Legislature(2015 - 2016)CAPITOL 17

03/05/2015 01:00 PM House TRANSPORTATION

Audio Topic
02:41:09 PM Adjourn
01:03:24 PM Start
01:03:43 PM Overview: Statewide Transportation Infrastructure Program by Jeff Ottesen, Department of Transportation & Public Facilities (dot&pf)
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ STIP Funding Overview by Jeff Ottesen, Program TELECONFERENCED
Development Director, Dept. of Transportation &
Public Facilities
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                         March 5, 2015                                                                                          
                           1:03 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Shelley Hughes, Co-Chair                                                                                         
Representative Benjamin Nageak (via teleconference)                                                                             
MEMBERS ABSENT                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Charisse Millett                                                                                                 
Representative Louise Stutes                                                                                                    
Representative Matt Claman                                                                                                      
Representative Dan Ortiz                                                                                                        
COMMITTEE CALENDAR                                                                                                            
OVERVIEW:  STATEWIDE TRANSPORTATION INFRASTRUCTURE PROGRAM BY                                                                   
JEFF OTTESEN~ DEPARTMENT OF TRANSPORTATION & PUBLIC FACILITIES                                                                  
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
JEFF OTTESEN, Director                                                                                                          
Division of Program Development                                                                                                 
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions during the                                                              
overview of the Statewide Transportation Improvement Program                                                                    
GINGER BLAISDELL, Staff                                                                                                         
Representative Shelley Hughes                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the overview of the                                                                     
Statewide Transportation Improvement Program (STIP).                                                                            
ACTION NARRATIVE                                                                                                              
1:03:24 PM                                                                                                                    
CO-CHAIR SHELLEY HUGHES called  the House Transportation Standing                                                             
Committee meeting to  order at 1:03 p.m.   Representatives Nageak                                                               
(via  teleconference) and  Hughes  were present  at  the call  to                                                               
^OVERVIEW:   STATEWIDE  TRANSPORTATION INFRASTRUCTURE  PROGRAM BY                                                               
JEFF OTTESEN,  DEPARTMENT OF  TRANSPORTATION &  PUBLIC FACILITIES                                                               
 OVERVIEW:  STATEWIDE TRANSPORTATION INFRASTRUCTURE PROGRAM BY                                                              
 JEFF OTTESEN, DEPARTMENT OF TRANSPORTATION & PUBLIC FACILITIES                                                             
1:03:43 PM                                                                                                                    
CHAIR HUGHES announced  that the only order of  business would be                                                               
an Overview:  Statewide  Transportation Infrastructure Program by                                                               
Jeff Ottesen,  Department of  Transportation &  Public Facilities                                                               
1:05:35 PM                                                                                                                    
JEFF   OTTESEN,  Director,   Division  of   Program  Development,                                                               
Department  of  Transportation   &  Public  Facilities  (DOT&PF),                                                               
offered  to  provide  details  on  the  Statewide  Transportation                                                               
Infrastructure Program  (STIP), which is the  document the DOT&PF                                                               
uses  to obtain  federal  surface transportation  funding.   Some                                                               
amendments  to this  100-year  old program  were  2,000 pages  in                                                               
length, with general rules and  exceptions to each amendment.  He                                                               
reported  that  due to  the  complexity  of the  federal  highway                                                               
funding,  software doesn't  exist  that will  integrate with  the                                                               
state's IRIS [Integrated Resource Information System] program.                                                                  
1:07:22 PM                                                                                                                    
MR.  OTTESEN  directed attention  to  slide  2, "Outline,"  which                                                               
covered  today's  overview  of  the general  STIP  mechanics  and                                                               
project   selection   factors.       Basically,   the   Statewide                                                               
Transportation   Improvement  Program   (STIP)  constitutes   the                                                               
federal law  and regulation covering the  transportation funding.                                                               
States are  required to prepare  documents that must  be approved                                                               
by two federal  agencies in order to expend  federal funding, the                                                               
Federal  Highway Administration  (FHWA) and  the Federal  Transit                                                               
Administration (FTA), but The STIP  may also include state-funded                                                               
projects,  especially projects  of  regional significance  [slide                                                               
3].   For example,  if the  state decided to  build the  Knik Arm                                                               
Crossing  project (KAC)  with  non-federal funds,  it  is such  a                                                               
significant project that it would need to be shown in the STIP.                                                                 
1:08:50 PM                                                                                                                    
MR.  OTTESEN said  fiscal constraint  was one  rule with  greater                                                               
implication  for the  DOT&PF,  since the  STIP  document must  be                                                               
programmed  to  spend  an  expected funding  level  in  the  year                                                               
covered [slide  4].   The difficulty lies  in the  uncertainty of                                                               
federal funding  since the Congress  doesn't act on  future years                                                               
nor has  it even finalized  the current year's funding,  he said.                                                               
At the  same time,  the state  must manage  a list  of up  to 200                                                               
projects in various stages of  development, consisting of unknown                                                               
costs  since the  DOT&PF  projects cost  estimates.   The  design                                                               
process  results in  new information  regarding right-of-way  and                                                               
environmental conditions.   As issues  arise and  overall project                                                               
costs  change, or  federal funding  changes,  the four-year  STIP                                                               
document  "gets   out  of  balance,"   is  no   longer  fiscally-                                                               
constrained, and must be readjusted.                                                                                            
1:10:46 PM                                                                                                                    
MR. OTTESEN  stated that  the DOT&PF adheres  to a  strict public                                                               
involvement process  and has developed  procedures to  inform the                                                               
public on changes  to the STIP, which include how  long to public                                                               
notice  projects  and  whether   the  notice  requires  newspaper                                                               
notices  or a  broadcast e-mail.   He  identified two  classes of                                                               
changes  to  the  four-year STIP  document:    amendments,  which                                                               
consist  of  more  significant   changes  and  require  a  public                                                               
involvement  process;  and  administrative  modifications,  which                                                               
address  minor  changes  that   only  require  notifying  federal                                                               
agencies [slide 4].                                                                                                             
1:11:37 PM                                                                                                                    
CHAIR  HUGHES   asked  for  confirmation  on   whether  the  STIP                                                               
amendment required public comment.                                                                                              
MR. OTTESEN answered absolutely.                                                                                                
1:11:44 PM                                                                                                                    
MR. OTTESEN  stated that the  STIP includes  different categories                                                               
of funding, each with unique  eligibility requirements [slide 4].                                                               
Some  require different  levels  of matching  funds.   Previously                                                               
some federal funds  could be carried beyond  the immediate fiscal                                                               
year,  but that  is no  longer  allowed, which  means the  DOT&PF                                                               
can't shelve that funding for future years.                                                                                     
1:12:34 PM                                                                                                                    
MR. OTTESEN  directed attention to the  project selection factors                                                               
for STIP projects  [slide 5], and indicated  a significant number                                                               
of  rules in  federal  and state  law  apply to  the  STIP.   The                                                               
National Highway  System (NHS)  in Alaska  covers 2,000  miles of                                                               
high-level  state highways  in Alaska.    Since local  government                                                               
doesn't  compete for  the  funding, the  DOT&PF  selects the  NHS                                                               
projects using overall system plans,  which are governed by state                                                               
and federal  law and performance  data, such as the  condition of                                                               
pavement, bridges, and the pattern and causes of crashes.                                                                       
MR.  OTTESEN  said  the  overall  emphasis  of  the  NHS  project                                                               
selection was on  safety and serving capacity.  It's  fair to say                                                               
that  Alaska's Surface  Transportation System  (STS) has  been an                                                               
important contributor to  the economy, in fact,  about 80 percent                                                               
of the  surface freight  continues to be  transported on  the STS                                                               
roads.  Finally, continuity plays  an important part since Alaska                                                               
has  a sparse  network of  roads, which  often means  that if  an                                                               
avalanche  occurs  or   a  bridge  goes  out,   there  isn't  any                                                               
alternative route.   More avalanches  are occurring and  a number                                                               
of  bridges   need  replacement,  he  said,   recalling  that  an                                                               
