  
reasonable  standards.  He noted  that $352 thousand  received                                                                  
in the early 1990's did not make a legitimate contribution.                                                                     
3:09:05 PM                                                                                                                    
Representative  Kelly  commented   that  Hooonah,  Juneau  and                                                                  
Valdez  had implemented  significant  fee  increases in  their                                                                  
harbors,  and asked what  fee increases  had been  experienced                                                                  
by their community.                                                                                                             
Mr.  Hennigh responded  that  for fifteen  years  the fee  for                                                                  
moorage had increased  by only 25 percent.  He  noted the need                                                                  
for a  local fee  increase,  but observed  that currently  the                                                                  
residents  might  be unwilling  to  pay  increased  fees on  a                                                                  
harbor that was  in ill repair.  He proposed that  support for                                                                  
fees  would increase  when they  could be  assured that  there                                                                  
would be building improvements.                                                                                                 
3:10:31 PM                                                                                                                    
Representative  Kelly asked how many were on the  waiting list                                                                  
for slips.   Mr. Hennigh responded  that there was  no waiting                                                                  
list, since  unless one  was a commercial  fisher, they  would                                                                  
not be  docking there.   He  noted that  their waterfront  was                                                                  
very busy,  although the community  was often overlooked.   He                                                                  
stated they  were the largest  per capita fish producing  area                                                                  
in that part of the state of Alaska.                                                                                            
3:11:42 PM                                                                                                                    
Vice-Chair Meyer     stated that  HB176  would  not be  heard;                                                                  
likewise  he stated  that  HB271  would not  be  heard in  the                                                                  
Public Testimony continued.                                                                                                     
3:12:59 PM                                                                                                                    
GREG MEISSNER,  HARBORMASTER, CITY  OF WRANGELL, testified  in                                                                  
support of the  bill.  He voiced concern over  page 3, line 9,                                                                  
regarding the  one time only nature  of a grant per  facility.                                                                  
He asked what qualified  as a "facility"; he pointed  out that                                                                  
perhaps each  float would  be considered  a facility  within a                                                                  
single harbor,  and suggested that  it might make sense  for a                                                                  
community to refurbish one float at a time.                                                                                     
Mr. Meissner  then referred to Line  16 of the bill  and noted                                                                  
that  a replacement  cost for  a concrete  float  would be  $5                                                                  
million, vs.  $3 million for a  repair, and suggested  that it                                                                  
would be more cost effective to replace rather than repair.                                                                     
3:15:04 PM                                                                                                                    
Mr. Stone  responded that  the definition  of facility  was an                                                                  
issue being  addressed with  the Department of  Transportation                                                                  
and Public Facilities.   He suggested that the  cases would be                                                                  
addressed  on an individual  basis.  He  stated that  he would                                                                  
be glad  to speak  directly  with Mr.  Meissner regarding  his                                                                  
3:16:02 PM                                                                                                                    
VALERY MCCANDELESS,  MANAGER, CITY OF WRANGELL,  testified via                                                                  
teleconference  in support  of the  bill.   She expressed  her                                                                  
pleasure that  the bill was addressing  specific work  on each                                                                  
3:16:49 PM                                                                                                                    
ALAN  SORUM, HARBOR  MASTER,  CITY  OF VALDEZ,  testified  via                                                                  
teleconference  in support of  the bill.   He noted that  many                                                                  
of the  boats harbored  in their  city were  from the city  of                                                                  
Fairbanks.    He  voiced his  support  for  working  with  the                                                                  
Department  of  Transportation  and  Public  Facilities,  with                                                                  
whom they've worked on grants for harbor projects.                                                                              
3:18:25 PM                                                                                                                    
SCOTT RANSOM,  HARBOR MASTER,  CITY OF  SEWARD, testified  via                                                                  
teleconference  in support  of the  bill.   He noted that  his                                                                  
community  had taken over  the management  of their harbor  in                                                                  
1999,  and   currently  had  over   $6  million  in   deferred                                                                  
maintenance.   He noted that these  were the oldest  floats in                                                                  
the harbor,  installed after the  earthquake.  He  stated that                                                                  
they  had two  rate increases  to  support the  harbors.   The                                                                  
bill will help with the deferred maintenance.                                                                                   
3:19:31 PM                                                                                                                    
RAY  MAJESKI,   HARBORMASTER,  CITY  AND  BOROUGH   OF  SITKA,                                                                  
testified  via teleconference,  in support  of  the bill.   He                                                                  
explained  that the  city had  taken over  three harbors  from                                                                  
the  State,  and  after  doing  so  discovered  that  Thompson                                                                  
Harbor  needed to be  replaced,  at a cost  estimated at  $6.7                                                                  
million.  He stated  that $3 million of $4.4 million  from the                                                                  
State  was spent on  the other  two harbors,  with $1  million                                                                  
remaining to replace  Thompson Harbor.  He noted  that repairs                                                                  
