Legislature(2017 - 2018)BARNES 124

02/15/2018 01:15 PM TRANSPORTATION

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01:44:02 PM Start
01:44:39 PM Presentation: the Alaska Marine Highway System Reform Initiative Presentation: the Alaska Marine Highway System Reform Initiative
02:53:15 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
+ Presentation: The Alaska Marine Highway System TELECONFERENCED
Reform Initiative
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                       February 15, 2018                                                                                        
                           1:44 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Louise Stutes, Co-Chair                                                                                          
Representative Adam Wool, Co-Chair                                                                                              
Representative Matt Claman                                                                                                      
Representative Harriet Drummond                                                                                                 
Representative Chuck Kopp                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mark Neuman                                                                                                      
Representative David Eastman (alternate)                                                                                        
Representative Gabrielle LeDoux (alternate)                                                                                     
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Justin Parish                                                                                                    
Representative Jonathan Kreiss-Tomkins                                                                                          
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: THE ALASKA MARINE HIGHWAY SYSTEM REFORM INITIATIVE                                                                
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROBERT VENABLES, Executive Director                                                                                             
Southeast Conference                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented a PowerPoint presentation of the                                                               
Alaska Marine Highway System (AMHS) Reform Initiative.                                                                          
                                                                                                                                
DENNIS WATSON, General Manager                                                                                                  
Inter-Island Ferry Authority;                                                                                                   
Vice-President, Southeast Conference                                                                                            
Craig, Alaska                                                                                                                   
POSITION STATEMENT:   Testified during the AMHS  Reform Initiative                                                            
presentation.                                                                                                                   
                                                                                                                                
SHANNON ADAMSON, Union Representative                                                                                           
Steering Committee;                                                                                                             
Regional Representative                                                                                                         
International Organization of Masters, Mates, and Pilots (MM&P)                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified during the AMHS  Reform Initiative                                                            
presentation.                                                                                                                   
                                                                                                                                
DAVID KENSINGER, General Manager                                                                                                
Inter-Island Ferry Authority                                                                                                    
Petersburg, Alaska                                                                                                              
POSITION STATEMENT:   Testified during the AMHS  Reform Initiative                                                            
presentation.                                                                                                                   
                                                                                                                                
GREG WAKEFIELD, Owner                                                                                                           
AAA Moving & Storage (AAA Moving);                                                                                              
Member, AMHS Reform Project Phase 1 Steering Committee                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified during the AMHS  Reform Initiative                                                            
presentation.                                                                                                                   
                                                                                                                                
JOHN WATERHOUSE, Chief Concept Engineer                                                                                         
Elliott Bay Design Group ("Elliott Bay")                                                                                        
Seattle, Washington                                                                                                             
POSITION STATEMENT:   Testified during the AMHS  Reform Initiative                                                            
presentation.                                                                                                                   
                                                                                                                                
SUSAN BELL, Principal                                                                                                           
McDowell Group                                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified during the AMHS  Reform Initiative                                                            
presentation.                                                                                                                   
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:44:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LOUISE  STUTES called  the House Transportation  Standing                                                            
Committee meeting  to order at 1:44 p.m.   Representatives Stutes,                                                              
Wool,  Drummond, and  Kopp  were  present at  the  call to  order.                                                              
Representatives  Sullivan-Leonard   and  Claman  arrived   as  the                                                              
meeting was in progress.                                                                                                        
                                                                                                                                
^Presentation:   The   Alaska   Marine   Highway   System   Reform                                                              
Initiative Presentation:  The Alaska Marine Highway  System Reform                                                          
Initiative                                                                                                                  
                                                                                                                              
                                                                                                                                
1:44:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR STUTES  announced that the  only order of  business would                                                              
be  a  "Presentation:  The Alaska  Marine  Highway  System  Reform                                                              
Initiative."                                                                                                                    
                                                                                                                                
1:46:15 PM                                                                                                                    
                                                                                                                                
ROBERT   VENABLES,  Executive   Director,  Southeast   Conference,                                                              
stated  he would  share the  findings  and results  of the  Alaska                                                              
Marine Highway System (AMHS) Reform Initiative.                                                                                 
                                                                                                                                