avalanche cut off service to Valdez two years ago.                                                                              
1:15:28 PM                                                                                                                    
CO-CHAIR HUGHES asked how many  more landslides are occurring now                                                               
as compared to 10 or 15 years ago.                                                                                              
MR. OTTESEN  offered to provide  the information.  He  noted that                                                               
the department has begun to  categorize avalanche hazards, noting                                                               
small landslides  often occur  due to  weather and  are typically                                                               
easy to  clear, but  others, such as  landslides on  the Sterling                                                               
Highway are due  to erosion of the bluff  overlooking Cook Inlet,                                                               
which undercuts  the road and  will require a  complete rerouting                                                               
of the highway at some point in the future.                                                                                     
1:17:06 PM                                                                                                                    
MR.  OTTESEN highlighted  a special  category of  funding in  the                                                               
STIP  that  addresses  safety, the  [Highway  Safety  Improvement                                                               
Program (HSIP)], which has nearly  tripled in the current federal                                                               
reauthorization [slide  5].  In  fact, it has changed  the nature                                                               
of  the kinds  of projects  that are  pursued.   In prior  years,                                                               
safety  projects were  often small,  targeted  projects, such  as                                                               
projects  for  adding  turning lanes,  reflectors,  or  guardrail                                                               
installations of roughly $1-2 million  each, totaling $17 million                                                               
statewide.     However,  when  federal  highway   safety  funding                                                               
tripled, the department had to  develop larger projects since the                                                               
DOT&PF  couldn't  produce enough  small  projects  to expend  the                                                               
funds.  He remarked that  highway safety projects make meaningful                                                               
changes, such as adding lanes  to the Parks, Sterling, and Seward                                                               
Highways,  as  well  as   widening  shoulders,  and  constructing                                                               
roundabouts in various areas of the  state.  In fact, this summer                                                               
the DOT&PF  will change two rail/highway  crossings from at-grade                                                               
to grade-separated,  and thus school  buses and fuel  trucks will                                                               
no  longer need  to stop.   In  response to  a question,  he said                                                               
these  rail/highway crossing  projects are  located on  the Parks                                                               
Highway outbound of Houston, Alaska.                                                                                            
CO-CHAIR HUGHES  asked whether  the highway  safety funds  can be                                                               
used for lighting,  commenting the lighting changes  on the Glenn                                                               
Highway were very helpful.                                                                                                      
MR. OTTESEN  answered yes.  He  pointed out that new  lighting on                                                               
the  Egan  Expressway  was   accomplished  using  Highway  Safety                                                               
Improvement Program  (HSIP) funds.   He said the lighting  on the                                                               
Glenn  Highway  was  primarily funded  through  stimulus  funding                                                               
[American  Recovery   and  Reinvestment  Act  of   2009  (ARRA)],                                                               
although  this  project  would have  been  eligible  for  federal                                                               
highway  safety  funding.   The  department's  only concern  with                                                               
lighting has been  the immediate increase in  operating costs due                                                               
to the  electricity required; however,  the tradeoff  is improved                                                               
safety, but it is a matter of policy.                                                                                           
1:20:08 PM                                                                                                                    
MR. OTTESEN highlighted that one  focus of highway safety funding                                                               
is  for use  in areas  of demonstrated  injuries and  fatalities.                                                               
Although  people  ask why  the  department  is not  proactive  in                                                               
addressing  safety  issues,  the department  currently  works  to                                                               
address existing  problems, and hopes  to be more  proactive once                                                               
it addresses them.   Certainly, this program can  have a positive                                                               
benefit to  cost ratio for  any investments  made.  In  fact, the                                                               
DOT&PF measures  the reduction in  fatalities and  major injuries                                                               
attributed to highway safety improvements.                                                                                      
MR.  OTTESEN directed  attention  to  the Surface  Transportation                                                               
Program funding  (STP), which is  scored.  The state  shares that                                                               
funding with  municipalities and  tribes.  Further,  that funding                                                               
is  sub-allocated to  MPOs -  the federal  term for  Metropolitan                                                               
Planning  Organizations -  which  are  essentially the  decision-                                                               
making  bodies  for  larger  cities  and  their  use  of  federal                                                               
funding.   He explained  that Alaska has  two, one  in Fairbanks,                                                             
FMATS [FMATS Fairbanks Metropolitan Area  Transportation System];                                                               
and the  second in Anchorage, AMATS  [Anchorage Metropolitan Area                                                               
Transportation  Solutions].     These   MPOs  are   not  strictly                                                               
municipal  organizations, but  are  collaborative  in nature  and                                                               
include state  and municipal  representation.   In the  Lower 48,                                                               
some transit organizations  are operated by cities  by a separate                                                               
transit  authority, with  the transit  authority having  a voting                                                               
membership.  For  example, if the Knik Arm Crossing  was built as                                                               
a  separate toll  road authority,  it would  have been  a logical                                                               
addition to the  AMATS board.  He reported there  are 450 MPOS in                                                               
the Lower  48, with  many MPOs  crossing state  boundaries, which                                                               
means more than one legislature  and governor are involved in the                                                               
decisions.  He  recalled that Portland, Oregon  has been involved                                                               
in rebuilding the bridge across  the Columbia River on Interstate                                                               
5.  The new governor in  Washington State decided not to fund its                                                               
share of the bridge, which halted the project.                                                                                  
1:23:43 PM                                                                                                                    
MR. OTTESEN stated that FMATS and AMATS both receive sub-                                                                       
allocated  funding and  these  MPOs make  decisions  on state  or                                                               
municipal roads; however, the DOT&PF  does have one vote on these                                                               
boards.   Further, the state  legislature doesn't  have authority                                                               
over federal  MPO funding, which  falls exclusively to  the MPOs,                                                               
he said.  Although the remaining  STP funding is available to any                                                               
other road in  the state not on the NHS,  this funding has shrunk                                                               
in the federal funding stream  since the Congress has changed its                                                               
priority,  which has  created a  tremendous backlog  of projects.                                                               
The department  has been unable  to bring on new  projects, which                                                               
has been frustrating to many communities, he said.                                                                              
1:25:08 PM                                                                                                                    
CO-CHAIR HUGHES  asked for clarification  on the  scoring process                                                               
for STP  funding.  She  asked whether  the AMATS performs  all of                                                               
the scoring within the Municipality  of Anchorage or if the state                                                               
helps score the projects.   She further asked whether the state's                                                               
participation in scoring falls outside FMATS and AMATS.                                                                         
MR. OTTESEN  answered that it  gets a little technical  since the                                                               
AMATS and FMATS  boundaries do not include the  entire borough or                                                               
municipality,  just the  urban portions.   Thus  in Anchorage  it                                                               
includes Eagle River to the  Knik Bridge and the Mat-Su boundary.                                                               
However, in the southern direction,  it stops near Potter's Marsh                                                               
so Girdwood does not fall under the AMATS domain.                                                                               
CO-CHAIR  HUGHES asked  whether the  state does  the scoring  for                                                               
Potter's Marsh.                                                                                                                 
MR. OTTESEN answered  that Seward is an NHS route,  but the state                                                               
has dominion  on NHS decisions,  even inside the MPOs.   Although                                                               
it is  supposed to  be a collaborative  decision inside  the MPO,                                                               
the  state   still  holds  the  primary   decision-making  power;                                                               
however,  on  all  other  roads  within  the  MPO  boundary,  the                                                               
Anchorage  Metropolitan  Area Transportation  Solution's  (AMATS)                                                               
board has  the primary decision-making  power.   He characterized                                                               
it as  being a hybrid-model  of decision making depending  on the                                                               
class of road.                                                                                                                  
1:26:38 PM                                                                                                                    
CO-CHAIR  HUGHES asked  whether AMATS  solely scores  the non-NHS                                                               
roads within the MPO.                                                                                                           
MR. OTTESEN  replied that the  DOT&PF has  one vote.   In further                                                               
