Legislature(2015 - 2016)CAPITOL 17

02/05/2015 01:00 PM House TRANSPORTATION

Audio Topic
01:02:47 PM Start
01:04:30 PM Presentation: Knik Arm Crossing Project Detail
03:04:39 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Knik Arm Crossing Project Detail TELECONFERENCED
-- Testimony <Invitation Only> --
Followed by Public Testimony if time allows
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                        February 5, 2015                                                                                        
                           1:02 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Shelley Hughes, Co-Chair                                                                                         
Representative Charisse Millett                                                                                                 
Representative Benjamin Nageak                                                                                                  
Representative Louise Stutes                                                                                                    
Representative Matt Claman                                                                                                      
Representative Dan Ortiz                                                                                                        
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
PRESENTATION:  KNIK ARM CROSSING PROJECT DETAIL                                                                                 
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
MARC LUIKEN, Commissioner Designee                                                                                              
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and answered questions on the                                                                  
Knik Arm Crossing Project (KAC).                                                                                                
JUDY DOUGHERTY, Executive Director                                                                                              
Knik Arm Crossing (KAC)                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented a PowerPoint overview on the Knik                                                              
Arm Crossing Project (KAC).                                                                                                     
PAT PITNEY, Director                                                                                                            
Office of the Director                                                                                                          
Office of Management & Budget (OMB)                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions on the                                                                  
Knik Arm Crossing Project (KAC).                                                                                                
JANET KINCAID, Acting Chair; Board Member                                                                                       
Knik Arm Bridge and Toll Authority (KABATA)                                                                                     
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and  answered questions during the                                                             
discussion of the Knik Arm Crossing Project (KAC).                                                                              
BOB FRENCH, Mechanical Engineer (ME)                                                                                            
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified in  opposition to  the Knik  Arm                                                             
Crossing Project (KAC).                                                                                                         
PAUL CAULCARR, Business Manager                                                                                                 
Iron Workers Local Union 751; Vice-President                                                                                    
Southcentral Building Trades                                                                                                    
Wasilla, Alaska                                                                                                                 
POSITION  STATEMENT:  Testified  in   support  of  the  Knik  Arm                                                             
Crossing Project (KAC).                                                                                                         
LARRY DeVILBISS, Borough Mayor                                                                                                  
Matanuska-Susitna Borough                                                                                                       
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  and testified in support                                                             
of the Knik Arm Crossing Project (KAC).                                                                                         
LOIS EPSTEIN, Professional Engineer (PE)                                                                                        
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified  against the  Knik Arm  Crossing                                                             
Project (KAC).                                                                                                                  
STEPHANIE KESLER, President                                                                                                     
Government Hill Community Council                                                                                               
Anchorage Alaska                                                                                                                
POSITION  STATEMENT:   Testified  on  the scheduled  right-of-way                                                             
demolition  during  the  discussion  of  the  Knik  Arm  Crossing                                                               
Project (KAC).                                                                                                                  
AVES THOMPSON, Lobbyist; Executive Director                                                                                     
Alaska Trucking Association, Inc. (ATA)                                                                                         
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Testified  in support  of  the  Knik  Arm                                                             
Crossing Project (KAC).                                                                                                         
CATHARINE JONES                                                                                                                 
Palmer, Alaska                                                                                                                  
POSITION  STATEMENT:    Testified  in support  of  the  Knik  Arm                                                             
Crossing Project (KAC).                                                                                                         
PAUL GROSSI, Lobbyist                                                                                                           
Ironworker Management Progressive Action Cooperative Trust                                                                      
Alaska State Pipe Trades UA Local 375                                                                                           
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Testified  in support  of  the  Knik  Arm                                                             
Crossing Project (KAC).                                                                                                         
JEFF OTTESEN, Director                                                                                                          
Division of Program Development                                                                                                 
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and  answered questions during the                                                             
Knik Arm Crossing Project (KAC).                                                                                                
ACTION NARRATIVE                                                                                                              
1:02:47 PM                                                                                                                    
CO-CHAIR SHELLEY HUGHES called  the House Transportation Standing                                                             
Committee meeting to order at  1:02 p.m.  Representatives Claman,                                                               
Millett, Ortiz,  Stutes, Foster  and Hughes  were present  at the                                                               
call to order.  Representative  Nageak arrived as the meeting was                                                               
in progress.                                                                                                                    
^PRESENTATION:  KNIK ARM CROSSING PROJECT DETAIL                                                                                
        PRESENTATION:  KNIK ARM CROSSING PROJECT DETAIL                                                                     
1:04:30 PM                                                                                                                    
CO-CHAIR HUGHES announced  that the only order  of business would                                                               
be  a  briefing  on  the  Knik Arm  Crossing  Project  detail  by                                                               
Commissioner  Luiken   Department  of  Transportation   &  Public                                                               
Facilities (DOT&PF).                                                                                                            
1:06:13 PM                                                                                                                    
MARC LUIKEN, Commissioner  Designee, Department of Transportation                                                               
& Public  Facilities (DOT&PF), introduced  himself and  said that                                                               
Judy Dougherty, the Executive Director  for the Knik Arm Crossing                                                               
(KAC)  will provide  an  overview of  the project.    He said  he                                                               
looked forward to working with the committee.                                                                                   
1:07:13 PM                                                                                                                    
JUDY DOUGHERTY,  Executive Director,  Knik Arm  Crossing, offered                                                               
to  brief the  committee on  the progress  made on  the Knik  Arm                                                               
Crossing Project.   She referred to a PowerPoint  overview of the                                                               
Knik  Arm Crossing  Project that  will cover  the public  finance                                                               
plan  review   and  project  development  activities   that  have                                                               
occurred  since the  last  legislative session  [slide  1].   She                                                               
reported  that the  public  finance plan  uses  three sources  of                                                               
public   funds,   including   $345   million   from   a   federal                                                               
Transportation Infrastructure Finance  and Innovation Act (TIFIA)                                                               
loan; $275 million in state  bonds, contingent on approval of the                                                               
TIFIA loan;  and $300 million  in STIP  [Statewide Transportation                                                               
Improvements  Program]  federal  highway   program  funds.    She                                                               
elaborated on  the finance  plan, indicating  TIFIA's goal  is to                                                               
encourage  non-federal investment  in infrastructure  projects by                                                               
providing  credit assistance  to projects  such as  the Knik  Arm                                                               
Crossing Project.   The intention  of the public finance  plan is                                                               
to spread  the spending  out over the  STIP in  approximately $45                                                               
million  per  year  increments,  with $75  million  of  the  STIP                                                               
funding already appropriated to date.                                                                                           
1:08:40 PM                                                                                                                    
MS.  DOUGHERTY  directed attention  to  the  "Waterfall" flow  of                                                               
funds and reported  that the Knik Arm Crossing,  a toll facility,                                                               
will  generate revenue  from the  first day  it opens  [slide 3].                                                               
The facility  would initially pay  for maintenance  and operation                                                               
costs through tolls.   Since the TIFIA funding  is a revenue-only                                                               
pledge, the  loan would be  repaid solely from tolls  and without                                                               
any state backstop,  she said.  After  operations and maintenance                                                               
costs  are  met, the  TIFIA  Debt  Service  would be  paid  next,                                                               
followed  by any  reserves  that the  TIFIA  loan might  require.                                                               
Excess tolls would  be used to repay bonds, but  in the out years                                                               
any surplus  of funds will  also be available for  other eligible                                                               
projects, she said.                                                                                                             
1:09:38 PM                                                                                                                    
MS. DOUGHERTY reported on the  pre-construction activities in the                                                               
project  development [slide  4].   In 2010,  the Federal  Highway                                                               
Administration  (FHWA) issued  its  record of  decision (ROD),  a                                                               
final  decision   and  the  challenge   period  is  over.     The                                                               
environmental permit  applications have all been  submitted, with                                                               
three  outstanding permits  remaining,  including  the USACE  [US                                                               
Army  Corps  of  Engineers]  44   Wetlands  permit;  second,  the                                                               
National Marine  Fisheries Service (NMFS) permit  for disturbance                                                               
of Beluga  whales during construction;  and finally the  US Coast                                                               
Guard Section 9 bridge permit.   She reported on the right-of-way                                                               
status,  such that  86 percent  of  right-of-way acquisition  has                                                             
been purchased,  including all the privately-owned  parcels.  The                                                               
remaining  parcels will  be purchased  from  the Alaska  Railroad                                                               
Corporation (ARRC),  the Joint Base  Elmendorf-Richardson (JBER),                                                               
the  Municipality  of  Anchorage  (MOA), and  the  University  of                                                               
Alaska  (UA), she  said.   The  Knik Arm  Crossing also  recently                                                               
completed a utility  study - available on the KAC  website - that                                                               
addresses the  relocation of water and  sewer in the area  of the                                                               
proposed tunnel.                                                                                                                
1:10:43 PM                                                                                                                    
CO-CHAIR HUGHES understood  that a no jeopardy  decision from the                                                               
National Marine Fisheries Service (NMFS)  was issued in 2011, but                                                               
the  state  has  not  yet  received the  letter  of  approval  or                                                               
authorization.  She  asked whether the department  has sought the                                                               
final approval.                                                                                                                 
MS. DOUGHERTY answered that a  no jeopardy biological opinion was                                                               
issued by the endangered species  branch of NMFS.  She elaborated                                                               
that the NMFS  has two branches, with the  regional staff issuing                                                               
the biological  opinion and  the no  jeopardy decision,  which is                                                               
part  of the  KAC's  NEPA process.    The KAC  must  apply for  a                                                               