1:46:53 PM                                                                                                                    
                                                                                                                                
DENNIS  WATSON,  General Manager,  Inter-Island  Ferry  Authority;                                                              
Vice-President,  Southeast Conference,  stated that he  previously                                                              
served as  the mayor,  City of Craig.   He  said the project  team                                                              
for  the AMHS  Reform initiative  strongly  supports this  effort.                                                              
From  his perspective  as a  ferry  operator, he  shared that  the                                                              
Alaska  Marine Highway  System  (AMHS) provides  Southeast  Alaska                                                              
access north  to Haines  and south  to Bellingham, Washington  and                                                              
Prince Rupert,  British Columbia.   He  emphasized the  importance                                                              
of the  AMHS to the  communities in  Southeast Alaska,  for access                                                              
to  transportation, goods  and  school or  cultural  events.   The                                                              
Inter-Island  authority  would  not  exist  without  a  functional                                                              
AMHS.   The AMHS  system also  provides access  to Western  Alaska                                                              
communities.                                                                                                                    
                                                                                                                                
1:48:52 PM                                                                                                                    
                                                                                                                                
SHANNON   ADAMSON,  Union   Representative,  Steering   Committee;                                                              
Regional  Representative, International  Organization of  Masters,                                                              
Mates,  and  Pilots (MM&P),  provided  her  background,  including                                                              
that she  has a United States  Coast Guard issued license  and she                                                              
has sailed  as a  licensed deck  officer with  the AMHS  for seven                                                              
years.  She  has worked in  her current position for  three years.                                                              
She   applauded  the   Department  of   Transportation  &   Public                                                              
Facilities  (DOT&PF) on the  AMHS reform  project, especially  for                                                              
actively involving the  MM&P in this project. When  the AMHS is in                                                              
decline it  not only hurts  communities but  also the crews.   The                                                              
Masters,  Mates,  and  Pilots (MM&P)  support  this  [AMHS  Reform                                                              
report], because it  recognizes that the AMHS is  failing, but the                                                              
ferry system has  an opportunity to succeed through  this project.                                                              
Although the union  does not agree with every  recommendation, the                                                              
MM&P  understands the  give and  take in  the negotiation  process                                                              
and the  union can tolerate  the outcomes.   In closing,  she said                                                              
that  changes  in  the AMHS  are  desperately  needed,  that  this                                                              
initiative  represents positive  change,  and  the union  supports                                                              
it.                                                                                                                             
                                                                                                                                
1:50:27 PM                                                                                                                    
                                                                                                                                
MR. VENABLES  recognized  members in the  audience, including  Jan                                                              
Hill,  Mayor,  Haines  Borough  and the  chair  of  the  Southeast                                                              
Conference.   He  emphasized  the  importance of  having  Alaskans                                                              
articulate  what  the  AMHS  should be  during  this  project.  He                                                              
discussed the  project process,  and noted the steering  committee                                                              
had   statewide  participation.      Further,   union  and   labor                                                              
representatives  participated  throughout  the process,  he  said.                                                              
The goal  has been to create  a management structure  empowered to                                                              
make the  decisions to  control costs  and create revenue  streams                                                              
to achieve  a reliable  and sustainable  system.   He invited  Mr.                                                              
Kensinger to describe his experience with the AMHS.                                                                             
                                                                                                                                
1:53:10 PM                                                                                                                    
                                                                                                                                
DAVID KENSINGER,  General Manager,  Inter-Island Ferry  Authority,                                                              
shared his  experiences and  observations  as a frequent  traveler                                                              
on the AMHS  and from operating  a produce business in  Alaska for                                                              
40  years.   He estimated  his  family has  traveled  on the  AMHS                                                              
ferries more  than 100 times per  year and doing so has  shown him                                                              
the  importance of  the  AMHS to  communities.    Further, he  has                                                              
encountered  hundreds  of  travelers   whose  destinations  extend                                                              
beyond Southeast Alaska  to all parts of Alaska.   He realized the                                                              
depth of  the problems the  AMHS faces  when in February,  none of                                                              
the ferries operated  in Southeast Alaska one day.   In fact, this                                                              
was the first  time since 1963 that  the AMHS did not  operate any                                                              
ferries.   He reported that he  often cannot use the  ferry system                                                              
due  to  [intermittent   or  inconvenient]  ferry   schedules  and                                                              
cancellations.                                                                                                                  
                                                                                                                                