response, he clarified  the two MPO acronyms  stand for Fairbanks                                                               
Metropolitan  Area Transportation  System  [FMATS] and  Anchorage                                                               
Metropolitan Area Transportation Solutions [AMATS].                                                                             
1:27:34 PM                                                                                                                    
MR. OTTESEN  directed attention  to the  process for  the project                                                               
selection factors depicted on slide  6, beginning with law - both                                                               
federal  and state  law -  that  drives the  requirement for  the                                                               
Statewide  Long Range  Transportation  Plan (SLRTP).   The  SLRTP                                                               
represents one of the  prerequisites for selecting transportation                                                               
projects,  he  said.    Both  federal and  state  law  require  a                                                               
planning document, either  a Statewide Transportation Improvement                                                               
Program  (STIP) or  something similar.   He  pointed out  that in                                                               
Alaska  it  is  referred  to   as  a  capital  budget  list,  but                                                               
practically speaking it  is the same thing.   This document helps                                                               
the department  decide which of  the projects ready to  be funded                                                               
need  legislative authority  to  use federal  funds.   Under  the                                                               
process,  the department  requests legislative  authority to  use                                                               
federal funds on  the most immediate projects in  the next fiscal                                                               
year.   When all  those steps for  those projects  are completed,                                                               
the DOT&PF can then move  them into project development, which is                                                               
the  point at  which design,  environmental, and  ultimately, the                                                               
construction process occurs, he said.                                                                                           
1:28:32 PM                                                                                                                    
MR.   OTTESEN  directed   attention   to   the  Federal   Highway                                                               
Administration  (FHWA)  program  overview  that  illustrated  the                                                               
steady federal funding, with few  exceptions [slide 7].  In 2009,                                                               
the stated received a large  spike of funding, depicted in purple                                                               
on slide 7, in which the  state received $175 million in stimulus                                                               
funding [American Recovery and Reinvestment  Act of 2009 (ARRA)].                                                               
In 2005-2012, the red bars  show earmarked federal funding, which                                                               
was  funding identified  by the  Congress for  specific projects.                                                               
He explained that  the Congress stopped earmarking  so almost all                                                               
the funding  is for the  core program,  which is depicted  by the                                                               
blue bars in  each year.  He reported the  three biggest programs                                                               
in the state's core program:   the National Highway System (NHS),                                                               
the  Surface Transportation  Program  (STP),  and Highway  Safety                                                               
Improvement  Program (HSIP).   The  average core  program funding                                                               
has been  running approximately  $500 million  per year  over the                                                               
past 10 years, he said.                                                                                                         
MR. OTTESEN  said the  bar chart  doesn't include  any repurposed                                                               
earmarks or funds  or funds captured from other  states, or funds                                                               
that  have carried  over from  prior  years, so  the program  can                                                               
actually be larger than shown on slide 7.                                                                                       
1:30:38 PM                                                                                                                    
MR.  OTTESEN  directed  attention  to MAP-21  [Moving  Ahead  for                                                               
Progress  in   the  21st  Century],   the  most   recent  federal                                                               
authorization that  passed late  in 2012 [slide  8.   He reported                                                               
that  MAP-21  increased  the emphasis  on  the  National  Highway                                                               
System (NHS),  as well as the  number of road miles  for the NHS.                                                               
In Alaska,  every road considered  to be a primary  arterial that                                                               
was not previously  categorized as the NHS, became  an NHS route,                                                               
such that  about 85 of  90 miles  additional NHS road  miles were                                                               
added in the Matanuska-Susitna Borough (MSB) and Anchorage.                                                                     
1:31:43 PM                                                                                                                    
CO-CHAIR  HUGHES asked  for examples  of some  of the  roads that                                                               
were  added in  the Matanuska-Susitna  Borough (MSB),  Anchorage,                                                               
and Juneau.                                                                                                                     
MR. OTTESEN  answered that  Knik-Goose Bay  Road and  the Palmer-                                                               
Wasilla Highway  were the two main  roads in the MSB,  several of                                                               
the roads  in the  arterial grid in  Anchorage -  typically those                                                               
with  stop lights  - not  previously on  the NHS,  and in  Juneau                                                               
approximately one-tenth  of a  mile from  Glacier Highway  to the                                                               
bridge at the existing ferry terminal.                                                                                          
1:32:46 PM                                                                                                                    
MR.  OTTESEN  said that  under  the  new MAP-21  reauthorization,                                                               
Highway   Safety  Improvement   Program  (HSIP)   funding  almost                                                               
tripled, as  previously mentioned, but  it must be used  in areas                                                               
in which the  department has a demonstrated  safety concern based                                                               
on crash  report records  [slide 8].   He identified  the biggest                                                               
shift  in  emphasis  in  MAP-21   was  the  idea  of  performance                                                               
standards, which  will apply to the  NHS routes.  Thus  the state                                                               
will essentially be receiving a  report card, which will focus on                                                               
pavement  conditions, bridges,  and  safety conditions.   If  the                                                               
state  doesn't meet  the  standards set  out  in rulemaking,  the                                                               
state will  first need to  direct more  money to the  problems to                                                               
attempt  to remedy  them.   Over time,  if the  problems are  not                                                               
remedied,   the  Federal   Highway  Administration   (FHWA)  will                                                               
increase  the required  state  match ratio.    He explained  that                                                               
nominally the match formula was  typically 20 percent state to 80                                                               
percent federal  funds.  Alaska  and several other states  with a                                                               
high land  base of federal lands  were given a discount  on match                                                               
based on  the percentage of  federal lands  in each state.   Thus                                                               
Alaska's  discount reduced  the match  ratio from  20 percent  to                                                               
slightly more than  9 percent.  He expressed concern  that if the                                                               
percentage of  match was increased,  the nominal  rate nationwide                                                               
would go from  20 to 35 percent, although Alaska's  rate would be                                                               
discounted  due  to the  federal  lands  in  Alaska.   Still,  he                                                               
anticipated  it  could be  a  big  increase, with  Alaska's  rate                                                               
possibly  increasing to  the high  teens, which  could result  in                                                               
$40-50 million in additional costs to the state.                                                                                
1:35:49 PM                                                                                                                    
MR. OTTESEN stated  that the bridge standard,  which the Congress                                                               
placed in  law, does not allow  more than 10 percent  of the deck                                                               
area on  bridges on the NHS  to fall below standard.   Currently,                                                               
10 percent of  DOT&PF bridges are below standard,  but the DOT&PF                                                               
has been working to improve the percentage.                                                                                     
CO-CHAIR HUGHES related  her understanding that MAP  21 passed in                                                               
2012.    She asked  whether  the  state  has received  its  first                                                               
"report card" or if the first one will be forthcoming.                                                                          
MR. OTTESEN answered it has not  yet received a report card.  The                                                               
DOT&PF  has been  measuring bridge  standards for  decades so  it                                                               
knows  the  condition  of  the   pavement,  bridges,  and  safety                                                               
conditions.  However, the department  does not know the target it                                                               
will need to meet since  the federal rulemaking is underway, with                                                               
some  comment periods  closed, although  the final  rule has  not                                                               
been issued.   The department believes its safety  record will be                                                               
fine, since  it is  generally pretty good  and has  gotten better                                                               
since  2007.   In 2000,  about 100  fatalities occurred,  but the                                                               
figures  have been  reduced to  approximately  60 fatalities  per                                                               
year,  in part  due  to  air bags,  anti-lock  brakes, and  other                                                               
warning  systems, as  well as  seat  belt use  improvements.   In                                                               
addition,  the  department  has installed  rumble  strips,  wider                                                               
lanes, and roundabouts,  that all help to reduce  the severity of                                                               
crashes.   He stated that  the DOT&PF has been  doing significant                                                               
work behind the scenes for performance standards.                                                                               
1:39:50 PM                                                                                                                    
CO-CHAIR  HUGHES asked  how  much  time the  state  will have  to                                                               
provide data  once rulemaking  ends.   She asked  whether bridges                                                               