construction  permit  for  disturbance   of  the  Beluga  whales,                                                               
essentially a noise permit for  use during construction, from the                                                               
Washington  D.C   NMFS  staff  who  oversee   the  Marine  Mammal                                                               
Protection Act.   Although this  permit has not yet  been issued,                                                               
she offered her  belief that the federal staff  has been watching                                                               
the KAC project and has put it the "back burner" at this time.                                                                  
1:12:18 PM                                                                                                                    
CO-CHAIR HUGHES  asked whether the  federal agency is  waiting to                                                               
see if  the project moves forward  or if the NMFS  has given some                                                               
other reason why the permit has not yet been issued.                                                                            
MS.  DOUGHERTY answered  that the  federal  agency has  indicated                                                               
that  it  plans  on  issuing  a decision  early  in  2015.    She                                                               
attributed the delay  to the NMFS staff being  understaffed so it                                                               
must prioritize  its actions.   Once  the project  moves forward,                                                               
she  anticipated  the   NMFS  will  act  quickly   to  issue  the                                                               
construction  permit  with  respect  to the  disturbance  of  the                                                               
Beluga whales.                                                                                                                  
1:13:04 PM                                                                                                                    
CO-CHAIR HUGHES  acknowledged the  workload and  juggling issues.                                                               
She  asked whether  the  department has  recently  asked for  the                                                               
status of the permit.                                                                                                           
MS.  DOUGHERTY replied  that  the NMFS  responded  to the  Alaska                                                               
Department of Law's  inquiry on the permit status in  the fall of                                                               
2014, indicating  the Beluga whale  permit was a  difficult case;                                                               
however,  the  agency  anticipated  it would  be  arriving  at  a                                                               
decision shortly.                                                                                                               
1:13:47 PM                                                                                                                    
REPRESENTATIVE  ORTIZ referred  to slide  3, entitled  "Waterfall                                                               
Flow of  Funds."  He  recalled that toll revenues  will initially                                                               
pay maintenance  and operations  (M&O) costs.   He  asked whether                                                               
any  studies have  been done  to  project toll  revenues and  the                                                               
ability to "get down the bucket trail" shown on the slide.                                                                      
MS. DOUGHERTY answered  that the studies were  updated last year.                                                               
For  example,  in   December  2014,  the  KAC   completed  a  new                                                               
socioeconomic  study as  well as  additional traffic  and revenue                                                               
studies.  She  relayed that the socioeconomic  study provides the                                                               
data that  is fed into the  traffic study so it  was important to                                                               
update the  2007 socioeconomic study.   She highlighted  the list                                                               
of   key  considerations   include  the   MSB  [Matanuska-Susitna                                                               
Borough] 2060 Futures  Project, the MSB Density  Build Out Study,                                                               
and  the   AMATS  [Anchorage  Metropolitan   Area  Transportation                                                               
Solutions] Anchorage  Transportation System Plan Update,  as well                                                               
as three key  studies performed by the  Municipality of Anchorage                                                               
to analyze  the housing market,  residential and  commercial land                                                               
availability in the Anchorage area [slide 5].                                                                                   
1:15:21 PM                                                                                                                    
CO-CHAIR   HUGHES   asked    whether   the   aforementioned   new                                                               
socioeconomic  study  was  separate  from  the  CDM  Smith  study                                                               
performed in  December [to  update the  traffic and  toll revenue                                                               
forecasts for the Knik Arm Crossing].                                                                                           
MS. DOUGHERTY answered yes.                                                                                                     
1:15:46 PM                                                                                                                    
CO-CHAIR HUGHES further asked how the studies compared.                                                                         
MS. DOUGHERTY reported that the  initial 2007 socioeconomic study                                                               
[,  the Knik  Arm Toll  Bridge Anchorage  Alaska MSA  Traffic and                                                               
Toll Revenue  Investment Grade Study,]  was performed by  a Texas                                                               
firm,  IRS, [Insight  Research Corporation]  under contract  with                                                               
the  traffic consultant  [Wilbur Smith  Associates].   This time,                                                               
the KAC used  an independent economist [Cardno,  Inc.] who teamed                                                               
with a  local planning consultant  [Agnew::Beck] to  provide more                                                               
of  a  grassroots effort  on  projections.   She  emphasized  the                                                               
importance for  KAC to have  direct contracts with  the economist                                                               
and the traffic  consultant.  This is really  important in moving                                                               
forward with this financing plan, she said.                                                                                     
1:06:53 PM                                                                                                                    
CO-CHAIR HUGHES asked  whether the new studies  support the prior                                                               
reports.  She offered that she  was surprised at how similar they                                                               
were  given  some  reactions  that the  2007  report  was  overly                                                               
optimistic.   She  further asked  whether the  "overly optimistic                                                               
language" was used in the report.                                                                                               
MS. DOUGHERTY  said the  December 2014 figures  are based  on new                                                               
studies.   She offered that  the KAC  also compared the  data and                                                               
found the  2007 socioeconomic data  was more optimistic  than the                                                               
current report;  however, this is  largely because the  study was                                                               
done in 2007.   An economic recession followed in  2008 and 2009,                                                               
she said.   In addition,  economists have  different perspectives                                                               
on   how  conservatively   to  report   their  forecasts.     She                                                               
acknowledged  that  KAC  has  found  the new  study  to  be  more                                                               
conservative and although traffic will  ramp up more slowly, over                                                               
time the traffic  projections catch up.  Although  she was unsure                                                               
which  figures Co-Chair  Hughes has  reviewed, she  reported that                                                               
the  gross toll  revenues  are significantly  different than  the                                                               
2007 projections.                                                                                                               
1:18:44 PM                                                                                                                    
REPRESENTATIVE  CLAMAN asked  whether  KAC will  present the  new                                                               
toll projections in today's presentation.                                                                                       
MS. DOUGHERTY answered yes.                                                                                                     
1:19:11 PM                                                                                                                    
MS. DOUGHERTY directed attention  to the draft tolling operations                                                               
plan  prepared this  past year  that  TIFIA will  want to  review                                                               
[slide  6].   She  reported  that the  KAC  has made  significant                                                               
advancements  in   the  FHWA  [Federal   Highway  Administration]                                                               
requirements.   She  explained that  any FHWA  project over  $500                                                               
million  must undergo  a Federal  Highway Administration  (FHWA)-                                                               
conducted cost estimate review, a  project management plan, and a                                                               
financial plan [slide  7].  The FHWA conducted its  review of the                                                               
KAC's  cost  estimate  last  June and  finalized  its  report  in                                                               
November.   The  FHWA estimates  were within  1.5 percent  of the                                                               
KAC's  estimate,  or $15  million,  which  was nearly  negligible                                                               
[given the size  of the project].  The KAC  has submitted a draft                                                               
project  management plan  -  a  living document  -  that will  be                                                               
updated annually  once a contractor is  in place, she said.   The                                                               
financial plan the  KAC will submit for the TIFIA  loan will also                                                               
satisfy  the  major project  requirement  so  once that  plan  is                                                               
completed, she anticipated the FHWA will accept it.                                                                             
1:20:40 PM                                                                                                                    
MS.  DOUGHERTY turned  to the  TIFIA financing  and said  the KAC                                                               
believes that the project will  meet the eligibility requirements                                                               
for the TIFIA loan [slide 7].   The current interest rate is 2.28                                                               
percent, which  is very low,  she said.   In addition,  the TIFIA                                                               
offers  a  rural rate  and  since  the  KAC is  approximately  74                                                               
percent rural,  the KAC  will apply  for and  hopes to  receive a                                                               
blended rate for the loan.                                                                                                      
1:21:17 PM                                                                                                                    
CO-CHAIR HUGHES  asked whether the  blended rate will  reduce the                                                               
2.28 percent  to 1.44 percent  under the interest rate  for rural                                                               
MS. DOUGHERTY answered yes; and  explained that the rural rate is                                                               
half of the urban rate so it is significant.                                                                                    
1:21:46 PM                                                                                                                    
CO-CHAIR  FOSTER asked  whether  other entities  have received  a                                                               
blended rate.                                                                                                                   
MS. DOUGHERTY was unsure but  offered to research and report back                                                               
the history.   She  offered her  belief that  ten percent  is set                                                               
aside for rural loans.   She did not know if  the project must be                                                               
100 percent rural in order to qualify for the blended rate.                                                                     
1:22:17 PM                                                                                                                    
CO-CHAIR  HUGHES  asked  for  clarification  on  the  application                                                               
process and whether the KAC has been denied a TIFIA loan.                                                                       
MS.  DOUGHERTY answered  that the  KAC  has not  gotten past  the                                                               
eligibility  test, but  she offered  to cover  this later  in her                                                               
presentation.   She  indicated the  KAC has  never been  denied a                                                               
loan, in  fact, the KAC hasn't  gotten to the stage  in which the                                                               
project has been asked to apply.                                                                                                
CO-CHAIR  HUGHES asked  whether  the process  has  been a  normal                                                               
MS.  DOUGHERTY answered  yes.   She  suggested that  a number  of                                                               
projects  are listed  on  the TIFIA  website  that indicates  the                                                               
status and  lists pending  legislation for  the KAC  project, she                                                               
1:23:21 PM                                                                                                                    
MS. DOUGHERTY  directed attention  to the projected  toll revenue                                                               
and  costs from  the  aforementioned traffic  study completed  in                                                               
December  [slide  8].   This  projection  assumes that  design  &                                                               
construction  will start  in late  2016; however,  if the  KAC is                                                               
delayed  it will  shift and  some  figures will  change, but  not                                                               
significantly, she  said.  She  pointed out that the  green wedge                                                               
in the background is the expected gross toll revenue from a two-                                                                
land roadway  without considering  any expansions  or extensions.                                                               
She  pointed out  the FHWA  declared  this project  operationally                                                               
independent.  Thus,  the project doesn't have to  be presented as                                                               
a  whole so  phase 1  of  the project  is  all that  needs to  be                                                               
advanced  at this  time.   Therefore, the  toll revenue  and cost                                                               
projections  are  based on  revenue  projections  for a  two-lane                                                               
roadway.   The black bars  show the  bonds and assumes  the bonds                                                               
