04/01/2008 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| HB314 | |
| HB322 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 314 | TELECONFERENCED | |
| += | HB 322 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
April 1, 2008
1:07 p.m.
MEMBERS PRESENT
Representative Kyle Johansen, Chair
Representative Mark Neuman, Vice Chair
Representative Anna Fairclough
Representative Craig Johnson
Representative Wes Keller
Representative Mike Doogan
Representative Woodie Salmon
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 314
"An Act providing for and relating to the issuance of general
obligation bonds for the purpose of paying the cost of state
transportation projects; and providing for an effective date."
- MOVED CSHB 314 (TRA) OUT OF COMMITTEE
HOUSE BILL NO. 322
"An Act establishing the Alaska transportation fund and relating
to the fund; and providing for an effective date."
- MOVED HB 322 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 314
SHORT TITLE: G.O. BONDS FOR TRANSPORTATION PROJECTS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/16/08 (H) READ THE FIRST TIME - REFERRALS
01/16/08 (H) TRA, FIN
03/25/08 (H) TRA AT 1:00 PM CAPITOL 17
03/25/08 (H) Scheduled But Not Heard
03/27/08 (H) TRA AT 1:00 PM CAPITOL 17
03/27/08 (H) Heard & Held
03/27/08 (H) MINUTE(TRA)
03/27/08 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/27/08 (H) <Bill Hearing Postponed>
04/01/08 (H) TRA AT 1:00 PM CAPITOL 17
BILL: HB 322
SHORT TITLE: TRANSPORTATION FUND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/17/08 (H) READ THE FIRST TIME - REFERRALS
01/17/08 (H) TRA, FIN
03/25/08 (H) TRA AT 1:00 PM CAPITOL 17
03/25/08 (H) Heard & Held
03/25/08 (H) MINUTE(TRA)
03/27/08 (H) TRA AT 1:00 PM CAPITOL 17
03/27/08 (H) Heard & Held
03/27/08 (H) MINUTE(TRA)
04/01/08 (H) TRA AT 1:00 PM CAPITOL 17
WITNESS REGISTER
AVES THOMPSON, Executive Director
Alaska Trucking Association (ATA)
Anchorage, Alaska
POSITION STATEMENT: Offered testimony in support of HB 314.
JAMES KING, Director
Division of Parks & Outdoor Recreation
Central Office
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Offered testimony in support of HB 314.
STEVE RIBUFFO, Deputy Port Director
Port of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Offered testimony in support of HB 314.
JERRY BURNETT, Director, Legislative Liaison
Administrative Services Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 322.
AVES THOMPSON, Executive Director
Alaska Trucking Association (ATA)
Anchorage, Alaska
POSITION STATEMENT: Offered testimony in support of HB 322.
ACTION NARRATIVE
CHAIR KYLE JOHANSEN called the House Transportation Standing
Committee meeting to order at 1:07:43 PM. Representatives
Johansen, Salmon, Johnson, Keller, and Neuman were present at
the call to order. Representatives Doogan and Fairclough
arrived as the meeting was in progress.
HB 314-G.O. BONDS FOR TRANSPORTATION PROJECTS
CHAIR JOHANSEN announced that the first order of business would
be HOUSE BILL NO. 314, "An Act providing for and relating to the
issuance of general obligation bonds for the purpose of paying
the cost of state transportation projects; and providing for an
effective date."
REPRESENTATIVE NEUMAN moved to adopt CSHB 314, Version 25-
GH2041\E, Cook, 4/1/08, as the working document. There being no
objection, Version E was adopted.
1:08:44 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association
(ATA), said that the general obligation bond projects are
important to the trucking industry and that ATA supports HB 314.
CHAIR JOHANSEN asked if the "Parks Highway: Weight Restriction
Elimination" project, referred to in HB 314, was part of Mr.
Thompson's February 14, 2008, Alaska Truckers Association
overview to the committee.
1:10:03 PM
JAMES KING, Director, Division of Parks & Outdoor Recreation,
Central Office, Department of Natural Resources (DNR), explained
that the "South Denali Access Road" project consists of a road
and visitor center that will allow visitors to share the Denali
experience. He reported that the access road project will start
from the Parks Highway, close to the South Denali view turnout
at Mile 134. He described that this will be a 3.5 mile road to
an alpine Visitors Center which improves access to the state
park lands and provides year round interpretative and
recreational opportunities for locals and visitors. He declared
that this will present an area-wide economic boost. He
explained that the $8.9 million bond is the start-up money for
the road. The rest of the project funding will be from federal
and private sources which have instructed that the state needs
to start the project before they will commit any further
funding.
1:14:54 PM
REPRESENTATIVE DOOGAN asked if this road is on state or federal
land.
