01/28/1998 01:02 PM House TRA
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HOUSE TRANSPORTATION STANDING COMMITTEE
January 28, 1998
1:02 p.m.
MEMBERS PRESENT
Representative William K. (Bill) Williams, Chairman
Representative Beverly Masek, Vice Chair
Representative John Cowdery
Representative Bill Hudson
Representative Jerry Sanders
Representative Kim Elton
Representative Al Kookesh
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL 328
"An Act making appropriations for continued maintenance and
operation of the Motor Vessel Malaspina; and providing for an
effective date."
- MOVED HB 328 OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 328
SHORT TITLE: APPROPRIATION FOR M/V MALASPINA
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
01/16/98 2066 (H) READ THE FIRST TIME - REFERRAL(S)
01/16/98 2066 (H) TRANSPORTATION, FINANCE
01/16/98 2067 (H) GOVERNOR'S TRANSMITTAL LETTER
01/28/98 (H) TRA AT 1:00 PM CAPITOL 17
WITNESS REGISTER
KURT PARKAN, Deputy Commissioner
Department of Transportation and
Public Facilities
3132 Channel Drive
Juneau, Alaska 99801
Telephone: (907) 465-3900
POSITION STATEMENT: Testified in support of HB 328.
ROBERT DOLL, Captain
General Manager, Alaska Marine Highway System
Department of Transportation and
Public Facilities
3132 Channel Drive
Juneau, Alaska 99801
Telephone: (907) 465-3959
POSITION STATEMENT: Testified in support of HB 328.
BERNE MILLER, Executive Director
Southeast Conference
213 Third Street, Suite 124
Juneau, Alaska 99801
Telephone: (907) 465-3445, Extension 21
POSITION STATEMENT: Testified in support of HB 328.
ACTION NARRATIVE
TAPE 98-1, SIDE A
Number 0001
CHAIRMAN WILLIAM K. (BILL) WILLIAMS called the House Transportation
Standing Committee meeting to order at 1:02 p.m. Members present
at the call to order were Representatives Williams, Masek, Cowdery,
and Kookesh. Representatives Sanders, Elton and Hudson joined the
meeting at 1:04 p.m., 1:10 p.m. and 1:37 p.m., respectively.
HB 328 - APPROPRIATION FOR M/V MALASPINA
Number 0030
CHAIRMAN WILLIAMS announced the committee would be taking up HOUSE
BILL 328, "An Act making appropriations for continued maintenance
and operation of the Motor Vessel Malaspina; and providing for an
effective date."
Number 0042
CHAIRMAN WILLIAMS stated the Alaska Marine Highway System (AMHS)
led to island communities in Southeast Alaska. He indicated the
new ferry, Marine Vessel Kennicott, is scheduled to come on-line
soon and hoped it would be on time.
0144
KURT PARKAN, Deputy Commissioner, Department of Transportation and
Public Facilities (DOT/PF), expounded on Captain Bob Doll's
distinguished maritime background. He said Mr. Doll spent 30 years
in the Navy commanding destroyers and cruisers - including a
squadron of destroyers. He has extensive shore and off-shore
management experience, he spent two years with deep-sea merchant
service and is a licensed master. Mr. Parkan said they were very
fortunate to have Captain Doll at the helm of the marine highway
system.
Number 0157
ROBERT DOLL, Captain, General Manager of the AMHS, DOT/PF, read his
statement:
"Thank you for the opportunity to describe this proposed
legislation [HB 328], which seeks your approval to operate the
Malaspina in the Lynn Canal in the summer of 1998. The timing of
this improved service was prompted, in large part, by two
imperatives that required action.
"The first was the need to publish the summer 1998 schedule not
later than early January. Earlier publication was, of course,
desirable but at the latest the schedule had to be available for
the travel trade shows that occur 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. We had agreed to provide the schedules
to the printer in September, but events following the Prince Rupert
blockade prevented that. The necessity to get the schedule to the
printer was urgent, and I'm glad to tell you that we have a
finished product.
"The Second requirement was to provide for the contingency that the
introduction of our new ship, the Kennicott, might be delayed or
interrupted. In the spring of 1977, the Marine Highway Advisory
Board had cited a requirement for a backup ship. 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 in other routes.
"Like all of our ships, Malaspina must hold a U.S. Coast Guard
Certificate of Inspection - issued each year. The certificate in
the case of the Malaspina expired on October 31, 1997. 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 operate - carrying
passengers in 1998.