are sold  up front  with a  level payment across  20 years.   The                                                               
blue  bars  represent  the  operating costs  after  the  road  is                                                               
constructed  and open.   Operating  costs include  routine bridge                                                               
and  roadway maintenance  and operations  (M&O) as  well as  toll                                                               
collection costs.   The  red bars  represent the  TIFIA payments.                                                               
She  emphasized that  TIFIA doesn't  require loan  payments until                                                               
five years  after the  roadway opens  to traffic,  with interest-                                                               
only payments  required for  the next five  years, followed  by a                                                               
level payment  thereafter.  However,  some opportunity  exists to                                                               
"sculpt" that once conversations are held with TIFIA, she said.                                                                 
1:25:32 PM                                                                                                                    
MS.  DOUGHERTY stated  that sensitivity  testing is  important to                                                               
the  TIFIA loan  process, with  KAC performing  sensitivity tests                                                               
using 17 key variables.   These are designed to answer questions,                                                               
for instance,  if the  population or economy  did not  growing as                                                               
anticipated or if road network improvements were incomplete.                                                                    
1:26:15 PM                                                                                                                    
MS. DOUGHERTY said the socioeconomic  forecast is important since                                                               
revenue can  vary by  20 percent  more or  less depending  on the                                                               
conditions.  The  outcome of the sensitivity  tests were overlaid                                                               
the  previous graph  to show  the expected  toll revenue  using a                                                               
50:50  case [slide  10].   The blue  line indicates  a 5  percent                                                               
probability  line,  which  means  there is  a  5  percent  chance                                                               
revenue may  be less  or a  95 percent  probability that  it will                                                               
exceed  the amount.   The  point the  blue line  crosses the  red                                                               
bars, the  KAC can meet the  TIFIA loan requirements even  at the                                                               
low probability, she  said, which is really  significant to them.                                                               
The Department  of Labor & Workforce  Development (DLWD) recently                                                               
issued a new  population forecast for the Anchorage  area that is                                                               
lower than the forecast the  KAC is using; however, those figures                                                               
came out  after the study was  prepared.  The KAC  reexamined the                                                               
probability  test  and  the blue  line  represents  a  population                                                               
projection  that  is even  lower  than  the DLWD's  figures,  she                                                               
stated, so the KAC is comfortable with the forecast.                                                                            
1:28:06 PM                                                                                                                    
MS. DOUGHERTY directed attention to  the TIFIA process, which can                                                               
be a lengthy  one taking up to  18 months to close  a loan [slide                                                               
11].   She anticipated that the  KAC should know within  about 18                                                               
months  whether the  TIFIA loan  is  approved.   First, the  loan                                                               
process requires parties to submit  a letter of interest, with an                                                               
eligibility review  conducted, which  is where  the KAC  has been                                                               
sitting  for   the  last   several  years   awaiting  legislative                                                               
approval.  Once  eligibility approval occurs, then  next phase is                                                               
the credit  worthiness and  risk assessment  phase, in  which the                                                               
KAC will makes an oral  presentation in Washington D.C. to obtain                                                               
rating  opinions,  and  submit  a  $100,000  fee  for  evaluation                                                               
purposes.  Upon  successful completion, the KAC  would be invited                                                               
to  apply.   After submitting  the application,  the TIFIA  would                                                               
conduct a  30-day completeness review  and it would  next advance                                                               
to  the credit  council.    The credit  council  has  60 days  to                                                               
approve  or  deny the  loan.    Upon  approval, the  TIFIA  would                                                               
obligate the  budget authority,  which takes  approximately eight                                                               
months, followed by another eight months to close the loan.                                                                     
MS.  DOUGHERTY   explained  that  during  the   last  legislative                                                               
session,  the  finance  plan  changed  since  the  Department  of                                                               
Revenue  (DOR)   wanted  to  ensure   that  the  plan   would  be                                                               
successful.  Thus,  the KAC didn't submit the  letter of interest                                                               
immediately, but  stopped the process,  met on  several occasions                                                               
and reviewed  the project requirements  from a  fresh perspective                                                               
under  the  public  finance  plan.   The  KAC  now  feels  really                                                               
comfortable  that  it is  ready  and  once  the KAC  obtains  the                                                               
authorization to do so, it will  be ready to submit the letter of                                                               
interest, she said.                                                                                                             
1:30:24 PM                                                                                                                    
REPRESENTATIVE  STUTES indicated  that the  total length  of time                                                               
spans 15-16  months and asked  how that will affect  the interest                                                               
rate for the project.                                                                                                           
MS.  DOUGHERTY agreed  that the  interest rate  is not  locked in                                                               
until the  loan closes, so it  will be the interest  rate that is                                                               
available at the time the loan closes.                                                                                          
1:30:55 PM                                                                                                                    
REPRESENTATIVE  STUTES asked  for  further  clarification on  how                                                               
volatile the interest rate has been in the past five years.                                                                     
MS. DOUGHERTY answered that last  year the interest rate was over                                                               
3 percent, but it has dropped in the last year.                                                                                 
1:31:18 PM                                                                                                                    
REPRESENTATIVE CLAMAN,  in terms  of the  letter of  interest and                                                               
eligibility review, pointed  out one of the issues  that may hold                                                               
up the  project is the  National Marine Fisheries  Service (NMFS)                                                               
decision  on the  permit  for disturbing  Beluga  whales in  Cook                                                               
Inlet.   He asked whether  the federal  agency is waiting  to see                                                               
what action  the legislature  takes before  making a  decision on                                                               
whether to issue a permit.                                                                                                      
MS.  DOUGHERTY  answered that  the  TIFIA  office doesn't  expect                                                               
permits  to  be  in  place.   The  TIFIA  considers  whether  the                                                               
National  Environmental Policy  Act  of 1969  (NEPA) document  is                                                               
complete, but the  KAC is awaiting legislative approval.   At the                                                               
time  [KABATA]  submitted  a  letter of  interest,  it  had  been                                                               
considering  a public  private  partnership (P3)  so  it will  be                                                               
necessary to start the process over again.                                                                                      
1:32:29 PM                                                                                                                    
REPRESENTATIVE CLAMAN  asked whether the Beluga  whale permitting                                                               
issue is separate from the loan eligibility.                                                                                    
MS.  DOUGHERTY agreed  the Beluga  whales represents  one of  the                                                               
major hurdles, but it is not associated with the TIFIA loan.                                                                    
1:32:58 PM                                                                                                                    
CO-CHAIR HUGHES, with respect to  the sensitivity testing and how                                                               
it overlaid the chart, said it  looks pretty positive.  She asked                                                               
whether she felt confident about  the risk assessment and whether                                                               
the KAC will likely be awarded the TIFIA loan.                                                                                  
MS. DOUGHERTY  answered that  in terms of  the timeline,  the KAC                                                               
has had an  ongoing relationship with the TIFIA  office, so staff                                                               
is very familiar with the KAC  project.  She anticipated that the                                                               
application  would  move  as  quickly  as  possible  through  the                                                               
federal process.   She offered her  belief that the loan  will be                                                               
1:33:55 PM                                                                                                                    
MS. DOUGHERTY, to wrap up, said  that the KAC is working on other                                                               
items to  preparing for opening,  including toll  rate schedules,                                                               
fees and  fines, commercial accounts,  rental car  companies, and                                                               
customer  care issues,  such as  privacy issues  and enforcement.                                                               
Although  the KAC  already has  the authority  to collect  tolls,                                                               
some legislation may be needed to  "beef up" some items.  The KAC                                                               
has initiated  discussion with Division  of Motor  Vehicles (DMV)                                                               
since that  agency collects  fees and  fines.   Thus, the  KAC is                                                               
hoping to  avoid duplication of  effort and partner with  the DMV                                                               
to implement the tolling plan.                                                                                                  
1:35:15 PM                                                                                                                    
CO-CHAIR HUGHES  asked what shelving  or slowing down of  the KAC                                                               
might mean in terms of the  TIFIA loan process.  In addition, she                                                               
expressed an interest on any costs  that might be incurred if the                                                               
project is placed on hold or is shelved.                                                                                        
MS. DOUGHERTY stated that it would  really depend on how long the                                                               
KAC will be  shelved; for example, the traffic  and revenue study                                                               
would likely be  relevant for several years.   She indicated that                                                               
study cost  $1 million.   She said  that the  permit applications                                                               
are  very mature,  for example,  the US  Army Corps  of Engineers                                                               
(USACE) is pretty  much through its process, but  must go through                                                               
the  National Environmental  Policy  Act of  1969  (NEPA) and  is                                                               
awaiting an incidental  take statement.  She  reiterated that the                                                               
USACE process  is completed and  the agency has closed  its file.                                                               
She suggested that if those things  languish too long, it will be                                                               
necessary  to  go  through  the   process  again.    It's  really                                                               
difficult  to  determine  the  impact.   In  assessing  the  pure                                                               
federal process, the KAC is  currently in the right-of-way phase,                                                               
and  she  believes that  the  project  has  10  years to  get  to                                                               
construction  before the  Federal  Highway Administration  (FHWA)                                                               
will determine the project isn't moving forward.                                                                                
1:37:23 PM                                                                                                                    
CO-CHAIR HUGHES asked whether the  record of decision holds for a                                                               
certain  timeline or  if the  KAC will  need to  go through  that                                                               
process again.                                                                                                                  
MS.  DOUGHERTY answered  no; that  the ROD  is a  final decision.                                                               
She offered her belief that  the project must move into right-of-                                                               
way  phase within  20 years,  but the  KAC has  already met  that                                                               
requirement, but  must go  into construction  within the  next 10                                                               
1:38:44 PM                                                                                                                    
CO-CHAIR  HUGHES stated  that all  of the  documents come  to the                                                               
Office of  Management &  Budget so it  seems appropriate  to hear                                                               
from her on the KAC.                                                                                                            
1:39:04 PM                                                                                                                    
PAT  PITNEY,   Director,  Office  of  the   Director,  Office  of                                                               
Management & Budget (OMB), stated  that the discussion on the KAC                                                               