MR.  KENSINGER  said he  believes  in  the [AMHS  Reform  Project]                                                              
because  it uses  fundamental  business principles  and  processes                                                              
like long-term planning  that is absent in the current  AMHS.  The                                                              
AMHS   budget  cycle   is   based  on   year-to-year   legislative                                                              
appropriations   that  limit   the  AMHS's   ability  to   operate                                                              
efficiently.    These  reforms   can  bring  increased  ridership,                                                              
provide   long-range  planning   opportunities,  and   potentially                                                              
reduce the  annual need for general  funds.  He  acknowledged that                                                              
public  funding is  always  necessary for  public  transportation.                                                              
He would  also like  to see  more service  with less  cost to  the                                                              
state.   He  said,  "We can't  get  to that  point  until we  have                                                              
something  like this  operational,  this business  plan, and  this                                                              
change that we're proposing in front of you right now."                                                                         
                                                                                                                                
1:56:29 PM                                                                                                                    
                                                                                                                                
GREG  WAKEFIELD,  Owner,  AAA  Moving   &  Storage  (AAA  Moving);                                                              
Member, AMHS  Reform Project  Phase 1  Steering Committee,  stated                                                              
that  his business  operates  in  seven locations  throughout  the                                                              
state, including  Kodiak, Fairbanks, Ketchikan, and  Sitka.  Since                                                              
1983  his  business  has  grown  from  a  small,  local  one-truck                                                              
company  to the  biggest one  in Alaska.   AAA Moving  would  be a                                                              
bigger customer  of AMHS if it  could rely on the  ferry services.                                                              
He has  participated  in the AMHS  Reform Project,  as a  steering                                                              
committee  member   to  provide   a  business  perspective.     He                                                              
emphasized  that the  AMHS is  a business  - a  public business  -                                                              
which  must be  run  on business  principles,  including  customer                                                              
service, reliability, and meeting the needs of the marketplace.                                                                 
                                                                                                                                
MR. WAKEFIELD  said  that as a  steering committee  member  he was                                                              
initially  surprised at  some of  the AMHS's  decisions.   Once he                                                              
observed  how  often  leadership   changes  and  the  effects  the                                                              
political  process  has on  the  AMHS,  he better  understood  the                                                              
decisions  being made.   He  advocated for  a public  corporation,                                                              
one  that would  bring  expertise,  continuity of  management  and                                                              
improved decision-making  to the  AMHS.   He highlighted  that the                                                              
AMHS has  some vessels  over 60  years old,  ones of that  vintage                                                              
that typically  are sold  for scrap or  to countries  in Southeast                                                              
Asia for  short-term hauls.   He reported that consultants  advise                                                              
replacing ferry vessels every six years.                                                                                        
                                                                                                                                
1:59:30 PM                                                                                                                    
                                                                                                                                
MR.  WAKEFIELD urged  members to  adopt  a public  model to  allow                                                              
this system  to continue.   As an  AMHS user  since the  1960s, he                                                              
felt that  the system  has grown,  but not  in the  best way.   He                                                              
explained   that  the  AMHS   is  an   integral  part   of  public                                                              
transportation;  however,  he acknowledged  that  it is  different                                                              
from highways  and airports.  In  closing, he emphasized  the need                                                              
for  a  focused,  professional   board  that  directs  the  AMHS's                                                              
management  which  will  result  in  better  decision-making  that                                                              
allows  for long-term  sustainability  and growth  and reduce  the                                                              
need for general  fund appropriations.  He said he  would like his                                                              
grandchildren  to have the  opportunity to ride  on the  AMHS, but                                                              
changes must  be made  for that  to happen.   He urged  members to                                                              
consider this proposal and move it forward.                                                                                     
                                                                                                                                