were the biggest concern.                                                                                                       
MR.  OTTESEN offered  his belief  that  the DOT&PF  was close  to                                                               
meeting  the bridge  standards since  significant  work has  been                                                               
done.   However,  he identified  pavement as  the major  problem.                                                               
One of  Alaska's disadvantage  Alaska has been  that most  of its                                                               
NHS roads have  driveways or side road accesses  so vehicles pick                                                               
up  and drop  gravel  on  its highways  creating  roughness.   In                                                               
addition, Alaska  also has  permafrost, which  creates additional                                                               
roughness.   Finally,  some highways  are gravel  roads, such  as                                                               
half the  Dalton Highway.   He was  uncertain how  the rulemaking                                                               
will  affect these  aforementioned  conditions, reiterating  that                                                               
Alaska has  some built-in disadvantages compared  to other states                                                               
in the Lower 48 that don't experience these kinds of issues.                                                                    
1:42:12 PM                                                                                                                    
MR. OTTESEN stated that Alaska  has been asking for consideration                                                               
and exceptions for Alaska and  the DOT&PF wants to avoid spending                                                               
all its dollars "chasing pavement" since  do so will mean it will                                                               
not be able to do other projects that the citizens expect.                                                                      
1:42:31 PM                                                                                                                    
CO-CHAIR HUGHES  asked whether the  department has  been weighing                                                               
in during the rulemaking process.                                                                                               
MR. OTTESEN answered absolutely.                                                                                                
1:42:43 PM                                                                                                                    
MR. OTTESEN  discussed additional MAP-21  changes [slide 9].   He                                                               
stated that  58 percent of the  public bridges and 77  percent of                                                               
all  public roads  are  not  on the  NHS,  which  means that  the                                                               
Surface  Transportation Program  (STP)  must  provide repair  and                                                               
maintenance funding, which represents a  very large set of needs.                                                               
In  addition, a  significant number  of mandatory  tasks must  be                                                               
funded using  STP funds, such  as the two-year inspection  of all                                                               
bridges for  safety needs, or  for transit improvements,  such as                                                               
the current project  to build a transit bus barn  in Sitka, or to                                                               
pay for ferry terminal needs.   Thus, a large number of types and                                                               
needs all  cling to  a small  slice of  the federal  STP funding,                                                               
which has  led the  department to slow  or terminate  projects in                                                               
some parts of the state, he said.                                                                                               
1:44:49 PM                                                                                                                    
MR. OTTESEN  directed attention to  the emphasis on  the National                                                               
Highway System  (NHS) [slide 10].   He explained that  the circle                                                               
graph on the left depicts  the federal-aid funding, with the blue                                                               
category  representing the  National Highway  Performance Program                                                               
(NHPP), which  relates to the  performance measures  he mentioned                                                               
earlier.   The number  of road  miles that  are considered  to be                                                               
part of the NHS  are depicted in blue on the  right of the chart,                                                               
which represents  less than a  quarter of the  state's inventory.                                                               
This means the smallest slice of  roads will be garnering most of                                                               
funding under MAP-21, he said.                                                                                                  
MR. OTTESEN  referred to the  graph on  the left, to  the Surface                                                               
Transportation  Program (STP)  funding, noting  that the  red and                                                               
green road  miles on  the right  were ones  eligible for  the STP                                                               
funding.   He  pointed out  safety funding  as the  third largest                                                               
area,  and congestion  mitigation air  quality, or  CMAQ, as  the                                                               
fourth largest funding  area.  He identified  the remaining funds                                                               
for  planning, research,  and transportation  alternatives, which                                                               
are shown  in orange and  blue.  He  reported that 23  percent of                                                               
the road  miles garners  57 percent of  federal-aid funding.   In                                                               
summary,  Congress has  prioritized the  National Highway  System                                                               
(NHS) as the highest priority,  but state and local jurisdictions                                                               
must take care of non-NHS road needs.                                                                                           
1:46:57 PM                                                                                                                    
MR. OTTESEN  directed attention  to the  $108 million  of Surface                                                               
Transportation Program  (STP) funding,  which is  further divided                                                               
into  five subcategories  [slide 11].   He  pointed out  that the                                                               
bridge funding for "off system  bridges" totals $3.7 million, but                                                               
these  funds  are  insufficient to  even  conduct  the  necessary                                                               
inspection for bridges that he mentioned earlier.                                                                               
MR. OTTESEN directed attention to  the red slice of $20.3 million                                                               
in the circle  graph for urban areas larger  than 200,000 people,                                                               
with Anchorage  as the only  community in Alaska large  enough to                                                               
qualify [slide 11].   He highlighted that the green  slice of $15                                                               
million  goes   to  seven  urban  areas   over  5,000,  including                                                               
Fairbanks,  Sitka,   Ketchikan,  Kodiak,  Palmer,   Wasilla,  and                                                               
Juneau,  which is  allocated based  on a  per capita  share, with                                                               
about  half  of   the  funds  are  allocated   to  Fairbanks  and                                                               
approximately $8  million to  be shared  among the  remaining six                                                               
1:49:47 PM                                                                                                                    
CO-CHAIR  HUGHES  recalled  that  the core  area  of  Wasilla  is                                                               
90,000,  yet half  of the  Surface  Transportation Program  (STP)                                                               
funding was allocated to Fairbanks.                                                                                             
MR. OTTESEN  answered that  the allocation is  all driven  by the                                                               
census bureau  and that  agency determined  the boundaries.   The                                                               
third  category  of STP  funding  was  designated to  populations                                                               
under  5,000,  with  numerous communities  in  the  Mat-Su  area,                                                               
Kenai, Nome,  and Kotzebue qualifying  to share the  $21 million;                                                               
however,  the   funding  is  clearly   inadequate  to   meet  the                                                               
transportation needs.   He then directed attention  to the Mat-Su                                                               
Urban Cluster map [slide 12].                                                                                                   
1:51:47 PM                                                                                                                    
CO-CHAIR  HUGHES  commented on  the  inadequate  STP funding  for                                                               
small communities.  She asked  whether he could identify any real                                                               
MR. OTTESEN answered that there  are not any winners and everyone                                                               
would feel the pain, for example,  a community the size of Juneau                                                               
will receive  less than  $2 million,  but it  is not  possible to                                                               
maintain  all the  non-NHS roads  in  Juneau and  still keep  the                                                               
pavement intact and bridges repaired.                                                                                           
CO-CHAIR   HUGHES    asked   whether   Anchorage    funding   was                                                               
proportionately similar.                                                                                                        
MR.  OTTESEN agreed,  noting that  Anchorage previously  received                                                               
close to $40 million, but it has been reduced to $20 million.                                                                   
1:52:51 PM                                                                                                                    
MR. OTTESEN also mentioned that the  "any area of the state" MAP-                                                               
21  funding of  $47.7 million  was  funding not  restricted to  a                                                               
specific  population, but  it  must be  used  to cover  mandatory                                                               
services,  such as  data collection,  civil rights  office costs,                                                               
bridge inspections, and to extent  that any funds remain, will be                                                               
used for projects nominated four years ago [slide 11].                                                                          
MR. OTTESEN related a scenario  that illustrated the department's                                                               
perspective on STP funding choices,  such that Kotzebue requested                                                               
an estimated  $20 million in funding  to build a road  project to                                                               
its  proposed port,  but  if  funding was  taken  from STP  funds                                                               
designated  to  the  under  5,000   communities,  it  would  have                                                               
depleted  the fund  [slide  11].   Therefore,  the only  possible                                                               
funding source  for a  project of  that size  would be  the $47.7                                                               
million in the "any area of state" MAP-21 funding.                                                                              
1:54:25 PM                                                                                                                    
MR. OTTESEN directed  attention again to slide 12.   Although the                                                               
DOT&PF doesn't design  the urban clusters, the  US Census Borough                                                               