is ongoing.  She focused on two  items, the cost to the state and                                                               
the near-term  cash outflow under the  current fiscal environment                                                               
and  the opportunity  cost.   First, there  are several  years of                                                               
payment  outlays until  the toll  revenue begins,  she said,  but                                                               
since  the ROD  has been  reached  there is  some flexibility  in                                                               
terms  of when  to start  the project.   Next,  besides the  cash                                                               
outlay, the  state must  also consider that  if the  federal STIP                                                               
funding  is  used   for  the  KAC,  the  state   won't  have  the                                                               
opportunity to use the funding  on another project.  However, the                                                               
highest consideration is the cash  outlay in the near term, given                                                               
the  state's  current  budget  circumstances,   she  said.    She                                                               
reported  that  she  is happy  to  have  Commissioner  [Designee]                                                               
Luiken on  board and they  are continuing to  hold conversations.                                                               
She  understands that  going from  a  public private  partnership                                                               
(P3)  structure  to a  fully  public  project will  require  some                                                               
legislation, as well.  She recapped  that the project is still in                                                               
discussion phase,  with a huge outlay  for the time period.   She                                                               
acknowledged that tolls have some  opportunity, but the tolls are                                                               
in the future, she said.                                                                                                        
1:41:18 PM                                                                                                                    
CO-CHAIR HUGHES understood  $5 million from the  general fund was                                                               
appropriated by  the last legislature.   She asked whether  it is                                                               
correct that STIP funds will not be required until 2017.                                                                        
MS. PITNEY deferred to the DOT&PF to respond.                                                                                   
CO-CHAIR HUGHES  viewed [this project]  as having the  ability to                                                               
leverage approximately $90 million  in federal funds.  Certainly,                                                               
it's good to think hard about  this project in terms of where the                                                               
project  is and  consider  any additional  costs  for items  that                                                               
might need to be redone [if  the project is halted]; however, she                                                               
urged the committee to keep an  open mind.  Although the state is                                                               
facing  tough  times,  these  funds  were  appropriated  for  the                                                               
project and  no additional general  fund funds will  be necessary                                                               
to  move forward,  she said.   Further,  the proposed  project is                                                               
located in  an area that faces  road closures, in fact,  the Knik                                                               
River Bridge and  the Glenn Highway were just  closed last night.                                                               
Commuters in  this area have pointed  out that there is  only one                                                               
route  between   the  Matanuska-Susitna  valley   and  Anchorage.                                                               
Therefore, she wondered whether this  is the right time to shelve                                                               
this project.                                                                                                                   
1:42:48 PM                                                                                                                    
CO-CHAIR  HUGHES  recalled  during   the  American  Recovery  and                                                               
Reinvestment Act  of 2009 (ARRA)  funding period  the legislature                                                               
frequently heard the  term "shovel ready."  She  asked Ms. Pitney                                                               
to  assess the  six projects  and  whether any  are more  "shovel                                                               
ready" than others and if the KAC would be among them.                                                                          
MS. PITNEY answered the KAC is  one of the closest "shovel ready"                                                               
projects.   In  response  to  a question,  she  said besides  the                                                               
Kodiak Launch Complex (Alaska  Aerospace Corporation), this would                                                               
be the next "shovel ready" project.                                                                                             
CO-CHAIR  HUGHES asked  whether there  is any  risk in  having to                                                               
repay Federal Highway Administration (FHWA) funds.                                                                              
MS. PITNEY answered  yes; but it is long-term risk  due to the 20                                                               
year timeline.                                                                                                                  
1:43:44 PM                                                                                                                    
REPRESENTATIVE ORTIZ  asked for  an estimate  of the  outlay that                                                               
will be needed in the next few years.                                                                                           
MS. PITNEY answered that based on  the graph provided it would be                                                               
the net debt  service payments since there wouldn't  be any other                                                               
revenue to cover those until toll revenues start coming in.                                                                     
1:44:15 PM                                                                                                                    
REPRESENTATIVE CLAMAN  understood the  governor has not  yet made                                                               
any decision  on whether  to shelve  the project.   He  asked for                                                               
further clarification on the timeline for the decision.                                                                         
MS.  PITNEY   answered  that  the   governor  and   the  incoming                                                               
commissioner will make  the decisions over the next  two to three                                                               
1:45:45 PM                                                                                                                    
JANET KINCAID,  Acting Chair; Board  Member, Knik Arm  Bridge and                                                               
Toll Authority (KABATA),  stated that she is the  acting chair of                                                               
the "non-functioning"  KABATA Board.   She gave a  brief personal                                                               
history, relaying  that she  is a 60-year  resident of  the state                                                               
and has lived 50 of  those years in the Matanuska-Susitna valley.                                                               
She  has  previously  served  on  the  Matanuska-Susitna  Borough                                                               
Assembly (MSB).   She related her understanding that  in the mid-                                                               
80s, former  Governor Cowper didn't  fund the capital  budget and                                                               
Anchorage lost 13  percent of their population and  25 percent of                                                               
their value.   She said she  embraces the theory that  when times                                                               
are tough it  is time for capital project  expenditures, in fact,                                                               
it is how Franklin D. Roosevelt got us out of the depression.                                                                   
MS.  KINCAID   stated  that  a  bridge   is  infrastructure,  the                                                               
population in  the Matanuska-Susitna valley is  growing, and will                                                               
continue to grow.  As the matriarch  of a very large family - her                                                               
immediate family is  45 persons with only  three offspring living                                                               
out of Alaska  - she wants a  living wage for all  of her family.                                                               
The KAC  will provide opportunities  to develop a  new community,                                                               
new enterprises,  and entrepreneurship and provide  families with                                                               
an opportunity to  buy relatively cheap land and  a bigger parcel                                                               
to raise  kids with 4-H projects,  which is near and  dear to her                                                               
heart.  She indicated that  she is passionate about this project.                                                               
She quoted  Rick Mystrom,  former Anchorage  mayor, who  wrote in                                                               
2010,  "The measure  of our  state  economy's health  is not  the                                                               
amount  of our  savings.   It's the  growth of  the economy,  the                                                               
prosperity  and  quality  of  life   for  its  citizens  and  the                                                               
opportunity of our young people."   She emphasized that she would                                                               
love to see the KAC happen  so the next generation will have this                                                               
opportunity to  develop new  land.  Certainly,  the traffic  is a                                                               
"big  thing"   but  more  importantly   she  wants  to   see  the                                                               
opportunity for the young people, she said.                                                                                     
1:49:03 PM                                                                                                                    
CO-CHAIR HUGHES  asked for additional information  on the traffic                                                               
MS. KINCAID answered that she  visually can see the traffic, plus                                                               
she owns businesses  in Palmer.  She predicted  that the truckers                                                               
will lessen  the impact on  the Glenn Highway, which  will impact                                                               
Palmer in  positive ways.  She  recently heard on the  radio that                                                               
traffic was backed up past  Eklutna, which highlights the traffic                                                               
CO-CHAIR  HUGHES  asked   why  the  KABATA  Board   is  still  in                                                               
MS. KINCAID  answered that  the KABATA Board  is the  vehicle for                                                               
collecting the  tolls.  The  legislature turned  the construction                                                               
phase to the DOT&PF.                                                                                                            
1:50:34 PM                                                                                                                    
CO-CHAIR HUGHES asked  Ms. Dougherty to provide  figures when she                                                               
testifies again.                                                                                                                
1:52:04 PM                                                                                                                    
BOB FRENCH, Mechanical Engineer (ME),  stated that he has been an                                                               
Alaska resident  for over  30 years.   He said  that he  has been                                                               
studying,  commenting,  and  providing  testimony  and  generally                                                               
living the proposed Knik Arm  Bridge [and Toll Authority] Project                                                               
for the  past 12 years.   In fact, one of  the former legislators                                                               
pointed out to  him that he and his  neighbors have institutional                                                               
knowledge about  the project.   He referred  to a 20  page "White                                                               
Paper on the Knik Arm Bridge Project" in members' packets.                                                                      
MR. FRENCH referred  to the report conclusions of  the 2013 audit                                                               
report and  read a sentence,  "The audit concludes that  KAC toll                                                               
and  revenue projections  are  unreasonably  optimistic, and  the                                                               
projected  cash flows  to the  State are  likely overstated  as a                                                               
result."   The financial structure  of the KAC has  changed since                                                               
that  audit was  completed but  the forecast  of the  traffic and                                                               
toll  revenues are  still key  in determining  whether the  KAC's                                                               
plan is  feasible and the  amount of  the real cost  to Alaskans.                                                               
Following the audit,  KABATA planned to hire  an independent firm                                                               
to review  the population and  employment forecast;  however, the                                                               
report that was released in December  was done by a consortium of                                                               
companies, including  the same discredited firm  who prepared the                                                               
first  forecast, and  not  surprisingly came  up  with even  more                                                               
"bloated" figures.   He  asked whether it  made sense  that these                                                               
outside  firms  are projecting  60  percent  more growth  in  the                                                               
Matanuska-Susitna  valley   than  comparable  estimates   by  the                                                               
state's demographer  or by the  University of Alaska  - Institute                                                               
of  Social and  Economic Research  (ISER).   He asked  whether it                                                               
makes  sense that  their  forecast uses  the  same traffic  daily                                                               
count on the KAC only 15 years  after the bridge opens as in 2012                                                               
on  the  new Glenn/Old  Glenn  Highway  interchange of  the  Knik                                                               
River.   He  referred to  pages 5-8  of the  aforementioned white                                                               
paper as proof that the KAC project figures are off.                                                                            
1:54:35 PM                                                                                                                    
MR.  FRENCH  stated that  the  public  record shows  the  traffic                                                               
estimates  for  the  proposed  Highway   to  Highway  project  in                                                               
Anchorage by DOT&PF shows less  than half the traffic that KABATA                                                               
is predicting.  Traffic estimates  done for the Wasilla bypass by                                                               
DOT&PF  showed   less  than  half  the   population  than  KABATA                                                               
predicted.  The  population and employment by  KABATA has changed                                                               
significantly over the years.  He  asked if there would be a zero                                                               
population  but  more  jobs  in   2035  at  the  Point  MacKenzie                                                               