2:01:45 PM                                                                                                                    
                                                                                                                                
MR. VENABLES added  that the AMHS Reform Project  team listened to                                                              
Alaskans first.                                                                                                                 
                                                                                                                                
2:02:16 PM                                                                                                                    
                                                                                                                                
JOHN  WATERHOUSE,  Chief  Concept  Engineer;  Elliott  Bay  Design                                                              
Group  ("Elliott  Bay"), stated  that  "Elliott  Bay"  is a  naval                                                              
architecture and  marine engineering firm who has  worked with the                                                              
Alaska  Marine  Highway  System  (AMHS)  for over  30  years,  and                                                              
worked with  Southeast Conference  on this study.   He  offered to                                                              
present a  PowerPoint to review  the work and conclusions  for the                                                              
project.                                                                                                                        
                                                                                                                                
2:02:43 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE  paraphrased  slide 2,  titled  "Project  Purpose"                                                              
which read [original punctuation provided]:                                                                                     
                                                                                                                                
       Create a strategic plan for AMHS                                                                                       
                                                                                                                                
       ? To provide financially sustainable ferry service                                                                       
     that meets the needs of Alaskans                                                                                           
                                                                                                                                
       Two-phase project                                                                                                      
                                                                                                                                
      ?Phase   1:   Mission,    Goals,   and   Governance                                                                       
          Recommendations                                                                                                       
          ?Phase 2: Strategic Operational and Business Plan                                                                     
                                                                                                                                
MR.  WATERHOUSE  said  that  "Phase  1"  of  the  project  was  to                                                              
reaffirm the mission  and goals; and review  governance structures                                                              
used by  ferry systems throughout  the world to identify  any that                                                              
might be  preferred as  optimal for  the AMHS.   He described  the                                                              
"Phase  2"  scope  of work,  which  was  to  examine  operational,                                                              
revenue,   and  planning   aspects   of  the   AMHS  and   develop                                                              
recommendations on how to improve the AMHS system.                                                                              
                                                                                                                                
MR.  WATERHOUSE  reviewed slide  3,  titled "Project  Team"  which                                                              
read [original punctuation provided]:                                                                                           
                                                                                                                                
       Southeast Conference                                                                                                     
     ? Contractors                                                                                                              
          ? Elliott Bay Design Group                                                                                            
          ? McDowell Group                                                                                                      
          ? KPFF Engineering Consultants                                                                                        
     ? Statewide Steering Committee                                                                                             
     ?Offices of the Governor and Lieutenant Governor                                                                           
                                                                                                                                
2:03:34 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE  reviewed slide 4,  titled "Phase 1 Scope  of Work"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     ? Statewide Summit                                                                                                         
     ? Stakeholder interviews                                                                                                   
     ? Case studies of other ferry systems                                                                                      
     ? Mission statement refinement                                                                                             
     ? Analysis of alternative governance models                                                                                
     ? Recommend governance model for AMHS                                                                                      
                                                                                                                                
MR. WATERHOUSE  said the project  began with a listening  session,                                                              
including   a   statewide   summit   and   interviews   with   key                                                              
stakeholders.  The  group held discussions with  the Department of                                                              
Transportation  & Public  Facilities (DOT&PF),  the AMHS,  and the                                                              
Department  of  Administration  (DOA).   He  reiterated  that  the                                                              
group examined  other ferry systems  worldwide for  best practices                                                              
that could  be adopted,  and it refined  its mission  statement as                                                              
well as making recommendations for a governance model.                                                                          
                                                                                                                                
2:04:28 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE  turned to  slide  5,  titled  "Phase 2  Scope  of                                                              
Work," which read as follows [original punctuation provided]:                                                                   
                                                                                                                                
       Define long-term operating strategy                                                                                    
          ? Task 1 - Revenue Analysis                                                                                           
          ? Task 2 - Operations Analysis                                                                                        
            Task 3 - Operations Financial Model                                                                                 
          ? Task 4 - Structure and Benefit of Public Corporation                                                                
          ? Task 5 - Public and Stakeholder Engagement                                                                          
                                                                                                                                