"Having gone to the effort of restoring the ship's capability to
operate it seemed to me that, if she were not required to
substitute for the Kennicott, we would have a significant state
capital asset which would not earn any income if she were merely
lying alongside the pier. 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 a result of
studies which show a 7.3 percent annual growth rate in the Juneau
to 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 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 revenue fare
attributable to the Lynn Canal segment. Operating seven days a
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. 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.
"Earlier efforts to develop a Lynn Canal service had floundered 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 an agreement that if the ship's hotel services do
not earn adequate revenue to justify the initial employment levels,
those shipboard positions can be adjusted. In other words, we are
able to monitor revenue and if that income is not sufficient,
adjust the crew level in the hotel area. I would like to take this
opportunity, by the way, to congratulate all of the unions involved
in reaching the Malaspina agreement and most especially the Inland
Boatmen's Union for the vision and imagination they have displayed.
The willingness to break new ground, I trust, will prompt a similar
response to this legislation.
"I think it's important to point 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 AMHS and, as far as I know, in the history of the state of
Alaska. The agreement creates an ongoing relationship between
shipboard manning levels and the vessel's success as a business
enterprise. That is, to say, I think it's a rare provision in any
labor contract. The agreement is, as far as I know, the first
which establishes a relationship between the profitability of a
marine highway operation and the number of jobs it supports.
"The Malaspina labor agreement is unique. It's a stand-alone
document, intended only for the special circumstances surrounding
the Malaspina in the Lynn Canal setting. But I'd like to suggest
that it's in the best interest of the State of Alaska to encourage
imaginative approaches to labor issues and to welcome the
profitability concepts embodied in the proposed Malaspina
operations.
"And, finally, the Malaspina/Lynn Canal proposal is offered as an
innovation in meeting our transportation needs. It provides an
opportunity to test, at a minimum cost, one approach to a possible
future system - namely the "dayboat" system. If our operational
experience so indicates, it's possible that the Malaspina could be
replaced by a purpose-built ship. Perhaps one designed for the
Lynn Canal setting and offering even greater 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.
"In researching this proposal I noted that every recent study of
the AMHS operations had one element that appeared repeatedly - a
day boat in the Lynn Canal. Many other conclusions in those
studies were in conflict with one another, but the Lynn Canal day
boat idea was persistent. I believe the persistent is because it
makes both economic and operational sense.
"To summarize 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.
To establish a profit-related basis for AMHS operations.
To implement an innovative and lower-cost labor agreement.
To test and evaluate the potential for dayboat operations.
And to operate the ship on a revenue-neutral basis.
"I am aware that this proposal is viewed by some as radical and
that it has evoked alarm in some quarters. The mere fact that it
contemplates a ninth ship in the marine highway inventory is enough
to cause some to object to it. I'd like to suggest that the
proposal is, in fact, consistent with the legislature's stated
objective to reduce AMHS costs while augmenting service. Those
objectives cannot be met unless we alter our current operating
concepts. I urge the legislature to make a start by approving the
legislation and I look forward to cooperating with both houses as
you examine this proposal."
Number 0855
REPRESENTATIVE JOHN COWDERY asked what the present value is of the
Malaspina. He noted Mr. Doll addressed only the assets.
Number 0871
MR. DOLL referred to it's market value. He said that it is very
difficult to establish since the Malaspina is not authorized to
operate under international rules in the open ocean. "So, [it is
an] archipelago kind of operation. Perhaps in the setting like the
Phillippines might be one of the few places where she could be
marketed." He stressed he would only be guessing if he told them
what he thought the market value would be. He added that it
depends on what the competition is at any particular time.
Number 0916
REPRESENTATIVE COWDERY asked if the present rates have been
established and advertised.
MR. DOLL responded in the affirmative.
Number 0930
REPRESENTATIVE COWDERY noted Goldbelt, Incorporated, is opening a
line to take passengers only. He asked if any thought had been
given to raise the rates to pay for the operation rather than have
it subsidized.
Number 0951
MR. DOLL said, "I spoke with the Chief Executive Officer of
Goldbelt [Incorporated] about that just this morning. And I said,
'I don't think we're in competition with one another except in the
most general sense because not only is their service very limited,
but it has an audience to whom it's directed which is cruise line
operations, and so forth. But, I told him that I expected that in
order to make a profit that we were in fact going to manipulate our
rates. And I expect to do that. Hotel is a good example, if we
leave Juneau at seven in the morning, and we start back at about
five or six in the evening - start south, how many rooms will we
sell. If we offered it at the standard rate, maybe not very many.