industrial  dome  than the  entire  City  and Borough  of  Juneau                                                               
currently has  or will  there new study  at Point  MacKenzie have                                                               
more  population than  the currently  Kenai,  Kodiak, and  Bethel                                                               
1:55:35 PM                                                                                                                    
MR. FRENCH  questioned KABATA's significantly different  land use                                                               
assumptions from 2007, 2011, and 2014,  outlined on pages 6 and 7                                                               
of  the aforementioned  white  paper, which  have  the effect  of                                                               
raising traffic  and toll projections  for the bridge  beyond the                                                               
assumptions  made for  other DOT&PF  projects.   These  scenarios                                                               
suggest that  the number of  daily trips rather than  a realistic                                                               
prediction of  future land use  and population was the  goal that                                                               
KABATA's outside consultants focused on.   He provided three more                                                               
reasons why KABATA's  traffic revenue forecasts are  at least two                                                               
times  greater than  the  actual traffic.    First, the  economic                                                               
outlook for the state is  significantly different than it was six                                                               
months  ago and  KABATA's  current predictions  were  built on  a                                                               
highly modified  2009 ISER  model.   Second, the  housing density                                                               
that KABATA  needs to  reach the  assumed population  and revenue                                                               
cannot happen  with the  well and septic,  one dwelling  per acre                                                               
land  use  that  Janet  Kincaid  talked about.    That  level  of                                                               
population  density  can  only  be  achieved  with  high  density                                                               
planned  neighborhoods  with  water  and sewer  provided  by  the                                                               
developer for the  MSB, although the borough  is still struggling                                                               
to  get  upgrades  to their  existing  sewage  treatment  plants.                                                               
However, KABATA  ignores that the cost  of buying a house  in the                                                               
planned  communities is  no  longer cheaper  than  buying in  the                                                               
Anchorage area.   Third,  he was told  by Scott  Goldsmith [ISER]                                                               
that the  KABATA sensitivity  tests do  not evaluate  whether the                                                               
new population they claim will  choose to live at Point MacKenzie                                                               
and if  they would  choose to  live there if  they paid  a couple                                                               
thousand in tolls.                                                                                                              
1:57:40 PM                                                                                                                    
MR. FRENCH asked  what the effect of  the unreasonably optimistic                                                               
revenue forecast could  be, noting that three  toll projects have                                                               
recently gone  bankrupt:   The Indiana toll  road, the  South Bay                                                               
Expressway  in California  and the  Southern  Connector in  South                                                               
Carolina,  and the  Pocahontas Parkway  in Virginia  went through                                                               
two defacto bankruptcies with the  creditors in the state finally                                                               
taking over the  project.  In all cases the  tolls were one third                                                               
to one  half of CDM Smith's  projections, which is the  same firm                                                               
KABATA has used  for its traffic and toll revenue  forecasts.  He                                                               
said he  did not  think that  the state  needs to  spend millions                                                               
more  on a  project that  doesn't pencil  out and  that we  can't                                                               
afford.  He  asked the legislature to support  Governor Walker in                                                               
halting the projects and using the  funds for other projects.  He                                                               
said that  former DOT&PF  Commissioner Kemp  wanted the  state to                                                               
believe there are  huge penalties for canceling  the project, but                                                               
the truth  is that  possibly 20  years down  the line  that might                                                               
occur;  however,  the federal  government  does  not want  to  be                                                               
responsible for  a big boondoggle  any more than  the legislature                                                               
does.  The  regulations require the state to study  the impact of                                                               
the project  prior to  moving on  to construction  and if  at any                                                               
point  during the  process  it  becomes clear  that  the cost  or                                                               
controversy  is too  significant and  the project  doesn't pencil                                                               
out the study could be curtailed.                                                                                               
1:59:08 PM                                                                                                                    
MR. FRENCH said that amendment 13  to the STIP program shows that                                                               
ending the project right now would  free up $600 million in state                                                               
and federal funds, about half of  which would be state bonds that                                                               
wouldn't need to be issued with  the remainder that could be used                                                               
to fund other urgent needs.                                                                                                     
1:59:49 PM                                                                                                                    
REPRESENTATIVE  CLAMAN recalled  Ms. Dougherty  stating that  the                                                               
KAC has  new studies  on both the  toll and  traffic projections.                                                               
He asked whether Mr. French has reviewed the new studies.                                                                       
MR.  FRENCH answered  that  he  was at  the  [Knik Arm  Crossing]                                                               
presentation  to the  Anchorage Metropolitan  Area Transportation                                                               
Solutions in December.   He said his comments are  related to the                                                               
current study  but did compare  the two previous studies  done by                                                               
2:00:41 PM                                                                                                                    
CO-CHAIR HUGHES  said it sounds  like he doesn't agree  with some                                                               
of  what Ms.  Dougherty  presented in  terms  of the  sensitivity                                                               
study that  shows the project in  a pretty good position.   Thus,                                                               
she further asked if he disagrees with the department.                                                                          
MR.  FRENCH  answered that  in  reviewing  KABATA's studies,  the                                                               
studies  show  there is  less  than  a percentage  of  difference                                                               
between a "build option" and a  "no build option" and in terms of                                                               
how the population might change overall  for the region.  He said                                                               
what the  study does  change is where  the population  chooses to                                                               
live.   He stated  that Scott Goldsmith  [ISER] pointed  out that                                                               
one of the sensitivities was  missing in KABATA's analysis, which                                                               
is whether  people would live  at Point MacKenzie with  that high                                                               
of a toll or if they would choose  to locate near the core of the                                                               
Matanuska-Susitna  valley  near  Palmer  and  Wasilla  with  full                                                               
access to schools, hospitals, and grocery stores.                                                                               
2:02:13 PM                                                                                                                    
CO-CHAIR  HUGHES stated  that the  area is  growing by  leaps and                                                               
bounds around Knik  Goose Bay and farther out.   In fact, she has                                                               
heard that if  the area was incorporated, it would  be the fourth                                                               
largest city  in the state.   She offered her belief  that people                                                               
are choosing  to be there  now and  the feedback she  receives is                                                               
that people  will be willing to  pay the toll.   She acknowledged                                                               
that is  up for  question right  now.   She hoped  the department                                                               
will  speak  to the  committee  on  the Statewide  Transportation                                                               
Improvements Program (STIP) funds.                                                                                              
2:03:21 PM                                                                                                                    
PAUL CAULCARR,  Business Manager,  Iron Workers Local  Union 751;                                                               
Vice-President,   Southcentral  Building   Trades,  stated   that                                                               
approximately 300  members live  and work in  Alaska.   He stated                                                               
that he is currently a resident  of Wasilla who commutes daily to                                                               
work in  Anchorage.   He stated that  the commute  is challenging                                                               
enough and minor accidents can close  the north - south travel in                                                               
the  state.   Just last  night his  one hour  commute became  2.5                                                               
hours,  he said,  so  he considers  the KAC  a  matter of  public                                                               
safety.   He recalled  two years  ago a  trooper shooting  on the                                                               
road closed  the highway  for 5-6  hours and he  missed a  day of                                                               
work  along  with  thousands  of  co-commuters.    He  passed  on                                                               
anecdotally that  commuters support another  north-south highway.                                                               
He  said the  future of  the infrastructure  challenged state  is                                                               
badly needing this project.   Alaska has overcome many challenges                                                               
in the past  with a "can do" independent spirit.   He can't think                                                               
of a  reason why  this project can't  be built -  it is  one that                                                               
Alaska  has talked  about for  30 years.   Construction  jobs are                                                               
often  considered  temporary jobs,  but  his  members are  paying                                                               
mortgages, coaching  youth hockey  teams, and  attending churches                                                               
for the long run.   In the late 80s people  left, but this bridge                                                               
will be a bridge  to the future of the state and  it will open up                                                               
opportunities  for industrial,  housing, schools,  and commercial                                                               
development.   He said he respects  the opinions of those  not in                                                               
favor of this project, but he  believes that Alaska needs this to                                                               
grow and infrastructure is never a waste of time or capital.                                                                    
2:06:22 PM                                                                                                                    
LARRY  DeVILBISS,   Borough  Mayor,   Matanuska-Susitna  Borough,                                                               
stated that he is very supportive  of this project.  He views the                                                               
project in terms  of economics and the negative  economics of not                                                               
doing  it. Population  figures were  discussed,  but he  recently                                                               
visited the  Joe Redington Jr. and  Sr. High School and  the site                                                               
of the  Dena'ina Elementary School that  will open  in fall.   He                                                               
said  the Knik  Fairview area  and the  Matanuska-Susitna Borough                                                               
center is  moving towards Point  MacKenzie.  The new  school will                                                               
be filling up with next generation  of students in 2016, which is                                                               
the  first  project  of  that  magnitude  that  has  started  and                                                               
finished  in  one  year.    The state  demographer  has  set  the                                                               
official population at  98,000 as of January 1  so the Matanuska-                                                               
Susitna  Borough  is  still  growing, and  has  the  only  school                                                               
district  that   is  growing   in  the  state.     He   said  the                                                               
transportation issues  really hurt and  his phone rings  "off the                                                               
hook."   The Knik-Goose Bay  Road and  Parks Highways are  two of                                                               
the three largest  safety problems in the state  and he predicted                                                               
that  this  will  only  get  worse  until  traffic  is  diverted.                                                               
Traffic  causes  congestion problems  for  the  City of  Wasilla,                                                               
which is why the city is very supportive of this project.                                                                       
2:09:29 PM                                                                                                                    
MAYOR  DeVILBISS  reported that  Port  MacKenzie  is more  of  an                                                               
economic  boon to  Anchorage due  to  its proximity,  so what  is                                                               
being decided with  the KAC is how fast to  develop that economic                                                               
unit and  give Anchorage an  opportunity to expand  an industrial                                                               
use property.   He found the issue of people  not wanting to live                                                               
at  Point MacKenzie  a bit  laughable.   There are  two liquefied                                                               
natural  gas (LNG)  projects that  are well  along in  developing                                                               
massive projects.   One of  their biggest concerns is  the source                                                               
of their  labor force.   The MSB  has laid out  a master  plan on                                                               