       Three tasks not funded                                                                                                 
          ? Household and Business Survey                                                                                       
          ? Capital Needs Assessment                                                                                            
          ? Transition Plan                                                                                                     
                                                                                                                                
MR.  WATERHOUSE explained  that "Phase  2" furthered  the work  of                                                              
"Phase  1," examining  how  the  recommended governance  model  to                                                              
create  a  public  corporation  would  change  the  way  the  AMHS                                                              
operates.   He  pointed out  the  five tasks  listed, noting  that                                                              
three tasks were  not undertaken due to lack  of funding; however,                                                              
the  unfunded  tasks  will  need  to  be  accomplished,  including                                                              
engaging  with   the  public,   considering  capital   needs,  and                                                              
developing a transition plan.                                                                                                   
                                                                                                                                
2:04:53 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE paraphrased  slide  6, titled  "Task  1 -  Revenue                                                              
Analysis"   which   read   as   follows:   [original   punctuation                                                              
provided]:                                                                                                                      
                                                                                                                                
     ?  Identify mix  of public  funding  and other  revenues                                                                   
     for sustainability                                                                                                         
     ?  Consider   possible  changes  to  tariff   rates  and                                                                   
     structure                                                                                                                  
     ?   Consider   potential  partnerships   with   private,                                                                   
     Tribal, municipal, and other entities                                                                                      
                                                                                                                                
MR.  WATERHOUSE remarked  that  the AMHS  project  group tried  to                                                              
take a fresh look at revenue.                                                                                                   
                                                                                                                                
2:05:20 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE paraphrased  slide 7,  titled "Revenue  Findings,"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     ?  AMHS  generates  $50  million   in  annual  operating                                                                   
     revenue                                                                                                                    
     ? Bellingham  service is an essential source  of revenue                                                                   
     (44% of total)                                                                                                             
     ? Bellingham in the top 6 revenue port pairs                                                                               
     ?  Non-resident travel  accounts  for  42% of  operating                                                                   
     revenue                                                                                                                    
     ?  Best  opportunity  for   revenue  growth  is  through                                                                   
     forward funding                                                                                                            
                                                                                                                                
MR. WATERHOUSE  highlighted  the findings,  noting $50 million  in                                                              
operating  revenue sources  are  generated from  ticket sales,  on                                                              
board  food sales,  and terminal  operations.   One of the  strong                                                              
findings was that  finding that Bellingham provides  44 percent of                                                              
the total system revenue.                                                                                                       
                                                                                                                                
2:05:58 PM                                                                                                                    
                                                                                                                                
CO-CHAIR STUTES asked  for the number of trips the  AMHS takes per                                                              
year from Bellingham to Alaska.                                                                                                 
                                                                                                                                
MR.  WATERHOUSE  answered that  he  did not  specifically  recall,                                                              
although the AMHS  operates 350 service weeks per  year across all                                                              
the vessels.   He  said the  figure for  the number of  Bellingham                                                              
trips  was included  in  the report.    In addition,  the  revenue                                                              
analysis   identified  the   importance   to   all  Alaskans   for                                                              
nonresident   AMHS   passengers   visiting  Alaska   since   their                                                              
ridership helps underwrite the system.                                                                                          
                                                                                                                                
2:06:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL  referred to  the 44  percent of revenue  attributed                                                              
to the Bellingham  service.  He asked if Bellingham  was mentioned                                                              
because the services to be Bellingham could be cut.                                                                             
                                                                                                                                
2:07:20 PM                                                                                                                    
                                                                                                                                
SUSAN  BELL,   Owner,  McDowell   Group,  stated  that   her  firm                                                              
contributed  to  the  revenue  analysis,   governance  model,  and                                                              
public outreach.   The firm reviewed all revenue by  route and the                                                              
numbers  of  Alaskans  using  the  ferry  system.    One  inherent                                                              
question  people have  asked  is whether  the  AMHS could  sustain                                                              
itself  if  it  only  operated  in  Alaska.    As  Mr.  Waterhouse                                                              
mentioned   earlier,  the  Bellingham   service  was   highlighted                                                              
because it  is important  to note  that Alaskans receive  benefits                                                              
from  the  Bellingham   route;  that  the  system   would  not  be                                                              
sustainable without [the Bellingham route].                                                                                     
                                                                                                                                