MR. KING replied that the road is on state land and is entirely
within Denali State Park.
REPRESENTATIVE DOOGAN asked if the facility will be on state
land, as well.
MR. KING responded that this will be a Denali State Park
facility. He explained that the project is a partnership with
the Matanuska-Susitna Borough and the National Park Service
(NPS) and that the NPS has been very supportive with finances,
planners, and funding into the future.
REPRESENTATIVE DOOGAN asked if Denali National Park and Preserve
will be accessible from this visitor facility.
MR. KING replied that this project does not touch the National
Park. He reiterated that all of this project will be within
Denali State Park.
1:17:12 PM
REPRESENTATIVE NEUMAN asked for an explanation of the federal
matching funds.
MR. KING replied that a funding package has been put together
and that the $8.9 million will start the process. He explained
that once this money is received, the project will qualify for
NPS Centennial Initiative funds that are a dollar for dollar
match. He pointed out that NPS has put a request in their
capital budget to help build the facility. He reported that all
three members of Alaska's congressional delegation have
indicated that they will support the project if the state
initially funds the project. He said that Division of Parks &
Outdoor Recreation has approached grantors and private funders
from the tourism industry, and several have responded that they
will participate.
1:19:07 PM
REPRESENTATIVE NEUMAN asked to clarify that this is not the
Stampede Road or the Petersville Road.
MR. KING agreed that this access road is neither of these.
REPRESENTATIVE DOOGAN asked how this project came to be included
in the bond package.
MR. KING conveyed that the governor requested proposals for new
roads, and that the division submitted this road project
proposal.
1:21:26 PM
REPRESENTATIVE KELLER asked if the $8.9 million is just for the
road or is also for the facility.
MR. KING said that the state requests that the money be
dedicated for a specific part of the project. He pointed out
that there is a need for environmental assessment and planning
as part of the road project. He noted that any left over money
will go toward construction of the visitor center.
STEVE RIBUFFO, Deputy Port Director, Port of Anchorage, said
that the Port of Anchorage is requesting $20 million each year
for the next five years as a state contribution to the port
expansion project.
1:24:07 PM
CHAIR JOHANSEN closed public testimony.
CHAIR JOHANSEN outlined the proposed changes in the bill to be
the removal of the $15 million for "Southeast Alaska: Pavement
Rehabilitation," and the addition of $45 million for "Gravina
Access." He allowed that this will reflect a net increase of
$30 million for the general obligation bonds requested.
1:25:02 PM
REPRESENTATIVE FAIRCLOUGH said that she appreciates the
discussion of the Gravina Access, but she questions how a bond
package will pass when more than 30 percent of the package goes
to Southeast Alaska.
CHAIR JOHANSEN replied that Gravina Access is an important
project, and he expressed his belief that the decisions of the
state should not be made based on the number of people living
within an area.
REPRESENTATIVE FAIRCLOUGH agreed that large infrastructure
projects should go through a process to determine the priority
level. She expressed concern that a project which is 30 percent
of the bond package will jeopardize the other community projects
in the bond package.
1:27:37 PM
CHAIR JOHANSEN offered his belief that this bill will be
balanced with other state interests by the time it reaches the
House Floor.
REPRESENTATIVE DOOGAN expressed his concern with the legislature
passing a bond package when there is so much money available.
He requested more discussion of the advisability for bonding.
REPRESENTATIVE NEUMAN agreed with Representative Doogan's
concern for a bond package. He mentioned that his constituents
feel that all the legislators are responsible for the budget.
He said that it is good that this bill will go to a vote of the
public.
1:31:14 PM
REPRESENTATIVE FAIRCLOUGH said that she wants her constituency
to know that she will put a "no recommendation" on this bill.
She noted that there are billions of dollars of transportation
projects and that she supports the governor's resolve to move
forward.
REPRESENTATIVE FAIRCLOUGH established that the "Gravina Access"
project may raise federal concerns as Alaska has supported a "no
build" alternative. She posed that this may initiate
liabilities or ramifications from the federal government.
1:34:26 PM
REPRESENTATIVE JOHNSON allowed that he also has concerns about
the legislation. He expressed his belief that this bill is a
budget increase, even though it is not contained in the capital
budget.
CHAIR JOHANSEN expressed his frustration with the
administration's approach to the budget. He explained that he
tries to separate operating and capital budgets. He offered his
belief that the capital budget should be investments in projects
that provide opportunities. He discussed the use of bonds,
stating that Alaska's bond rating is improved, and that this
bill is a wise use of money.
REPRESENTATIVE NEUMAN moved to report CSHB 314, Version 25-
GH2041\E, Cook, 4/1/08, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 314(TRA) was moved from committee.
The committee took an at-ease from 1:38 PM to 1:41 PM.