borough-owned property  for a new  town site right at  the bridge                                                               
landing  and the  MSB  intends  to sell  that  land this  summer,                                                               
complete with utilities, including gas,  septic, and water.  This                                                               
subdivision is  capable of  the density  of population  needed to                                                               
supply jobs to  the prison and the port, with  the rail extension                                                               
fitting into that, too.                                                                                                         
2:11:32 PM                                                                                                                    
CO-CHAIR HUGHES asked for a  range of projected jobs specifically                                                               
related to Port MacKenzie.                                                                                                      
MAYOR DeVILBISS responded with respect  to the two LNG projects -                                                               
WestPac  [Logistics]  and  REI  [Resource  Energy,  Inc.].    The                                                               
forecast on one of the projects  is 250 [jobs] and the maximum on                                                               
the other is 2,500 local jobs.   He clarified that these jobs are                                                               
not related  to bridge construction  and the projects  are moving                                                               
ahead with  or without a bridge.   He offered that  the decisions                                                               
being made today  will determine how fast  development will occur                                                               
and the extent to which the economic engine will be nurtured.                                                                   
2:12:50 PM                                                                                                                    
LOIS EPSTEIN,  Professional Engineer (PE), stated  that she lives                                                               
in   Anchorage  and   served  two   terms  on   AMATS  [Anchorage                                                               
Metropolitan  Area Transportation  Solutions] Technical  Advisory                                                               
Committee.   She  has since  remained involved  in transportation                                                               
decision-making  in  Alaska  and statewide,  including  authoring                                                               
several  editions of  a transportation  finance report  entitled,                                                               
Easy to  Start, Impossible  to Finish.   This  publication covers                                                             
the  economics of  the  state's megaprojects.    She offered  her                                                               
belief  that  the  KAC  is   a  Matanuska-Susitna  Borough  (MSB)                                                               
priority, but  shouldn't be a  priority for others in  the state.                                                               
First,  Matanuska-Susitna  employees   only  represent  about  10                                                               
percent of  the Anchorage  work force.   Second, the  "so called"                                                               
explosive growth  in the Knik-Goose Bay  area may be high  but it                                                               
started  with a  relatively  low population  base. She  cautioned                                                               
that statements  about the road  should not be used  in isolation                                                               
to justify  a bridge for an  area with still a  small population.                                                               
Third,  as the  MSB  grows,  it is  developing  its own  business                                                               
community so there  will be less and less need  over time for the                                                               
MSB to depend on Anchorage for employment.                                                                                      
MS. EPSTEIN said that the  arguments against the proposed KAC are                                                               
important for the  legislature to consider.   First, the proposed                                                               
toll  is  among the  highest  in  the  country so  commuters  and                                                               
travelers are  likely to  take the  Glenn Highway  alternative to                                                               
travel to  and from Anchorage.   Second,  it will be  farther and                                                               
take more  time via  the bridge route  for people  traveling from                                                               
Wasilla east so  these drivers will likely avoid  the toll bridge                                                               
and  road.   Third, as  previously stated,  there are  inadequate                                                               
traffic  projections.    She  pointed   to  projections  for  the                                                               
Whittier tunnel as an example  of a project built with overstated                                                               
traffic  projections, noting  the legislature  currently provides                                                               
an  annual  subsidy  of  $2  million  for  the  Whittier  tunnel.                                                               
Fourth, evidence  shows that younger  generations are  relying on                                                               
cars less and less.  Finally,  it is extremely unlikely the [KAC]                                                               
will receive a  TIFIA loan, especially since the  project has not                                                               
been   invited  to   submit  further   information  on   numerous                                                               
occasions.   In addition, the  vehicle miles traveled  per capita                                                               
peaked several years ago in  Alaska and elsewhere in the country,                                                               
so people are  relying on other ways to connect.   In response to                                                               
[KAC]  that  alternatives to  the  bridge  could cost  more,  she                                                               
offered three  points:  1.  A number of organizations  proposed a                                                               
comprehensive alternative  to the bridge, which  was not analyzed                                                               
since  KABATA  apparently  did not  take  alternatives  seriously                                                               
enough   2.  The Glenn  Highway corridor  could carry  the needed                                                               
traffic  with  options  such  as  congestion  pricing  to  spread                                                               
traffic  to  non-peak  times, or  using  advanced  transportation                                                               
solutions  3.    The  Wasilla   bypass  could  meet  the  freight                                                               
industry's  needs and  is desirable  for  reasons not  associated                                                               
with the bridge.                                                                                                                
MS. EPSTEIN directed  attention to Amendment 13  to the Statewide                                                               
Transportation  Improvements Program  (STIP), which  is currently                                                               
out for  public comment through  February 13, 2015,  which wisely                                                               
transfers nearly  $900 million  in federal  and state  funds from                                                               
Knik Arm Bridge to more  essential transportation projects.  This                                                               
funding could  be applied to other  projects statewide, including                                                               
road    and   bridge    upgrades,    safety   upgrades,    public                                                               
transportation, or ferries, she said.                                                                                           
2:16:56 PM                                                                                                                    
MS. EPSTEIN pointed out approximately  $250 million of the nearly                                                               
$900 million in  the current STIP is for state  bonds, which will                                                               
not need  to be issued  if the [KAC]  is cancelled.   She offered                                                               
her belief that  the bridge is not  a wise, fiscally-conservative                                                               
investment   and    will   harm   the    state's   transportation                                                               
infrastructure by siphoning away  dollars that would otherwise be                                                               
able to  maintain and  upgrade existing roads  and bridges.   She                                                               
questioned  the need  for the  bridge given  the state's  limited                                                               
finances and  offered that projects with  poor justification like                                                               
this bridge must  be the first to go.   She asked the legislature                                                               
to take action  to ensure that the properties  on Government Hill                                                               
currently   scheduled    for   demolition   by    Department   of                                                               
Transportation  &  Public  Facilities  (DOT&PF)  this  spring  be                                                               
preserved  for the  good  of the  Anchorage  and Government  Hill                                                               
2:17:45 PM                                                                                                                    
STEPHANIE KESLER,  President, Government Hill  Community Council,                                                               
asked  to testify  on the  scheduled  right-of-way demolition  on                                                               
Government  Hill.   She stated  in  January one  of the  business                                                               
owners received  a letter from  DOT&PF indicating  their property                                                               
would  enter into  eminent domain  proceedings.   Governor Walker                                                               
stopped that  because it  was contrary  to his  order prohibiting                                                               
additional spending  on the large mega-projects.   However, three                                                               
properties on  Government Hill -  two homes  and one hotel  - are                                                               
still  scheduled for  demolition  in the  spring.   She  directed                                                               
attention to  this matter so  during discussing  expenditures for                                                               
the  KAC, the  legislature  will  be aware  that  the DOT&PF  has                                                               
indicated  it is  still moving  forward  with the  aforementioned                                                               
demolitions.   She  said the  council  thinks this  is an  unwise                                                               
expenditure of money, plus it will  demolish two fine homes and a                                                               
motel in  the Government Hill area  for a project that  may never                                                               
happen,  leaving the  community with  destroyed properties.   She                                                               
concluded by  saying, "We  will continue to  raise this  issue as                                                               
the  legislative session  progresses  with the  hope that  cooler                                                               
heads  will  prevail  and  consider  that  those  houses  not  be                                                               
demolished until construction is actually ready to begin."                                                                      
2:20:20 PM                                                                                                                    
AVES  THOMPSON,  Lobbyist;  Executive Director,  Alaska  Trucking                                                               
Association, Inc. (ATA),  stated that the ATA  has long supported                                                               
the Knik  Arm Crossing Project.   Although the ATA  realizes that                                                               
serious budget  constraints exist  this year,  the ATA  hopes the                                                               
state will  not abandon  the work  done on the  KAC project.   He                                                               
offered  his  belief  that  this   is  a  once  in  a  generation                                                               
opportunity  to  expand   the  regional  transportation  network,                                                               
provide  alternative  ways   to  move  freight  in   and  out  of                                                               
Anchorage,  and  generally  create  a safer  and  more  efficient                                                               
transportation system.                                                                                                          
2:21:37 PM                                                                                                                    
CO-CHAIR HUGHES  asked for further  clarification on  any figures                                                               
for fuel savings and trip  length benefits that might be realized                                                               
by the industry.                                                                                                                
MR. THOMPSON answered that he has not  done so, but it would be a                                                               
"serious  swag" and  he'd rather  not get  quoted on  it at  this                                                               
2:22:21 PM                                                                                                                    
CATHARINE JONES  stated that the  Knik Arm Bridge is  a necessary                                                               
part of Alaska's  infrastructure.  She said,  "It certainly needs                                                               
to be  built and to move  forward sooner than later  because it's                                                               
only going to get more expensive."                                                                                              
2:23:09 PM                                                                                                                    
PAUL GROSSI,  Lobbyist, Ironworker Management  Progressive Action                                                               
Cooperative Trust, Alaska State Pipe  Trades UA Local 375, stated                                                               
he wanted to testify on behalf  of the ironworkers, but he wanted                                                               
to add to  Mr. Caulcarr's testimony.   Obviously the organization                                                               
supports this  project for jobs, including  construction jobs for                                                               
building the bridge and  for potential private-sector development                                                               
across the  proposed bridge.   He said  the state will  need this                                                               
because people  can't depend  on state  dollars as  much anymore.                                                               
He suggested that  the state will need creative  thinking to fund                                                               
future projects, especially since  projects are important for the                                                               
economy  since they  are  construction jobs,  but  also since  it                                                               
develops infrastructure and allow for further development.                                                                      
MR. GROSSI  said he has  listened to potential problems  with the                                                               
[KAC] project; however, if this is  not a viable project, it will                                                               
come out through  the TIFIA process and the loan  will be denied.                                                               
It's important  for the state  to move  forward, he said,  and he                                                               
did not think the TIFIA loan  will be denied.  Further, the state                                                               
can benefit  by learning  the TIFIA process,  which could  fund a                                                               
number of infrastructure projects.   In addition, another similar                                                             