CO-CHAIR   WOOL  remarked   that   he  appreciated   the   revenue                                                              
percentages  and  figures;  however,  the  costs  to  operate  the                                                              
Bellingham  routes  were  not listed,  including  any  maintenance                                                              
costs  for ferries.   He  clarified  that he  was not  necessarily                                                              
asking for those figures.                                                                                                       
                                                                                                                                
MS. BELL added  that with the marine expertise  that "Elliott Bay"                                                              
has, it  provided more  of the operational  analysis.   She stated                                                              
that the  McDowell Group  and "Elliott  Bay" provided  some pieces                                                              
that fit  into the  report.  She  that they  are taking  notes for                                                              
follow-up to provide more details for the committee.                                                                            
                                                                                                                                
2:09:11 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE  stated that  the AMHS relies  on the  general fund                                                              
to underwrite  the ferry  system operations;  in fiscal  year (FY)                                                              
17, the appropriation  was $89 million.  Still,  the AMHS provides                                                              
public transportation  for the "public  good," he said.   In fact,                                                              
the AMHS  will always be  dependent on funds  from the state.   It                                                              
is  not feasible,  given  the geography  of  Alaska and  ridership                                                              
levels for the AMHS to cover all the operating costs from fares.                                                                
                                                                                                                                
2:10:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  directed  attention  to slide  7                                                              
and asked  him to  expand on  the bullet  point "Best  opportunity                                                              
for revenue growth is through forward funding."                                                                                 
                                                                                                                                
MR. WATERHOUSE  responded  that one key  aspect of  transportation                                                              
is reliability  and given  the decrease in  funding for  the AMHS,                                                              
the  system   has  struggled  to   provide  reliable   service  to                                                              
communities.   The  less reliable  the  AMHS is,  the less  people                                                              
will want to use  it, he said.  Thus, stable  funding is essential                                                              
to  allow nonresidents  sufficient  planning  time.   Many  people                                                              
plan their  vacations in advance  and rely on published  schedules                                                              
in the 6 to  12 months prior to their vacations.   However, if the                                                              
AMHS lacks  adequate funding to  publish its schedule  in advance,                                                              
it becomes  more difficult  to attract  these vacationers.   Thus,                                                              
"Elliott  Bay" emphasizes  creating  stability  in  the system  as                                                              
inherent aspects to "grow" fare revenue.                                                                                        
                                                                                                                                
2:11:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  asked  how  that ties  into  the                                                              
consideration of creating a corporation.                                                                                        
                                                                                                                                
MR. WATERHOUSE  pointed out  that Mr.  Wakefield stated  the [AMHS                                                              
Reform  Project's]  observation  that  a  public  corporation  can                                                              
operate  more  nimbly,  much closer  to  how  businesses  operate.                                                              
Businesses  examine how to  enhance their  revenues, for  example,                                                              
by  considering   and  improving   their  customers   experiences,                                                              
perhaps by  making the vessels  more reliable, or  offering routes                                                              
with better  schedules to suit  ridership needs.   Those represent                                                              
things that  "Elliott Bay"  believes a  public corporation  with a                                                              
good  management team  could  achieve.   He  said  that [a  public                                                              
corporation]  could  improve  the  system  for  Alaskans  and  all                                                              
system users.                                                                                                                   
                                                                                                                                
2:12:41 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE  reported that "Elliott  Bay" examined  other ferry                                                              
systems,  globally  and  nationally,  including  Scotland's  ferry                                                              
system   [Caledonian  MacBrayne   Clyde   and  Hebridean   Ferries                                                              
(CalMac) that  operates in a  very similar geography.   Scotland's                                                              
ferry system  serves small,  remote island  communities with  some                                                              
routes  connecting   to  large  towns  or  municipalities.     The                                                              
consultants, ["Elliott  Bay"] also  examined the British  Columbia                                                              
Ferry  [Services,   Inc.]  which  has   a  mix  of   urban  routes                                                              
connecting  Nanaimo and  Vancouver,  British  Columbia, with  some                                                              
routes serving  smaller and more  isolated communities  in British                                                              
Columbia.                                                                                                                       
                                                                                                                                