But if I offered a discount on those rooms I might. If the ship is
crowded enough people will use those rooms just to get away from
the crowds, or to get away from the kids, or because they want to
read. So, the answer to you question is that I will manipulate the
tariffs in order to induce the business and I do expect to take
reservations, so if people buy a room well in advance they'll pay
whatever they are charged at that time. But after the ship gets
underway, I might well walk around and say, 'hey, I've got a room
for you,' - do a little scalping, whatever it takes to make a
profit on that operation. I have a chance here with a confined
audience between two points to induce them to spend money and
that's what I'm going to try to get them to do."
Number 1061
REPRESENTATIVE COWDERY asked if Goldbelt, Incorporated, would be
operating four months this year.
Number 1065
MR. DOLL replied yes, mid-May to mid-September.
Number 1074
REPRESENTATIVE COWDERY stated it was his understanding Goldbelt,
Incorporated, would take the cruise ship passengers under contract,
any other seats will be for sale - no vehicles. He asked what is
the expectation of capacity for vehicles on the Malaspina.
Number 1096
MR. DOLL said he expected the Malaspina to be full. He said, "Not
only is the demand there in any case, but I also have the
opportunity to direct callers who are trying to book on the marine
highway to the Malaspina and make certain it's revenue is always
maximized." He didn't expect any difficulty. However, Mr. Doll
stated the car deck will probably be the limiting factor - it
usually is - and he expects it will be again.
Number 1119
REPRESENTATIVE COWDERY suggested DOT/PF charge $10 or $11 more per
head and $30 to $35 per vehicle - this could probably make it a
paying situation without any subsidy. He asked if it was realistic
to charge user fees.
Number 1144
MR. DOLL said it is a possibility. He believed it was realistic in
economic terms - it is a bargain to make that transportation
connection and do it on a daily basis with confidence the ship will
depart on schedule. How AMHS would approach the freedom to
manipulate the tariffs, Mr. Doll said that would need more
consideration.
Number 1203
REPRESENTATIVE BEVERLY MASEK referenced the Governor's letter. She
asked what the cost would be to run the Malaspina for an additional
14 weeks.
Number 1227
MR. DOLL pointed out the cost of $3,979,600 and revenues of
$2,215,157. He said that is assuming the costs are steady
throughout the summers and indicated that his job was to make sure
the costs and revenues match.
Number 1306
REPRESENTATIVE MASEK noticed there were no fiscal notes attached.
Number 1314
MR. DOLL said HB 328 represents the equivalent of the fiscal note.
Number 1343
REPRESENTATIVE COWDERY stated this was a temporary fix on some
things that are absolutely needed. He asked if DOT/PF had an
estimate to bring the vessel up to code.
Number 1364
MR. DOLL said, "There are, what could be classed as repairs in
Malaspina which have been deferred in anticipation of other
service. These include some things which the Coast Guard would
like to see us get done, and others that I think are wise. These
amount to a capital budget of $2,457,000 which I would like to
accomplish. I would like to get those things done over the
winter(s) of 1998 and 1999, if the legislature agrees to that."
Mr. Doll said it would give DOT/PF a long-term, five years or so,
to bring it up to code. He did not expect, however, to necessary
leave the Malaspina operating in the Lynn Canal indefinitely. He
said DOT/PF has a transportation plan under development in which
the Malaspina or north Lynn Canal service appears very prominently.
Mr. Doll said he was sure this would be woven into that plan.
Number 1431
REPRESENTATIVE ALBERT KOOKESH stated it was his understanding that,
regardless of what the AMHS does, they have to do the repairs
anyway - even if we decided we did not want it for a day boat for
Lynn Canal.
Number 1446
MR. DOLL stated the $2,457,000 are repairs that do not have to be
done until the winter(s) of 1998 and 1999. He said he could
operate throughout the summer without accomplishing those.
However, if it is a success, and he believes it will be, the AMHS
will want to capitalize on that. Work is now being done on the
engine and generator overhaul. The dry docking will allow DOT/PF
to operate the ship through the summer and take the Malaspina to
the end of her certification period next October. Mr. Doll said,
"If we want to operate her beyond that, then I would like to get
these other capital kind of things done."