program to  consider is the  WIFIA [Water  Infrastructure Finance                                                             
and  Innovation Act]  loan program  that  can be  used for  water                                                               
infrastructure  projects.   Thus,  that  type  of expertise  will                                                               
allow the state access to  very low interest loans with long-term                                                               
payouts.  Although he is not  an economist, he offered his belief                                                               
that  the loans  will  be  beneficial.   In  addition, the  [KAC]                                                               
requires  very little  general fund  monies.   He encouraged  the                                                               
state to  find ways  of building  projects without  using general                                                               
fund monies.   He served as a former administrator  in hard times                                                               
and he understands the need to be creative with funding.                                                                        
MR.  GROSSI recalled  that  the state  had  some tough  financial                                                               
times in the  80s for similar reasons.  He  further recalled that                                                               
the price  of oil  was at  $9 per barrel.   He  characterized the                                                               
TIFIA loans as a creative means of viewing projects.                                                                            
2:27:41 PM                                                                                                                    
MR.  GROSSI,  speaking anecdotally,  stated  that  he resides  in                                                               
Juneau.   First, he recalled  the break-even traffic  figures for                                                               
the KAC  was 10,000 vehicles  per day,  which is about  that same                                                               
number of  daily crossings  on the  bridge connecting  Juneau and                                                               
Douglas.  He said  he finds it hard to believe  there won't be at                                                               
least  10,000  crossings  for  the KAC.    Secondly,  during  his                                                               
travels on  the East Coast he  used toll roads and  toll bridges.                                                               
Although alternative  roads were  always an  option, he  paid the                                                               
tolls since it  typically provided a more direct route.   He said                                                               
he  would pay  the toll  if  the proposed  KAC was  built and  he                                                               
believes others would be willing to do so.                                                                                      
2:29:29 PM                                                                                                                    
CO-CHAIR  HUGHES agreed  that  time is  definitely  a factor  and                                                               
people  like to  save time.   She  asked whether  people [in  the                                                               
trades, such as  the ironworkers] with expertise moved  out.  She                                                               
expressed  concern  about losing  skilled  workers  as the  state                                                               
hopes  to  build a  natural  gas  pipeline.   She  further  asked                                                               
whether the state will risk people moving out of state.                                                                         
MR. GROSSI answered yes.  He  said he is a plumber and pipefitter                                                               
by trade  and he  nearly left,  but found a  job working  for the                                                               
state within days  of preparing to leave the state.   He stressed                                                               
that a lot  of plumbers and pipefitters moved  out, although some                                                               
returned.   He cautioned that if  there are not any  jobs, people                                                               
have to go somewhere  to work.  He pointed out  the state has had                                                               
a stable working situation during the last 20 years.                                                                            
2:31:31 PM                                                                                                                    
REPRESENTATIVE ORTIZ  asked how  he would  prioritize the  KAC in                                                               
terms of the state's major projects.                                                                                            
MR. GROSSI  said he  doesn't know  the answer  to that  since the                                                               
construction  industry would  like  a pipeline,  a  dam, and  the                                                               
other  major projects.    He  agreed that  each  project must  be                                                               
judged, but  he also  believes that all  the major  projects have                                                               
validity.  He suggested that  what's doable with the least amount                                                               
of  general fund  dollars  is one  consideration,  but it's  also                                                               
important to consider what is  necessary in Alaska.  For example,                                                               
the  proposed natural  gas pipeline  is necessary  for long  term                                                               
viability of the state in terms  of jobs and future revenue.  The                                                               
KAC does  the same thing, not  to the same extent  as a pipeline,                                                               
but this project  will provide revenue in the long  term that can                                                               
be used for infrastructure, he said.                                                                                            
2:33:40 PM                                                                                                                    
REPRESENTATIVE  CLAMAN  asked  whether  he  would  pick  the  gas                                                               
pipeline if he had to prioritize and select one project.                                                                        
MR. GROSSI  hesitated to say yes,  but he agreed that  a proposed                                                               
natural gas line is extremely important project.                                                                                
2:34:22 PM                                                                                                                    
CO-CHAIR HUGHES pointed  out that the small  diameter natural gas                                                               
pipeline is under consideration at this point.                                                                                  
2:34:32 PM                                                                                                                    
REPRESENTATIVE CLAMAN  did not hear  any distinction  between the                                                               
large or small diameter pipelines in Mr. Grossi's response.                                                                     
MR.  GROSSI  offered that  in  1981,  there were  three  proposed                                                               
projects  ready to  go:   the natural  gas pipeline,  the Susitna                                                               
Dam, and the Knik Arm Crossing.  He said:                                                                                       
     You know, I was a young man then and I thought it was                                                                      
     a great idea and I was promoting that.  Now I'm an old                                                                     
     man and the one thing I  really don't want to see is my                                                                    
     grandchildren sitting  here as  old men and  asking for                                                                    
     the same  three projects -  or these same projects.   I                                                                    
     think, it's time we start  building.  In the governor's                                                                    
     words,  "We've studied  enough."   It's  time to  build                                                                    
     some of these things.                                                                                                      
CO-CHAIR HUGHES  directed attention  to the written  testimony in                                                               
members'  packets  from  the  International  Union  of  Operating                                                               
Engineers Local 302.                                                                                                            
2:36:16 PM                                                                                                                    
CO-CHAIR HUGHES closed public testimony  on the Knik Arm Crossing                                                               
2:39:55 PM                                                                                                                    
REPRESENTATIVE NAGEAK remarked  that when he was a  young man the                                                               
cost  of gasoline  was $.35  per gallon.   He  recalled when  the                                                               
Parks Highway  was built what a  difference in time it  made.  He                                                               
described  it as  being  progress.   He viewed  it  as being  the                                                               
difference  between the  old  and  new ways.    He stressed  that                                                               
projects  are necessary.    He remarked  on  improvements in  the                                                               
quality of life in Anchorage and  other parts of Alaska since the                                                               
60s.   He said the Bush  aspires to improve the  quality of life.                                                               
He remarked  on the cost  of gasoline  in rural Alaska,  which is                                                               
over $  7 a gallon.   In terms of  the [KAC], it will  reduce the                                                               
cost of  doing business, especially  for the  trucking companies.                                                               
He  still wants  the  road to  his  house, but  he  said he  also                                                               
recognizes  that some  projects are  much needed  ones.   At some                                                               
point, he will come back and request the road [to his house].                                                                   
2:41:30 PM                                                                                                                    
MS. DOUGHERTY emphasized  that the new study  shows an incredible                                                               
difference in  traffic.   She stated that  under the  P3 [public-                                                               
private partnership] process, the  KABATA was looking at carrying                                                               
the whole availability  payment with toll revenue,  but when that                                                               
wasn't possible the  project considered a reserve  account.  Now,                                                               
the KAC seeks enough funding  to repay approximately one-third of                                                               
the financing  plan since  the TIFIA  needs to  be covered.   She                                                               
characterized the KAC plan as  a much more conservative approach.                                                               
She argued that  the figures are not the same,  that [traffic and                                                               
toll revenues] are  approximately half of the  predictions in the                                                               
early years, in part, because the  KAC used a local firm, as well                                                               
as  an  economist who  has  performed  multiple studies  for  the                                                               
Municipality  of   Anchorage  -  and  was   raised  in  Soldotna.                                                               
Further, the KAC performed significant  outreach to local people.                                                               
She predicted  approximately 3,500  ADT [average  daily traffic],                                                               
with a  slow ramp  up, but  within 10 years  extra lanes  will be                                                               
needed.   Thus, the growth  will still be  there.  The  new study                                                               
indicates  the ADT  will start  more  slowly, but  once the  town                                                               
sites are developed,  the traffic will shoot up, in  part, due to                                                               
the  lack  of  single  family   homes  in  Anchorage  and  people                                                               
preferring  not  to live  in  condos.    She suggested  that  the                                                               
predicted ADT  figures are ones that  could be met even  in small                                                               
communities such as Barrow.                                                                                                     
MS.  DOUGHERTY said,  "If you  step back  and look  at it  from a                                                               
'pass  the red  face' test,  it absolutely  passes 'the  red face                                                               
test'".  All  the studies show that  the Matanuska-Susitna valley                                                               
is growing, even during downturns, she stated.                                                                                  
2:44:49 PM                                                                                                                    
CO-CHAIR  HUGHES  summarized  that   the  newer  figures  show  a                                                               
slightly  slower ramp  up but  the [KAC]  is considered  a viable                                                               
project in terms of traffic.                                                                                                    
MS.  DOUGHERTY   answered  yes.    She   recalled  one  testifier                                                               
suggested that the sensitivity didn't  address the willingness to                                                               
pay   a  toll.      She  acknowledged   that  the   socioeconomic                                                               
sensitivities  studies don't  include that,  but the  traffic and                                                               
revenue  study does  since it  applies toll  friction.   The toll                                                               
friction reduces the  traffic, she said, and that  is included in                                                               
the aforementioned study.                                                                                                       
2:45:48 PM                                                                                                                    
REPRESENTATIVE  ORTIZ recalled  one testifier  said that  the KAC                                                               
will be  the highest toll in  the country.  He  asked whether she                                                               
agreed with that statement.                                                                                                     
MS.  DOUGHERTY answered  that most  toll  roads in  the Lower  48                                                               
apply the toll  every half mile so it isn't  a fair comparison to                                                               
the KAC proposed  tolls.  In further response,  she reported that                                                               
the proposed  toll has been modeled  at $5 each way,  which would                                                               
grow with inflation.   The KAC has done surveys  and studies that                                                               
indicate people are willing to pay those tolls.                                                                                 
2:46:43 PM                                                                                                                    
REPRESENTATIVE MILLETT recalled hearing  the same discussion when                                                               
the Whittier  tunnel was  build, as to  whether people  would pay                                                               
the toll.   She recalled  the toll  is set at  $6 each way.   She                                                               
indicated it  is a busy  port and  the tunnel has  taken pressure                                                               
off Seward and  Whittier.  She ascribed to the  theory, "Build it                                                               