HB 322-TRANSPORTATION FUND
1:41:13 PM
CHAIR JOHANSEN announced that the final order of business would
be HOUSE BILL NO. 322, "An Act establishing the Alaska
transportation fund and relating to the fund; and providing for
an effective date."
1:41:42 PM
REPRESENTATIVE FAIRCLOUGH commented that the state
transportation infrastructure is critical for maintaining public
safety and economic opportunities. She agreed with the
administration that long term planning for the aging
transportation infrastructure is necessary. She compared the
endowment concept to the permanent fund. She declared her
concern that the transportation infrastructure requires more
than an annual $50 million appropriation. She presented an
annuity approach that provides increased annual funding for the
transportation projects.
REPRESENTATIVE FAIRCLOUGH stated that a $1 billion endowment
fund, paying 5 percent annually, will take 21 years to finance
$1.48 billion worth of transportation construction projects,
compared to an annuity fund that will spend $1.49 billion on
transportation projects over 10 years.
REPRESENTATIVE FAIRCLOUGH offered her belief that the state will
suffer a revenue shortfall within the next eight years, and that
could cause the transportation endowment fund to be usurped for
other funding. She noted that during this same time period an
annuity will have spent more than $1 billion on transportation
projects, and the state will have better prepared for the
economic viability of the gas pipeline. She noted that
construction costs have increased 30 percent over the last 4
years, and that the assets of an endowment fund will erode much
more quickly than an annuity. She asked that the committee
consider the purchasing power of $1 billion when determining the
merits of an endowment savings account compared to an annuity.
1:50:17 PM
REPRESENTATIVE NEUMAN asked if an annuity would be zeroed out in
21 years.
REPRESENTATIVE FAIRCLOUGH clarified that at the end of 21 years,
$1 billion will remain in the endowment fund; but at the end of
10 years, the annuity will have spent $1.49 billion, all of its
money, on transportation projects. She called attention to the
rising cost of construction, explaining that the value of the
money still left in the endowment fund will lose its purchasing
power for transportation projects.
1:52:07 PM
JERRY BURNETT, Legislative Liaison, Director, Administrative
Services Division, Department of Revenue (DOR), stated that DOR
has a different estimate for an annuity payout. He reported
that an annuity has to guarantee payments; therefore, a 10 year,
risk-free annuity invested in treasury bills will generate a
return rate under 3 percent, for a total payout of $115 billion.
He identified the difficulty of expecting an 8 percent return
when the payout must be within 10 years. He pointed out that a
poor return in the first year of an annuity will not generate
the money necessary for a payout. He explained that an
endowment account allows payments during good years and bad
years.
REPRESENTATIVE DOOGAN asked if the endowment plan is predicated
on earnings of 8 percent.
MR. BURNETT explained that the endowment plan is predicated on
average earnings of 8 percent over a 25-30 year time frame, not
average earnings in a 10 year period. He said that an annuity
needs to be concerned about earnings in each year.
REPRESENTATIVE DOOGAN asked to clarify the risk difference
between an annuity and an endowment, as the payout is
guaranteed, and the predicated interest is the same.
MR. BURNETT explained that the endowment plan is predicated on
paying a percentage of the average market value for the prior
five years, so the average over time only needs to be 8 percent.
With an annuity, there needs to be earnings in each year, in
order for it to pay out correctly.
1:55:59 PM
REPRESENTATIVE DOOGAN asked again that if there is a $1 billion
investment with assumed earnings for either an endowment or an
annuity, then there needs to be the same set of assumptions. He
posed that DOR is making a favorable set of assumptions for the
endowment and an unfavorable set of assumptions for the annuity.
MR. BURNETT reiterated that an endowment investment allocation
is based on the return over a longer period of time, which
allows for a greater variation of annual earnings. He explained
that an annuity investment is for a shorter time period and that
does not allow for the same earnings variation if there is to be
a guaranteed annual payout.
REPRESENTATIVE FAIRCLOUGH commented that she is happy that DOR
is working to meet the needs of DOT&PF. She asked for an
explanation of the real rate of return and a suggestion to
maintain the purchasing power of the investment.
MR. BURNETT explained that the endowment approach is based on a
5 percent real rate of return. He agreed that this return will
not maintain the purchasing power given the rate of inflation
for construction projects.
REPRESENTATIVE FAIRCLOUGH furnished an example that the dramatic
increase of oil industry construction costs is eroding the
purchasing power of the dollar, and pointed out that this
demonstrates the need for transportation projects to be built
immediately. She offered her belief that the ten year annuity
payout program, using the full $1 billion transportation fund,
will bring more construction work and safer travel for Alaskans.
She expressed her belief that an 8 percent return for the ten
year program is attainable.