Number 1481
REPRESENTATIVE KOOKESH said AMHS future plans for the Malaspina
does not include having it as a day boat for everybody. He asked
if it doesn't preclude that either.
Number 1491
MR. DOLL responded not at all. He said he did not want to preclude
or preempt the results of the Southeast Transportation Plan which
is under development and other studies going on. He offered the
possibility that the Malaspina could operate in Lynn Canal at a
profit for a long time in the future.
Number 1522
REPRESENTATIVE KIM ELTON referred to the $2 million plus to bring
the Malaspina up to standard. He asked if it accomplished the
safety of life at sea concerns (SOLAS).
Number 1539
MR. DOLL replied no it does not. He pointed out some of them are
SOLAS related, but there is no effort to establish a long-term
SOLAS improvement. He did not have complete facts but confidently
predicted the price of doing that might be deterring.
REPRESENTATIVE JERRY SANDERS asked what percent of capacity were
they [AMHS] using last year.
Number 1582
MR. DOLL replied that they operate in 100 percent of capacity. He
said, "One of the tests that we have for how much of our capacity
is meeting the demand is how many times do we sail from any given
port leaving people behind who are on standby. Skagway and Haines
provide us with the largest examples of that. And we typically
make, I'd say over the years, our typical number of trips to
Skagway and Haines are nine trips a week. In the summer of 1998,
I will have more like 13 which is more than I would really prefer.
The reason for that is I have some mainliners making the trip all
the way to Skagway. That's a hedge on not knowing whether the
Malaspina is going to be available. But in the summer of 1999, I
would like to cut that back to the typical nine trips. So there
would be seven by the Malaspina, and have one each by the Kennicott
and Columbia."
Number 1649
MR. DOLL indicated the real difference, however, will be
Malaspina's capacity. Department of Transportation and Public
Facilities will probably increase their total capacity in Lynn
Canal by about 30 percent in car deck space as opposed to, for
example taking the Le Conte on several of those trips. He said the
two ships do not match at all in terms of capacity. By assigning
the Malaspina to the Lynn Canal we would be increasing our carrying
capacity about 30 percent.
Number 1673
MR. DOLL said the real benefit is the regularity - predictability.
Number 1684
REPRESENTATIVE SANDERS referred to selling rooms to obtain
additional revenue. He asked what percentage of the customers buy
a room on this particular run.
Number 1694
MR. DOLL stated he did not have the figures readily at hand.
Department of Transportation and Public Facilities did not have
anything that resembles this because all of the ships that are
traveling now are coming from someplace south of here. If you even
travel from Ketchikan you would have to get a room. However, a few
people boarding in Juneau may not get one. Mr. Doll again stated
he did not have a ready answer to that question.
Number 1718
REPRESENTATIVE COWDERY stated it would not apply.
Number 1725
MR. DOLL noted the circumstances are going to be a little
different. He said for example, if the Juneau passengers are
scheduled to depart at 7:00 a.m. they would probably want
breakfast. If they board in Skagway they would most likely want
dinner. He believed those are predictable uses for the hotel. To
induce the passengers to take a room AMHS would have to offer some
incentives and encourage them. The crew understands this is what
they have to do.
Number 1760
CHAIRMAN WILLIAMS noted they have been hearing about the
Southeastern plan for a number of years, but the legislature has
not seen one. Chairman Williams said he did not want to spend more
money on something that would not be in the plan.
Number 1813
MR. DOLL understood Chairman Williams desire to not embark on
something that is going to turn out to be a variance with a wider
study. He was not able to give a date to expect the plan since he
was not personally involved in the production of it. Mr. Doll
informed the committee that a replica, of what HB 328 requests,
appears in every version of the draft plan that has been circulated
to the communities, of which they have all had a chance to make
comments. He noted that it is assumed that there is going to be a
day boat in the Lynn Canal in every option that the draft Southeast
Transportation Plan has produced thus far.
Number 1865
CHAIRMAN WILLIAMS asked for clarification of the plan regarding the
day boat.
Number 1871
MR. DOLL believed he would not find any resistance to the day boat
appearing in the plan. He said he would exert every effort to see
to it that it did appear. The plan is coming to that conclusion on
it's own. Mr. Doll indicated that it was not being muscled into
the plan at all.