and they  will come."  She  said she lives in  Anchorage and it's                                                               
becoming a  public safety  issue due to  the increase  in cluster                                                               
homes being  built.  She said  she is not threatened  by the road                                                               
since she believes  traffic will grow since there  isn't any land                                                               
in Anchorage.                                                                                                                   
2:49:20 PM                                                                                                                    
JEFF   OTTESEN,  Director,   Division  of   Program  Development,                                                               
Department of Transportation &  Public Facilities (DOT&PF), asked                                                               
to address  the STIP amendment  since it currently  reflects that                                                               
the governor asked  to slow down major projects to  allow them to                                                               
be reevaluated.   This  meant money  in the  STIP for  the Juneau                                                               
Access  and  KAC were  designated  for  other projects  to  avoid                                                               
losing the federal funding.   The DOT&PF has moved other projects                                                               
forward to take  the place of these two large  projects.  As part                                                               
of  the federal  requirements,  the department  needed to  select                                                               
projects under  active design  or under  environmental work.   It                                                               
takes 3-5 years to bring a  project to the point of using federal                                                               
funding for construction.   He indicated the  DOT&PF has selected                                                               
projects from around the state, including replacing 10 bridges.                                                                 
2:51:15 PM                                                                                                                    
MR.  OTTESEN clarified  that $154  million is  being reprogrammed                                                               
this year, not  $900 million.  In addition, one  other project is                                                               
a technical  that allows the  IFA [Inter-Island  Ferry Authority]                                                               
to use  funds for their  ferries.  The remaining  projects listed                                                               
either  delay the  two major  or move  in approximately  20 other                                                               
2:52:04 PM                                                                                                                    
CO-CHAIR  HUGHES  asked  whether  the other  projects  using  the                                                               
amended STIP funds will require  general fund dollars, and if so,                                                               
how much would be required.                                                                                                     
MR.  OTTESEN answered  that the  federal  funds require  matching                                                               
funds,  and  whether the  federal  funding  is applied  to  major                                                               
projects or lesser  ones will use same amount  of matching funds.                                                               
He reported that  the DOT&PF uses general fund at  the rate of $9                                                               
of state funding for every $91 of federal funding.                                                                              
CO-CHAIR HUGHES  appreciated the clarification since  some people                                                               
were  confused  and thought  that  not  moving forward  on  major                                                               
projects will save general fund dollars.                                                                                        
MR. OTTESEN clarified  that the way the financing plan  is set up                                                               
for  the KAC  requires the  use of  state bonds  as its  matching                                                               
funds.   The  state  bonds are  state-provided  dollars that  are                                                               
borrowed dollars, which  are repaid over time.   He characterized                                                               
the financing as more of a technical issue.                                                                                     
2:53:35 PM                                                                                                                    
CO-CHAIR  HUGHES asked  whether the  KAC would  use less  general                                                               
funds than if the funding were  used on projects that moved up on                                                               
the STIP.                                                                                                                       
MR.  OTTESEN answered  yes; although  it is  a matter  of timing.                                                               
The  state bonds  must be  repaid with  general fund  dollars, at                                                               
least initially, until the traffic  and toll revenues reached the                                                               
point in  which the  bonds would  be repaid  by revenue  from the                                                               
project.    He  characterized  it as  being  illustrated  in  the                                                               
cascade  chart [on  slide 3],  in which  it would  be one  of the                                                               
lower buckets.                                                                                                                  
2:54:22 PM                                                                                                                    
CO-CHAIR  HUGHES  said  she recently  attended  a  Transportation                                                               
Finance Subcommittee.  She referred  to federal SAFETEA-LU [Safe,                                                               
Accountable,  Flexible, Efficient  Transportation  Equity Act:  A                                                               
Legacy for Users],  funding.  She recalled one  memo she received                                                               
indicated $32.1 million was designated for the KAC.                                                                             
MR. OTTESEN  reported that there  was initially over  $90 million                                                               
in earmark  funding, which was used  for preconstruction activity                                                               
that has  happened for  nearly a  decade.   Although some  of the                                                               
remaining $31 million  in funding is being  used for right-of-way                                                               
acquisition, it is not actually  expended.  In addition, there is                                                               
approximately  $23 million  in earmarked  funds dedicated  to the                                                               
KAC  that has  not yet  been assigned  a project  number, but  is                                                               
obligated.  He  explained that once the DOT&PF asks  to put money                                                               
on a project, it obligates the federal funds.                                                                                   
2:55:58 PM                                                                                                                    
REPRESENTATIVE  CLAMAN asked  whether the  state bonds  earmarked                                                               
for  Knik  Arm  Crossing  (KAC) can  be  allocated  to  different                                                               
MR.  OTTESEN answered  that last  year, the  legislature approved                                                               
$300  million  in   bonding  in  House  Bill  23   for  the  KAC,                                                               
exclusively, subject to  the TIFIA loan approval.   Thus, without                                                               
an approved TIFIA loan, the bonds won't be sold.                                                                                
2:56:54 PM                                                                                                                    
REPRESENTATIVE CLAMAN  related his  understanding that  the bonds                                                               
are contingent  upon the TIFIA  loan, so  if the loan  doesn't go                                                               
through,  the  state  is  not authorized  to  issue  the  general                                                               
obligation (GO) bonds.                                                                                                          
MR. OTTESEN answered that he is correct.                                                                                        
2:57:09 PM                                                                                                                    
CO-CHAIR HUGHES recalled the OMB  director indicated a bill still                                                               
needed to be passed.                                                                                                            
MR.  OTTESEN  answered that  he  is  not  aware of  any  proposed                                                               
legislation.   He suggested  that there may  be some  things that                                                               
House  Bill 23  has expanded,  but  nothing is  required to  move                                                               
forward with the TIFIA application.                                                                                             
2:58:05 PM                                                                                                                    
CO-CHAIR HUGHES indicated that AO  271 [Administrative Order 271]                                                               
pertained  to  discretionary  funds.   She  indicated  that  non-                                                               
discretionary funds  could still move  forward and asked  what is                                                               
still moving forward.                                                                                                           
MR. OTTESEN deferred to Ms. Dougherty.                                                                                          
2:58:48 PM                                                                                                                    
MR. OTTESEN, in  terms of impact, stated that  by subtracting out                                                               
the  earmarks  dedicated  to  the KAC,  that  the  project  would                                                               
require $271 million  of other federal highway  funds [FHWA] that                                                               
are general  purpose, which means  that funding could be  used on                                                               
other projects  in the  state for  National Highway  System [NHS]                                                               
projects.  He  said this represents about 90 percent  of the FHWA                                                               
funding the state  receives each year.  Thus, if  the project was                                                               
performed   all  at   once,  it   would   represent  a   one-year                                                               
appropriation of  funding at the  current level.  There  are ways                                                               
to spread that  out, especially since the  project is anticipated                                                               
to span four years; which would  reduce the overall impact to the                                                               
MR.  OTTESEN said  for the  last  three years  many projects  are                                                               
coming  in  under  the  estimate,  in  fact,  approximately  $100                                                               
million  per year.   The  DOT&PF takes  the "extra  dollars" that                                                               
were not needed and find projects  in the same year.  In response                                                               
to a  comment, he  agreed it is  a good problem  to have,  but it                                                               
does mean  the design  squads have  more work  to complete.   The                                                               
DOT&PF has  already had  $35 million  come back  this year.   The                                                               
overall effect of spending $75 million  a year to do this project                                                               
will be almost nil, he said,  if the state takes advantage of the                                                               
low  bid  environment.    He  anticipated  that  the  trend  will                                                               
continue  since the  cost of  construction is  contingent on  the                                                               
price of energy.                                                                                                                
3:01:36 PM                                                                                                                    
REPRESENTATIVE  HUGHES asked  Mr.  Ottesen to  recap and  provide                                                               
some figures he mentioned today.                                                                                                
3:01:53 PM                                                                                                                    
MS. DOUGHERTY referred  to Administrative Order 271  (AO 271) and                                                               
indicated that  the KAC  has stopped  work with  its consultants,                                                               
and  slowed  down  the   right-of-way  work,  although  acquiring                                                               
federal  lands is  a  lengthy process,  she said.    She did  not                                                               
anticipate  any eminent  domain  proceedings  will be  necessary.                                                               
The KAC has  jumped to work on tolling operation  plans that will                                                               
be needed in the future.   Further, she reported that the KAC has                                                               
been "polishing up"  the TIFIA letter of interest,  which is web-                                                               
based.    This   process  includes  a  variety   of  studies  and                                                               
documents, including links to traffic  and toll revenues studies,                                                               
the National  Environmental Policy  Act of  1969, and  proof that                                                               
the KAC can collect tolls.   These items can be transmitted in an                                                               
electronic format  so the TIFIA  can click on the  hyperlinks and                                                               
see the necessary proof.                                                                                                        
3:03:23 PM                                                                                                                    
CO-CHAIR HUGHES said  she thought the work was  minimal and there                                                               
isn't a lot of non-discretionary obligated functions going on.                                                                  
MS. DOUGHERTY explained that the  term "discretionary" can mean a                                                               
variety of things.  The KAC  thinks of federal highway dollars as                                                               
being non-discretionary  since the FHWA authorizes  the agency to                                                               
make   expenditures  that   are  specifically   for  right-of-way                                                               
acquisition so it can't be used for something else.                                                                             
3:04:05 PM                                                                                                                    
CO-CHAIR HUGHES clarified that the AO 271 referred to contracts.                                                                
MS. DOUGHERTY,  in reference to building  demolition, stated that                                                               
the KAC  is under  contract to take  buildings off  of properties                                                               
that have already  been purchased.  She  stated that cancellation                                                               
would  result in  approximately $250,000  non-participating funds                                                               
that would need to be general funds.                                                                                            
3:04:39 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Transportation Standing  Committee meeting was adjourned  at 3:04