MR. BURNETT expressed his belief that an 8 percent return for a
ten year investment is not a reasonable expectation. He
explained that annuity funds are generally risk free
investments. He allowed that should a higher acceptable level
of risk be determined, the annuity could be invested for a
larger return than the risk free investment option.
REPRESENTATIVE FAIRCLOUGH expressed her "great faith in the
investment strategies of our permanent fund board." She
suggested that the transportation fund be invested in sub
accounts to allow a wider range of risk so that the potential
for a larger return is tempered with lower risk investments.
She restated the importance of promptly investing more money
into transportation projects.
2:02:31 PM
REPRESENTATIVE NEUMAN asked if the permanent fund has had an
annual rate of return greater than 8 percent over any 10 year
period.
MR. BURNETT offered his belief that there have been periods of
return both higher and lower than 8 percent. He referred to the
prior 8 years, and reported that the first 3 years lost money.
He noted that if annuity funds had been invested at that time,
the investment payoff would have been down.
2:03:45 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association
(ATA),stated that an ATA legislative priority is to expand the
DOT&PF capital projects program. He expressed support of the
endowment concept as it will create a sustainable and
predictable revenue source for DOT&PF. He reported that there
are many multi year projects that require a lot of time and
planning. He allowed that federal funding will probably not
meet the needs. He encouraged state funding and he supported
Representative Fairclough's ten year plan that will put money
more quickly into the programs. He offered his belief that the
highway system supports the largest part of the population and
deserves the largest portion of any transportation fund
appropriations.
2:06:15 PM
CHAIR JOHANSEN closed public testimony.
REPRESENTATIVE NEUMAN offered his belief that this bill is not
the best use of the state funds. He said that he did not know
what the state needs might be in five years, citing education
and public safety as two possibilities. He expressed concern
that a transportation fund is "locking it [the money] up,"
whereas if the money is in the Constitutional Budget Reserve the
legislature will be able to appropriate the money.
2:10:50 PM
REPRESENTATIVE FAIRCLOUGH said that the people of Alaska support
the governor's proposal to create separate funds for alternative
energy sources and transportation. She stated that the
transportation infrastructure plan needs to include long term
maintenance goals. She noted that maintenance is less expensive
than replacement, but that there is no incentive for
maintenance.
REPRESENTATIVE FAIRCLOUGH expressed her belief that the
transportation divisions are at a disadvantage when they submit
their recommendations as each legislator advocates for a
specific region and re-prioritizes the transportation goals.
She stressed that a transportation fund is critical to the
infrastructure, and she agreed with DOR and the administration
that long term planning is needed.
REPRESENTATIVE DOOGAN said that he is going to oppose the bill.
He agreed that $1 billion could be spent on transportation
projects. He stated his belief that his job is to decide on
appropriations. He noted that this bill takes $1 billion,
dedicates it to a specific range of projects, and gives DOT&PF a
$50 million a year capital budget. He expressed that his
preference is to vote annually for sensible spending on
transportation projects. He expressed his belief that he is not
doing his job if he gives money to a department to spend as they
determine.
2:16:38 PM
REPRESENTATIVE KELLER reported his understanding that the Alaska
State Constitution requires that [capital] spending is to go
toward infrastructure, and he expressed his belief that this is
not upheld. He declared that a long term transportation account
is an investment which provides huge returns by building roads
that allow for development. He stated his support for the bill.
REPRESENTATIVE JOHNSON expressed his belief that relegating
funding responsibilities to the departments is a bad idea. He
stated that he would rather appropriate money for projects every
year, instead of setting up funds for each department.
REPRESENTATIVE SALMON remarked that the legislature is here to
annually appropriate money.
2:20:36 PM
REPRESENTATIVE FAIRCLOUGH expressed her belief that roads
require long permitting processes, so there is a need for a
fiscal strategy that keeps the projects moving and allows for
increased costs. She offered her belief that an annuity and an
endowment are examples of transportation accounts. She stated
that the projects will still be brought to the legislature for
approval, and that this will ensure that the projects maintain
the state transportation infrastructure.
REPRESENTATIVE JOHNSON reported his belief that money will be
tight in the next five to seven years. He said that he could
not reconcile that money will have already been appropriated for
transportation when the most pressing future needs might be for
education, senior care, or children. He stated that he could
not support the bill.
2:24:50 PM
REPRESENTATIVE NEUMAN moved to report HB 322 out of committee
with individual recommendations and the accompanying fiscal
notes.
REPRESENTATIVE DOOGAN objected.
A roll call vote was taken. Representatives Fairclough, Keller,
Neuman, and Johansen voted in favor of HB 322. Representatives
Johnson, Salmon, and Doogan voted against it. Therefore, HB 322
was reported out of the House Transportation Standing Committee
by a vote of 4:3.
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at
2:27:57 PM.
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