Number 1919
BERNE MILLER, Executive Director, Southeast Conference, stated the
conference was formed over 40 years ago by the municipalities of
Southeast Alaska to get the state to create the AMHS. Because that
transportation system is the lifeblood of Southeast's economic and
social well-being, the conference has taken a very keen interest in
the system, it's operations, it's budget and performance ever
since.
Number 1941
MR. MILLER noted the Southeast Conference is in favor of HB 328 for
three reasons. First, not providing backup for the Kennicott would
be irresponsible. Second, keeping the Malaspina in service would
be a prudent use of a valuable resource. Third, keeping the
Malaspina in service would help meet some of the transportation
needs of Southeast Alaska in a time of economic vulnerability and
uncertainty.
Number 1966
MR. MILLER stressed he has 15 years of experience in shipbuilding.
He urged system management to make plans to have a backup for the
Kennicott when, not if, one of those two things happen. System
management made a plan to use the Malaspina because it would
irresponsible not to have a backup.
MR. MILLER said their second reason for supporting this is that our
communities have been clamoring for better service. Everyone
acknowledges that there is a bottleneck in north Lynn Canal that
keeps us from moving as many ferries through as we might otherwise.
Therefore, it limits to some extent the revenue the system can
generate.
Number 2009
MR. MILLER pointed out less that two years ago, Commissioner
Perkins, DOT/PF, told the mayors of Southeast Alaska that if they
wanted to keep the Malaspina in service and expand system he would
be happy to try to make it so. Mr. Miller said, "The director at
that time [AMHS] said that if the mayors wanted the system to go
forward with operating the Malaspina as a day boat in north Lynn
Canal, the system would be happy to take that on as an experiment.
What was discussed at that time was that, as an experiment the
operation would have to be revenue neutral. And the director said
to the mayors, 'I m willing to try this. There's some risk here,
but I'm willing to try this if you will agree not to fry me if this
thing does not prove to be revenue neutral. If it proves to be a
revenue hemorrhage that I've got to cut off to not hurt the system
in other places." And the mayors agreed to that.
Number 2051
MR. MILLER stated the third reason for supporting keeping the
Malaspina in service is because trailers, from whom we gain most of
the revenue that the system operates during the winter, are already
leery of using the system because of their experience with the
blockade in Prince Rupert. We simply can not afford another year
of scheduled chaos. We must do whatever is necessary to provide
scheduled stability and to maximize system revenue. Mr. Miller
said, "And quite frankly, the system needs your help to do that.
And if we are going to do it, we need to make the decision soon so
we can get the information out to the public so they can book it
and bring the revenue that we need."
Number 2083
MR. MILLER concluded the conference believes it would be
irresponsible not to have the Malaspina available as a backup for
Kennicott until she is reliably in service. It would be prudent to
use the valuable resource that Malaspina represents to see whether
we can improve service (indisc.), thereby increasing revenue. If
the Malaspina doesn't work well we can terminate it at a minimum
loss. That is why we support timely appropriation of the dollars
needed to make sure Malaspina is available to backup Kennicott and
that it is used as a revenue neutral compliment for increasing the
system's revenue generating capacity.
Number 2109
MR. MILLER provided the committee with several resolutions. He
asked Chairman Williams keep the record open until Friday because
the region's mayors are currently meeting in Juneau and are
considering another resolution on the subject and would like to get
it on the record also.
Number 2137
REPRESENTATIVE COWDERY asked what the present value of the
Malaspina is.
Number 2147
MR. MILLER said he would not even hazard a guess. He backed up Mr.
Doll's statement. He believed it would depend on the service a
buyer would want to use it for, if a buyer had to take it and make
it SOLAS certifiable it probably have a reasonably low value. If
somebody was going to take it and use it where they did not have to
make all of that investment to put it in SOLAS service, then it
probably would have a greater value. However, he would not
speculate as to what somebody would pay.
Number 2185
CHAIRMAN WILLIAMS said HB 328 would be heard next in the House
Finance Committee and indicated he would like to move the bill
today.
Number 2204
REPRESENTATIVE BILL HUDSON made a motion to move HB 328 out of
committee. There being no objection HB 328 moved from the House
Transportation Standing Committee with individual recommendations.
ADJOURNMENT
Number 2233
CHAIRMAN WILLIAMS adjourned the House Transportation Standing
Committee meeting at 1:45 p.m.
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