does, the  state was  allowed to smooth  the boundaries  and make                                                               
them more  rational.   The MAP-21 Mat-Su  Urban Cluster  takes in                                                               
the core of  Palmer and Wasilla; however, it  doesn't include all                                                               
of the actively-growing  areas of the Mat-Su Borough.   One slice                                                               
of MAP-21  funding goes to the  area depicted in yellow,  but the                                                               
cluster represents less  than 1 percent of the  Mat-Su Borough by                                                               
land area.   Maps are available for each of  the census areas, he                                                               
MR.  OTTESEN  directed  attention   to  the  2012-2015  Statewide                                                               
Transportation  Improvement  Program   (STIP)  [slide  13].  This                                                               
document  provides   details,  including  the   program,  region,                                                               
election district, title, description,  type of funding, and what                                                               
year the funding will be used.   In addition, the department must                                                               
show technical  requirements, including the phase,  the source of                                                               
funding, and  for instances in  which the STIP doesn't  cover the                                                               
whole project, it  also identifies the amount  needed to complete                                                               
the project.   He explained that the state is  nearly through the                                                               
halfway point  of fourth year  of the STIP.   The DOT&PF  has had                                                               
three  major amendments,  including  Amendment 12,  which was  to                                                               
address  the  regional boundary  change  within  DOT&PF, and  the                                                               
changes that  occurred during  the closeout for  2014.   Thus the                                                               
DOT&PF  needed to  adjust the  STIP to  reflect what  occurred in                                                               
2014,  for  example, to  indicate  which  projects proceeded  and                                                               
others did  not and  were moved  to the next  fiscal year  in the                                                               
1:57:03 PM                                                                                                                    
CO-CHAIR HUGHES asked  whether there was a 2013  - 2016 Statewide                                                               
Transportation Improvement Program (STIP) document.                                                                             
MR. OTTESEN answered that the  DOT&PF is currently working on the                                                               
2016-2019 Statewide Transportation Improvement Program (STIP).                                                                  
CO-CHAIR  HUGHES related  her understanding  that  as the  DOT&PF                                                               
finishes one STIP some projects will move to the next one.                                                                      
MR. OTTESEN replied that the  department would like to adjust the                                                               
STIP on a  two-year cycle.  In doing so  the DOT&PF would prepare                                                               
a four-year  STIP, refresh it  with a  new four-year STIP  in the                                                               
third year, but never reach the tail end as it currently does.                                                                  
CO-CHAIR HUGHES asked whether the years would also be bumped.                                                                   
MR. OTTESEN said  the department was asked not to  do that by the                                                               
previous administration.                                                                                                        
MR. OTTESEN  offered that the  election cycle  and administration                                                               
change  have slowed  the  department down,  but  the DOT&PF  must                                                               
prepare the 2016-19  Statewide Transportation Improvement Program                                                               
(STIP) or the state will not receive federal funding.                                                                           
1:58:11 PM                                                                                                                    
CO-CHAIR HUGHES  asked whether work  was currently being  done on                                                               
the Statewide Transportation Improvement Program (STIP).                                                                        
MR. OTTESEN answered absolutely.                                                                                                
1:58:16 PM                                                                                                                    
MR.  OTTESEN  said that  Amendment  13  addresses the  governor's                                                               
administrative order, AO 271, which  halted the Knik Arm Crossing                                                               
and Juneau Access Road Project.   Thus the department had to find                                                               
a different  set of projects  that were eligible for  the funding                                                               
that could not  go to the Knik Arm Crossing  (KAC) and the Juneau                                                               
Access [Road  Project] this  fiscal year.   He reported  that the                                                               
DOT&PF  made the  necessary changes,  closed  the public  comment                                                               
period,  and  sent  the  document to  the  federal  agencies  for                                                               
approval yesterday.  He explained  that Amendment 14 consisted of                                                               
a  technical amendment  to address  the  normal ebb  and flow  of                                                               
project development  since some projects are  delayed for reasons                                                               
specific to each project and  other projects have changes in cost                                                               
estimates.   He offered  that the department  tries to  keep STIP                                                               
amendments on a two-month cycle.                                                                                                
1:59:23 PM                                                                                                                    
CO-CHAIR HUGHES asked whether Amendment 13 stayed in the STIP.                                                                  
MR.  OTTESEN  answered that  the  public  comment was  closed  on                                                               
Friday,  February 13,  2015 and  the  STIP was  submitted to  the                                                               
federal partners  for approval.   He indicated that  $154 million                                                               
in projects were made eligible in the process.                                                                                  
2:00:04 PM                                                                                                                    
CO-CHAIR  HUGHES  asked  what would  happen  if  the  legislature                                                               
wanted the two delayed projects to go forward.                                                                                  
MR. OTTESEN answered  that each of these  projects received prior                                                               
legislative  approval through  the  capital budget  process.   In                                                               
fact, he advised that the DOT&PF  cannot add projects to the STIP                                                               
without prior legislative authorization.                                                                                        
CO-CHAIR  HUGHES asked  for further  clarification that  the $154                                                               
million  replaced the  Juneau Access  Road Project  (JA) and  the                                                               
Knik Arm Crossing (KAC).                                                                                                        
MR. OTTESEN agreed.                                                                                                             
2:00:38 PM                                                                                                                    
CO-CHAIR HUGHES related her understanding  that the STIP included                                                               
the projects prior to Amendment 13.                                                                                             
MR.  OTTESEN agreed,  but clarified  that the  projects had  been                                                               
listed in the advance construction phase.                                                                                       
CO-CHAIR HUGHES  asked whether the  STIP would be amended  if the                                                               
legislature decided to move forward with the projects.                                                                          
MR. OTTESEN offered his belief  that the department could not use                                                               
the  funds  this   year  even  if  the   administration  and  the                                                               
legislature agreed to  move forward with the  two large projects.                                                               
He characterized the  reasons as unique, for  example, the DOT&PF                                                               
has not yet applied for  the TIFIA [Transportation Infrastructure                                                               
Finance and  Innovation Act] loan  for the Knik Arm  Crossing and                                                               
the  draft  supplemental  Environmental Impact  Statement  (SEIS)                                                               
will  not  ready this  fiscal  year  on  the Juneau  Access  Road                                                               
project.   Thus  both projects  would be  ineligible for  federal                                                               
funding so  at this stage  the DOT&PF must  change the STIP.   In                                                               
further response to  Co-Chair Hughes, he agreed that  at the time                                                               
the  aforementioned  projects  were   placed  in  the  STIP,  the                                                               
department hoped that  both projects would be ready.   Again, the                                                               
KAC awaits  approval to release  the TIFIA  application; however,                                                               
most of  the work has been  done on the application.   He further                                                               
clarified that both projects would be included in the 2019 STIP.                                                                
2:02:29 PM                                                                                                                    
CO-CHAIR HUGHES  asked whether anything  in AO 271  would prevent                                                               
the two projects from being included in the 2019 STIP.                                                                          
MR.  OTTESEN   said  Commissioner   Luiken  will   make  specific                                                               
recommendations to  Governor Walker to  proceed to the  Record of                                                               
Decision (ROD) for the Juneau  Access Road project (JA) to ensure                                                               
that the  state is not  obligated to repay federal  funding spent                                                               
to date.   Once the  state reaches the  ROD, the state  will have                                                               
options  in terms  of how  to  proceed since  completing the  ROD                                                               
doesn't  predetermine the  chosen alternative.   He  felt certain                                                               
that the  commissioner would recommend proceeding  with the TIFIA                                                               
loan  on the  Knik Arm  Crossing (KAC),  since without  the TIFIA                                                               
determination,  the  state will  never  know  if the  project  is                                                               
eligible.   He  characterized  it as  being  the next  meaningful                                                               
point in the timeline for the project.                                                                                          
2:03:59 PM                                                                                                                    
CO-CHAIR  HUGHES   asked  for  further  clarification   that  the                                                               
department can move forward on  the two aforementioned projects -                                                               