2:13:14 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE  said "Elliott Bay"  examined what  constitutes the                                                              
best  practices  and  common  themes.     Both  ferry  systems  it                                                              
examined  have found  the  public corporation  model  to be  quite                                                              
effective  in retaining  the necessary  links  to public  funding,                                                              
plus it  is important to  give the systems  the ability  to engage                                                              
in  long-term planning.  This  public corporation  model  provides                                                              
the foundation that  can be built on to reinvent  the AMHS for the                                                              
next 50 years, he said.                                                                                                         
                                                                                                                                
2:14:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD  asked for the  anticipated amount                                                              
of  the   fiscal  note   to  implement  the   AMHS  as   a  public                                                              
corporation.                                                                                                                    
                                                                                                                                
MR. WATERHOUSE  responded  that "Elliott  Bay" has not  calculated                                                              
any  estimates for  a  transition  plan.   He  suggested that  the                                                              
costs  to change  the AMHS  to an  operational public  corporation                                                              
would  need   to  be   done  in   consultation  with   the  DOT&PF                                                              
commissioner.                                                                                                                   
                                                                                                                                
2:15:04 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE  turned to  slide  8, titled  "Revenue  Findings,"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     $89 million in GF support in FY17                                                                                          
     ?Down 28% from FY13 ($35 million cut)                                                                                      
     ?AMHS will always rely on public funds to provide safe                                                                     
     and reliable transportation                                                                                                
     ?Transition to a public corporation will not endanger                                                                      
     revenue flows from federal government                                                                                      
      ?Price Elasticity - Reduced fares are not likely to                                                                       
      produce sufficient new demand to compensate for loss                                                                      
     of revenue                                                                                                                 
                                                                                                                                
                                                                                                                                
MR.  WATERHOUSE said  that one  aspect "Elliott  Bay" reviewed  as                                                              
part of  the revenue study was  price elasticity; for  example, if                                                              
the  AMHS lowered  ticket prices  would  enough additional  people                                                              
ride the  ferry to  compensate for  the lower  fares.   During the                                                              
listening session  feedback, "Elliott Bay" found  that many people                                                              
believed  that lower  prices  would increase  ridership;  however,                                                              
the study  found that  would not  occur.   Incidentally, the  AMHS                                                              
has  been  working to  rebalance  some  of  the fares  across  the                                                              
routes,  which needs  to an ongoing  focus of  any new  management                                                              
team.   In  addition,  management could  also  review the  dynamic                                                              
pricing  model used  by the cruise  industry  and to consider  any                                                              
modern business practices that cruise lines and airlines use.                                                                   
                                                                                                                                
2:16:37 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE reviewed  slide 9,  titled "Operations  Analysis,"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
        ?Identify basic marine transportation needs for                                                                         
     Alaskans                                                                                                                   
         ?Examine current system operations to identify                                                                         
     strengths, weaknesses, and constraints                                                                                     
                                                                                                                                
MR. WATERHOUSE  reviewed slide  10, titled "Operations  Findings,"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     ?Complex System                                                                                                            
     ?9 Operational Vessels                                                                                                     
     ?36 Ports of Call (37 Terminals)                                                                                           
     ?Variable service schedules                                                                                                
     ?Aging Fleet                                                                                                               
      Terminal/Vessel compatibility                                                                                             
     ?Service areas                                                                                                             
     ?Terminal weight restrictions ? Traffic requirements                                                                       
    Residents,   communities,    and   businesses   require                                                                     
      reliable, consistent service                                                                                              
                                                                                                                                