had  added  15  more years  to  the  other  two  harbors,  but                                                                  
stressed  that   Thompson  Harbor  was  beyond   repair.    He                                                                  
expressed   concern  regarding   the   statement  that   grant                                                                  
applications  must be  filed in  the fiscal  year  immediately                                                                  
preceding  February  1.    He  pointed   out  that  they  were                                                                  
currently replacing  the harbor and receiving  bids, beginning                                                                  
construction  by  mid-August.   He  hoped  that the  bill,  if                                                                  
passed, would cover  their current process.  He  noted that in                                                                  
the past  six years,  they'd  raised moorage  rates more  than                                                                  
100 percent.  The bill would help the community members.                                                                        
3:22:25 PM                                                                                                                    
He noted  that to  be able to  take the  burden off of  harbor                                                                  
users in  his community,  the bill would  allow them  to raise                                                                  
them to  raise rates  at an  acceptable level.   He  concluded                                                                  
that the bill was a positive step.                                                                                              
3:23:08 PM                                                                                                                    
There  being  no  further  testimony,   public  testimony  was                                                                  
JOHN  MAKINNON,   DEPUTY  COMMISSIONER,   TRANSPORTATION   AND                                                                  
PUBLIC FACILITIES,  responded to a question by  Representative                                                                  
Kelly  regarding  the original  formulation  of  funding  when                                                                  
harbors  were   originally  transferred  from   the  State  to                                                                  
3:25:07 PM                                                                                                                    
He  explained   that  most   of  the   harbors  discussed   as                                                                  
"underfunded"  were part of the  November 2002 statewide  bond                                                                  
issue,  allocating  $30  million  to ten  communities  and  26                                                                  
facilities.   The numbers used  for allocations resulted  from                                                                  
a  1992  Core of  Engineers'  condition  survey  of  all  boat                                                                  
harbor  facilities in  Alaska.   In 2002,  the Department  was                                                                  
asked  to develop a  list of  harbors for  repair and  amounts                                                                  
for  deferred maintenance.  The  numbers from  the 1992  study                                                                  
were adjusted for  inflation and also for additional  deferred                                                                  
maintenance.   He stated  that  it was unclear  as to  whether                                                                  
those numbers  were accurate.   He conceded that the  level to                                                                  
which  they aspired  was not that  which was  desired by  many                                                                  
communities.     He  referred   to  testimony  by   Mr.  Stone                                                                  
regarding changes  in codes, but noted that community  changes                                                                  
also resulted  in different harbor  user needs.  Some  harbors                                                                  
had changed  from working harbors  into recreational  harbors.                                                                  
He stated  that  changes in  community  expectations were  not                                                                  
reflected  in  the  numbers devised  by  the  harbor  engineer                                                                  
involved  in  the   bond  study.    He  concluded   that  this                                                                  
accounted for the discrepancy between the estimates.                                                                            
3:27:39 PM                                                                                                                    
Responding  to another question  by Representative  Kelly, Mr.                                                                  
Makinnon  noted  that  some harbors  were  very  difficult  to                                                                  
transfer due  to a difference in  expectation.  He  noted that                                                                  
communities  were   reluctant  to  raise  rates   to  pay  for                                                                  
3:28:45 PM                                                                                                                    
Representative  Hawker noted his experience with  the transfer                                                                  
of the harbor at  Whittier, stating clearly that  there was no                                                                  
State responsibility  following  the transfer  of the  harbor.                                                                  
However, he noted  the significant need at some  of the harbor                                                                  
facilities.    He also  proposed  that  harbors should  be  in                                                                  
"excellent"  condition  rather  than "good"  as  is stated  in                                                                  
current   policy,   along   with  the   transfer   of   harbor                                                                  
responsibility to local authorities.                                                                                            
3:30:42 PM                                                                                                                    
Representative  Kelly observed  that harbor  masters found  it                                                                  
difficult to balance  the amount of repairs needed  with funds                                                                  
available.  He  asked how the Legislature could  avoid another                                                                  
problem with deferred maintenance in the future.                                                                                
Mr.  Makinnon  recommended  a  change  in  the  definition  of                                                                  
"facility",  including "portion  thereof".   A facility  might                                                                  
decide  to improve  a  separate  finger  each year,  and  that                                                                  
could  be considered  a separate  facility.     The intent  is                                                                  
that once the various  portions are completed,  it becomes the                                                                  
responsibility  of the community to collect adequate  fees for                                                                  
maintenance  so as  not to approach  the State  in another  15                                                                  
years for  replacement  costs.  He  stressed that  communities                                                                  
need to take on the responsibility.                                                                                             
HB  478   was  HEARD  and  HELD   in  Committee  for   further                                                                  
The meeting was adjourned at 3:32 PM                                                                                            

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