the ROD and TIFIA application  without the projects listed on the                                                               
Statewide Transportation Improvement Program (STIP).                                                                            
MR. OTTESEN replied  that the funding has  already been allocated                                                               
to  the STIP,  the funding  was approved  by the  Federal Highway                                                               
Administration  (FHWA,)  and  the department  has  allocated  the                                                               
matching  funds.    From  a   funding  standpoint  the  work  can                                                               
continue, but the department will  need the administrative policy                                                               
decision addressed on AO 271, he said.                                                                                          
2:05:03 PM                                                                                                                    
MR.  OTTESEN  advised  members that  the  department  faces  some                                                               
technical constraints  with respect to  the current STIP  and the                                                               
2016  STIP.   In  fact,  if  the Federal  Highway  Administration                                                               
(FHWA) was  asked to approve  an environmental document,  but the                                                               
STIP  did not  include the  project for  the next  project phase,                                                               
FHWA  will  not  approve  it,  and  will  place  the  project  in                                                               
suspense, he  said.  He  emphasized the importance  of completing                                                               
the 2016  STIP since  a large number  of projects  throughout the                                                               
state  could be  stalled without  it.   In  response to  Co-Chair                                                               
Hughes, he agreed the STIP was  behind schedule and the delay was                                                               
beginning to have some "on the ground" impacts.                                                                                 
CO-CHAIR HUGHES further asked for  the reason that the DOT&PF was                                                               
behind  schedule   on  2016   -  2019   Statewide  Transportation                                                               
Improvement Program (STIP).                                                                                                     
MR. OTTESEN offered his belief  that Governor Parnell didn't want                                                               
to publish  a STIP that  showed delays for many  local government                                                               
projects.     In   further  response   to  Co-Chair   Hughes,  he                                                               
anticipated that  the 2016 STIP  would be completed  by mid-April                                                               
2:07:39 PM                                                                                                                    
MR. OTTESEN compared the programming  considerations to a "river"                                                               
since the funding cycle tended  to be relentless and the DOT&PF's                                                               
goal was  to use funding rather  than allow it to  pass by unused                                                               
[slide 15].                                                                                                                     
MR. OTTESEN stated that federal  funding was almost entirely "use                                                               
or lose," but it wasn't as  simple as just identifying a project,                                                               
since  the Federal  Highway  Administration  (FHWA) requires  the                                                               
department to  seek project  approval by phases  [slide 16].   He                                                               
explained  the FHWA  process  was to  allocate  funding for  each                                                               
stage   of   the    project,   including   design,   right-of-way                                                               
acquisition,  and  utility  relocation, if  needed,  followed  by                                                               
permitting, and  construction.  He  reported that to  get through                                                               
these  series  of  steps  can  take  from  two  to  seven  years,                                                               
depending on  the complexity  of the project.   For  example, the                                                               
complicated Cooper  Landing Bypass on  the Sterling began  in the                                                               
70s, which  has the distinction  of being the oldest  federal aid                                                               
project  in  the  US.    Although federal  funding  can  be  very                                                               
challenging, the department has an  almost a perfect track record                                                               
in not  allowing federal funding  to lapse.   In fact,  the state                                                               
has also been  able to acquire lapsed funding  from other states.                                                               
Further, the state  has been able to respond late  in the federal                                                               
fiscal year, while other states are  not able to react as quickly                                                               
as  Alaska.     He  characterized  programming  as   the  art  of                                                               
determining which  projects to spend  funds on, while  keeping in                                                               
mind  that  the  state  currently  has  over  1,200  active  FHWA                                                               
MR. OTTESEN  reported that  the department  has dozens  of design                                                               
squads working  on the myriad of  projects that lie in  a variety                                                               
of  phases,  with its  overarching  goal  to absorb  the  federal                                                               
funding  in order  to better  the state's  transportation system.                                                               
In  response  to   Co-Chair  Hughes,  he  agreed   one  year  the                                                               
department lost  a total of  $.30, remarking that the  DOT&PF has                                                               
done an  excellent job in  assuring federal funding stays  in the                                                               
2:11:11 PM                                                                                                                    
MR. OTTESEN  returned to programming considerations  on slide 16,                                                               
noted that funding cannot be carried  over from year to year, nor                                                               
can  it be  assigned to  a project  at the  time the  legislative                                                               
capital budget  authority occurs.   He likened  it to  having the                                                               
state's authority to spend in  one spot and federal funding being                                                               
in  another spot,  but these  funds are  not "married"  until the                                                               
projects are  obligated.  He  indicated that  obligation actually                                                               
occurs  when a  project is  certified as  having met  all federal                                                               
requirements and  a funding agreement  is signed by FHWA  and the                                                               
state.  In  Alaska - and nationwide - 30  percent of projects end                                                               
up  being delayed  to  a  subsequent year  since  the process  to                                                               
achieve project  funding must address  or meet numerous  laws and                                                               
requirements,   such   as    environmental,   air   quality,   or                                                               
archeological concerns.  Although  these processes are important,                                                               
he said, it  makes projects expensive, time  consuming, and prone                                                               
to delays.                                                                                                                      
2:13:29 PM                                                                                                                    
MR. OTTESEN, in response to  Co-Chair Hughes, replied that he was                                                               
referring  to federal  funding,  not state  funding, since  state                                                               
funding is provided in a single  block.  The state matching funds                                                               
would be  applied at the  same time the federal  funding happens.                                                               
He described  the process,  such that the  DOT&PF would  create a                                                               
project  identification  and  acquire  a  federal  aid  agreement                                                               
signed  by  the  FHWA  that will  guarantee  reimbursement.    He                                                               
clarified  that the  FHWA program  was not  a grant  program with                                                               
funding happening up front; instead,  the FHWA provides certainty                                                               
on reimbursement for state expenditures  on projects - so federal                                                               
reimbursement follows  the state expenditures on  projects.  Thus                                                               
the   DOT&PF  typically   will   bill  the   FHWA  twice   weekly                                                               
electronically,  he  said,  noting that  the  DOT&PF  accumulates                                                               
receipts  for any  contractor  and  staff labor  as  well as  for                                                               
materials  and   bills  these  expenditures   electronically.  In                                                               
further response  to Co-Chair  Hughes, he  responded that  the 90                                                               
percent  federal and  9 percent  state matching  funds relate  to                                                               
most federal  funding, including STIP or  National Highway System                                                               
(NHS) projects, but a few categories are matched at 20 percent.                                                                 
2:14:57 PM                                                                                                                    
MR.  OTTESEN reiterated  that projects  were  often delayed,  but                                                               
large,  controversial  projects  have   a  much  higher  risk  of                                                               
slipping due  to project complexity  and to political  support or                                                               
opposition.    The  department  manages  these  uncertainties  by                                                               
having projects  in the queue that  can be plugged in  to use the                                                               
funding.   He  said, "You  absolutely  have to  have those  extra                                                               
projects working.   It's the only  way we ensure that  we use all                                                               
the funding."                                                                                                                   
2:15:43 PM                                                                                                                    
MR. OTTESEN  directed attention  to slide  17, stating  that it's                                                               
somewhat   embarrassing  that   the  department   has  not   been                                                               
obligating its  federal funding  until well  into second  part of                                                               
the year.   He estimated  that in the  first six months  about 20                                                               
percent  of the  program  was  obligated and  in  the second  six                                                               
months the remaining 80 percent were obligated.                                                                                 
MR. OTTESEN  stated this pattern  started in 2009 when  the state                                                               
received  the  American Recovery  and  Reinvestment  Act of  2009                                                               
(ARRA)  funding.   The state  funded its  current projects,  then                                                               
depleted the extra projects it had  on the "shelf."  He explained                                                               
that the "shelf" projects were  ones that have been developed and                                                               
met the  federal tests, but were  ones that tended not  to be the                                                               
highest priority projects for the  year.  Instead, these projects                                                               
were projects that  are ready to go and are  ones that can absorb                                                               
federal funding when other projects  become stalled.  The overall                                                               
effect has impacted  the department since it must  work closer to                                                               
the  deadline.   In  fact, the  department  has continually  been                                                               
struggling to catch up and add projects to the "shelf," he said.                                                                
2:17:14 PM                                                                                                                    
CO-CHAIR  HUGHES  asked for  further  clarification  on the  line                                                               
depicting the 2015 obligation.                                                                                                  
MR.  OTTESEN  explained  that these  figures  are  current  until                                                               
February,  but the  line will  start to  rise as  the months  are                                                               
reported.   He  elaborated by  directing attention  to the  final                                                               
column  labeled "Total  + Transfers,"  explaining that  transfers                                                               
were funds that have been  transferred to another federal agency.                                                               
For example,  the Inter-Island Ferry  Authority might be  doing a                                                               
project  with  the  Federal   Transit  Administration  (FTA)  and                                                               
receive some  FHWA funding to  complete its  budget.  In  such an                                                               
instance, the  DOT&PF would ask  its federal partner  to transfer                                                               
funds  to the  FTA  to administer.   Thus,  each  year a  certain                                                               
number  of  projects will  be  transferred  and not  administered                                                               
directly by the state.   In further clarification, he stated that                                                               
the chart relates to a month-by-month federal fiscal year.                                                                      
2:19:14 PM                                                                                                                    
MR. OTTESEN  directed attention  to other  program considerations                                                               
[slide  18].   He  highlighted  recent  trends that  resulted  in                                                               
surplus funding  due to  underbidding, in  which the  project bid                                                               
comes in lower  than the obligated federal funds.   He said these                                                               
funds will  be returned to  the program; however, the  funds must                                                               
be  expended by  the  end  of the  year.    In addition,  similar                                                               
surpluses occur during project closeouts  when project costs fall                                                               
under  the obligated  amount; these  two trends  have brought  in                                                               
about $100 million  to the program in the past  five years.  Last                                                               
year he said he testified  before the Senate Finance Committee to                                                               
inform the  committee that  surplus funding could  be used  for a                                                               
major project such as the Juneau  Access Road Project (JA) or the                                                               
Knik Arm Crossing  Project (KAC), yet have very  little impact on                                                               
other planned projects.  Ultimately,  the department must develop                                                               
more  "shelf" projects  to  absorb the  surplus  funds, which  he                                                               
characterized  as  "use  or  lose"   funds  that  will  lapse  by                                                               
September 15th if it is not used.                                                                                               
MR. OTTESEN declared that the  department must obtain legislative                                                               
authority, too; however, the eligibility  process has also become                                                               
more complicated.   As previously  mentioned, the  DOT&PF shifted                                                               
$150 million into  the STIP due to AO 271,  plus it received $100                                                               
million surplus  funds from  underbidding and  project closeouts.                                                               
This  combined funding  totals  $250 million  this  year and  the                                                               
DOT&PF  must identify  and certify  eligible  projects to  absorb                                                               
this funding  or the  state will  lose these  federal funds.   He                                                               
acknowledged  DOT&PF's challenge  was  to  develop "shelf"  ready                                                               
projects that  will meet eligibility  requirements - with  all of                                                               
the steps for each project completed.                                                                                           
2:22:39 PM                                                                                                                    
MR.  OTTESEN,  in  response to  Co-Chair  Hughes,  identified  AC                                                               
[advance construction] as  being the means for  the department to                                                               
show its  "shelf" projects [slide  18]. He  characterized advance                                                               
construction as  being similar to  going on vacation and  using a                                                               
credit card.  He elaborated  that federal rules allow projects to                                                               
be  shown  as AC  in  the  STIP  and  to proceed  with  signature                                                               
approval,  but to  inform Federal  Highway Administration  (FHWA)                                                               
that  the  state  would  like  to  postpone  reimbursement  to  a                                                               
subsequent year.   This  tool provides  the certainty  of federal                                                               
authorization,  but  slows  down reimbursement  in  projects,  he                                                               
said.  He described how the AC  process would work.  He related a                                                               
scenario  in  which the  DOT&PF  planned  to purchase  two  large                                                               
engines  for the  Alaska Marine  Highway System  (AMHS), but  the                                                               
manufacturer estimated the  engine delivery date would  be in two                                                               
years.    In that  case,  the  DOT&PF  would place  the  proposed                                                               
engines  in  advance construction  (AC),  award  the bid  to  the                                                               
manufacturer,  issue the  order, but  not execute  the terms  for                                                               
payment  until the  engines were  delivered.   In  this way,  the                                                               
department could lock  up $30 million in federal  funding for the                                                               
engines, but request  federal funding at the time  of delivery by                                                               
matching the cash flow to the federal receipts, he said.                                                                        
2:24:59 PM                                                                                                                    
MR. OTTESEN offered that advance  construction (AC) could also be                                                               
used  on  large  projects,  for example,  ones  of  three  years'                                                               
duration  [slide 18].    For example,  if the  DOT&PF  had a  $90                                                               
million  construction  project  with a  three-year  horizon,  the                                                               
state could  [advance construction] AC  $60 million in  the first                                                               
year, place  $30 million in  the STIP in funding  in anticipation                                                               
of  contractor construction  costs,  but receive  $30 million  in                                                               
each of  the following two  years.   He said this  process allows                                                               
the state  to use federal funding  in line with the  cash flow to                                                               
contractors,  followed by  reimbursement  from the  FHWA, but  it                                                               
also allows  the state to  show additional projects in  the STIP,                                                               
but  avoid the  fiscal constraint  limitation.   Another way  the                                                               
DOT&PF  uses  advance  construction  is  in  instances  in  which                                                               
shortfalls  are anticipated  in  the fourth  quarter.   In  those                                                               
instances,  the  department  will  AC  [advance  construction]  a                                                               
project  in August  - with  the  knowledge the  project will  not                                                               
proceed  during the  winter months  - and  payoff the  AC in  the                                                               
first quarter  of the  next federal fiscal  year.   Although this                                                               
process does not impact the  state fiscally, it allows the DOT&PF                                                               
to time  its projects  to take advantage  of the  maximum federal                                                               
funding available, he said.                                                                                                     
MR. OTTESEN  turned to ILLU  [illustrative], which he said  was a                                                               
little  different,  such that  if  extra  funding occurs  due  to                                                               
another project being delayed, this  project is one that would be                                                               
ready  to take  advantage of  the  extra money  that comes  along                                                               
[slide 18].   He offered to cover this in  more detail later, but                                                               
noted that several  events can occur that  could bring additional                                                               
funding to the state rather suddenly.                                                                                           
2:27:53 PM                                                                                                                    
MR.  OTTESEN turned  to slide  19, "Programming  Considerations,"                                                               
and reiterated  that the  FHWA priority will  be on  the National                                                               
Highway System and on asset management.                                                                                         
2:27:59 PM                                                                                                                    
GINGER  BLAISDELL, Staff,  Representative Shelley  Hughes, Alaska                                                               
State  Legislature, asked  about federal  dollars that  don't get                                                               
spent  at the  end  of the  year.   She  recalled that  typically                                                               
general funds are spent first  and federal reimbursement follows.                                                               
In the event  a project comes in under the  bid amount, she asked                                                               
whether  general funds  are also  forwarded with  surplus federal                                                               
dollars.  In other words, she  wondered what happens to the state                                                               
matching  funds at  the end  of  a project  in the  event a  FHWA                                                               
project falls  under the bid amount  and if the state  would then                                                               
be required to pay another 10 percent in matching funds.                                                                        
MR.  OTTESEN answered  that unexpended  funds  that are  released                                                               
from the  obligation are released back  in the same ratio  of $91                                                               
federal  funding to  $9 state  general fund  matching funds.   He                                                               
characterized this  as "one  good thing"  that happens  since the                                                               
federal  dollars would  also release  the  state matching  funds,                                                               
which goes back to the state's "match pot."                                                                                     
2:29:06 PM                                                                                                                    
MR.  OTTESEN  directed  attention  to  slide  20,  "Funding  Wild                                                               
Cards,"   and   related    instances   of   additional   funding.                                                               
Historically,  when the  Congress  has  reauthorized the  highway                                                               
funding bill, it  has increased its funding by  about 20 percent.                                                               
Currently, both  the Republican and Democratic  leadership in the                                                               
Congress  have  been   considering  an  increased  transportation                                                               
program  although   the  funding  mechanism  still   hasn't  been                                                               
decided.  Historically,  the FHWA Trust Fund has  been funded via                                                               
gas taxes  from vehicles using  the highway system;  however, the                                                               
model has  been declining  in recent years.   Although  these gas                                                               
taxes still  generate 80 percent  of the current  funding needed,                                                               
the taxes  no longer generate 100  percent of the funding.   This                                                               
decline  has  been  happening,  in  part,  since  cars  are  more                                                               
efficient,  and  because  some vehicles  don't  use  gasoline  or                                                               
diesel fuel.   In  addition, reduced  driving occurred  after the                                                               
recession and although  it has been increasing,  driving has been                                                               
rising at a much slower rate.   Therefore, the Congress must find                                                               
another funding  mechanism, such  as a  mileage tax;  however, he                                                               
predicted that  the technical and  social implications  will take                                                               
time  to develop.   In  addition, a  tax forgiveness  program for                                                               
overseas  profits  might come  back  to  the state,  which  would                                                               
generate revenue  that could  be allocated  to the  Highway Trust                                                               
Fund.   If that  were to  happen, it would  mean the  state would                                                               
have additional  funds, he said, and  it could solve some  of the                                                               
other problems with projects in the queue.                                                                                      
2:31:59 PM                                                                                                                    
MR.  OTTESEN turned  to "Repurposed  Earmarks" [slide  20].    He                                                               
reported that the  state still has approximately  $153 million in                                                               
funding from federal earmarks, which do  not lapse.  In 2012, the                                                               
Congress repurposed some earmarks, changing  the title of all the                                                               
earmarks.  So instead of  the earmarks identified as project "x,"                                                               
"y," and  "z" in location  "y," these funds became  eligible like                                                               
Surface Transportation Program (STP)  dollars, and the funds were                                                               
directed to the  Alaska DOT&PF, and had all  the same eligibility                                                               
requirements  as  formula  funds,   except  that  the  state  was                                                               
required  to  use  the  repurposed  funds  within  three  months.                                                               
Fortunately,  the  state  had  projects  ready,  with  sufficient                                                               
matching funds and  legislative approval, he said,  so the DOT&PF                                                               
was able to generate a list  and obligate the repurposed funds or                                                               
Alaska would have lost the funding.                                                                                             
2:33:38 PM                                                                                                                    
MR. OTTESEN  cautioned that  if something  similar were  to occur                                                               
with respect to  the remaining $153 million in  earmarks, it will                                                               
be  difficult, especially  if the  Congress repurposed  the funds                                                               
outside of the legislative session.                                                                                             
CO-CHAIR HUGHES asked whether the  legislature could take advance                                                               
action so it could trigger  legislative authority if the Congress                                                               
took action.                                                                                                                    
MR. OTTESEN answered  that she has identified the  challenge.  He                                                               
suggested  it takes  time to  get projects  ready, such  that the                                                               
department can't  get projects ready  in six months, so  it would                                                               
need to look at projects already  in the process.  Certainly, the                                                               
state  will  spend next  year's  funds  on the  highest  priority                                                               
projects,  so the  remaining  projects that  are  extra ones.  In                                                               
addition,  it  is  helpful  to  have  some  projects  in  advance                                                               
construction since the AC can  be paid off, but timing challenges                                                               
exist, he  said.  The  list for 2016  will be different  than the                                                               
2017  list;   however,  the  DOT&PF   cannot  predict   when  the                                                               
repurposing might  happen.   In response  to Co-Chair  Hughes, he                                                               
predicted that if the department  learned it needed to respond to                                                               
repurposed  earmarks in  May 2015,  that the  DOT&PF could  spend                                                               
next year's state matching funds  and request additional matching                                                               
funds in January [based on the  federal fiscal year].  Thus there                                                               
are ways to temporarily borrow;  however, he exclaimed that state                                                               
matching funds are  an issue and the state has  not been carrying                                                               
much  balance in  its "match  fund."   Thus state  matching funds                                                               
pose one issue  and having sufficient projects ready  to go poses                                                               
another issue.   In further response to Co-Chair  Hughes, he felt                                                               
confident that the department could find  30 to 50 percent of the                                                               
total  $153 million  in repurposed  earmark funding;  however, he                                                               
was uncertain whether the DOT&PF  would have enough "shelf ready"                                                               
projects, unless one of the major projects became eligible.                                                                     
2:36:59 PM                                                                                                                    
CO-CHAIR HUGHES  related her understanding  that the  state could                                                               
potentially lose some funding.   She asked whether the department                                                               
has been  holding any  conversations with  Alaska's Congressional                                                               
MR. OTTESEN answered  yes; stating that the  DOT&PF holds ongoing                                                               
discussions  with  the  governor's  Washington D.C.  staff.    He                                                               
explained  that the  DOT&PF has  been  discussing earmarks  since                                                               
2012.   He predicted that the  next set of earmarks  the Congress                                                               
will   likely   take   action   on   will   be   the   SAFETEA-LU                                                               
[Transportation  Equity Act:    a Legacy  for  Users earmarks  in                                                               
2005] era  earmarks.  He  surmised that the Congress  could lapse                                                               
the earmarks,  and if so,  Maine and  Alaska would lose  the most                                                               
since they  have the  most earmarks.   Although Alaska  stands to                                                               
lose the most, Alaska stands to lose  the most in the event it is                                                               
not  ready to  obligate.    In response  to  Co-Chair Hughes,  he                                                               
agreed that it  would be triggered by  the Congress reauthorizing                                                               
MAP-21 [Moving Ahead for Progress in the 21st Century Act].                                                                     
MR. OTTESEN  commented that the  Congress has set a  deadline for                                                               
the end  of May  2015 to  achieve reauthorization.   At  the last                                                               
national  meeting,  the DOT&PF  learned  that  the Congress  will                                                               
likely  do   a  short-term  extension,   but  it  does   plan  to                                                               
reauthorize MAP-21  by mid-summer; however, the  legislature will                                                               
be out of session so the DOT&PF  will manage it with the tools it                                                               
has at its disposal.                                                                                                            
2:39:10 PM                                                                                                                    
MR.   OTTESEN   remarked   that  the   Statewide   Transportation                                                               
Improvement Program  (STIP) document  constantly changes,  but he                                                               
said  it was  important to  have  the flexibility  to change  the                                                               
document.   In response  to Co-Chair Hughes,  he stated  that the                                                               
STIP   can   be   accessed   from    the   DOT&PF's   home   page                                                               
MR. OTTESEN explained that the  link includes the amendments, the                                                               
current  Statewide  Transportation  Improvement  Program  (STIP),                                                               
along with an  interactive map that also allows  people to access                                                               
project status reports.   He concluded by  acknowledging that the                                                               
STIP is complicated.                                                                                                            
2:41:09 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Transportation Standing  Committee meeting was adjourned  at 2:41                                                               

Document Name Date/Time Subjects
STIP Overview 3-4-15.pdf HTRA 3/5/2015 1:00:00 PM