                                                                                                                                
MR.  WATERHOUSE  advised members  that  the  AMHS is  complex  and                                                              
complex  issues  cannot be  resolved  with  simple answers.    The                                                              
aging  fleet  causes uncertainty  when  vessels  spend  additional                                                              
time in  the shipyard for repairs,  which disrupts the  system and                                                              
puts  the management  team into  a crisis  management mode  rather                                                              
than focusing on planning and forward thinking.                                                                                 
                                                                                                                                
MR.  WATERHOUSE reviewed  slide  11 "Operations  Findings,"  which                                                              
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
     ?Strengths                                                                                                                 
     ?Dedicated personnel at all levels                                                                                         
     ?Vital service to communities                                                                                              
     ?Weaknesses                                                                                                                
      ?Lack of funding certainty for planning, scheduling,                                                                      
      and market development                                                                                                    
      ?Aging fleet with increasing and unexpected service                                                                       
      losses                                                                                                                    
     ?Management - labor alignment                                                                                              
                                                                                                                                
MR. WATERHOUSE  reviewed the  strengths of  the AMHS,  noting that                                                              
all the  AMHS's personnel want the  system to operate  better than                                                              
it  currently  works.    The  AMHS   provides  vital  service  for                                                              
communities, many of  which have no other options  for travel.  In                                                              
terms  of weaknesses,  he  highlighted  that "Elliott  Bay"  found                                                              
that the  AMHS needs to improve  the alignment between  management                                                              
and  labor.   He  offered his  belief  that a  public  corporation                                                              
could  provide  an opportunity  for  them  to  focus on  a  common                                                              
vision and work together.                                                                                                       
                                                                                                                                
2:18:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  WOOL asked  whether other  systems such  as in  Scotland                                                              
use standardized  vessels in its fleets for  interchangeability of                                                              
parts  and ease  of maintenance.    He further  asked whether  the                                                              
AMHS  system  issues  is  an anomaly  or  if  other  systems  have                                                              
similar problems.                                                                                                               
                                                                                                                                
MR. WATERHOUSE  responded that most  other systems operate  with a                                                              
legacy  fleet, with  the  typical age  of  vessels from  25 to  30                                                              
years.    Some of  Scotland's  ferries  are  40  to 45  years  old                                                              
whereas the  United States, Alaska  and Washington, is  an anomaly                                                              
because it  uses its vessels for  60 to 65 years.   One additional                                                              
challenge the AMHS  faces is the port size; for  example, a vessel                                                              
such as the motor  vessel (M/V) Columbia cannot  serve the smaller                                                              
port community of  Angoon due to the dock size.   In addition, the                                                              
smaller  vessels such  as the  M/V  Aurora or  M/V LeConte  cannot                                                              
operate  on  some  ocean  routes  [due to  the  vessel  sizes  and                                                              
navigability].   One challenge will  be to minimize the  number of                                                              
vessel types and  to standardize components within  the vessels to                                                              
obtain efficiencies  of scale, he said.  He emphasized  the public                                                              
corporation's flexible  plan and strategic vision  structure could                                                              
help move the AMHS in that direction.                                                                                           
                                                                                                                                
2:20:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL  directed attention  to management/labor  alignment.                                                              
He  imagined  "Elliott  Bay"  spent  considerable  time  examining                                                              
alignment,  especially in terms  of wages  and benefits.  He asked                                                              
whether it was a "Pandora's Box."                                                                                               
                                                                                                                                
MR.  WATERHOUSE  agreed  that "Elliott  Bay"  has  held  extensive                                                              
discussions, including  meeting with representatives  of the three                                                              
marine labor  unions and the  Department of Administration  (DOA).                                                              
One challenge  has been that  the collective bargaining  agreement                                                              
is currently  handled by the DOA and  not by the AMHS.   Thus, the                                                              
AMHS does  not control the  labor negotiations; however,  the AMHS                                                              
participates  in  negotiations in  an  advisory capacity.    Since                                                              
labor  represents the  largest cost  in running  any ferry  system                                                              
all businesses  want  to control  costs.  The  labor sector  agree                                                              
that  its representatives  need to  be part  of the  negotiations.                                                              
The good news is  that there is a team sentiment,  as it will take                                                              
efforts  by  all parties  to  make  this  system better  and  work                                                              
together, he  said.  Anecdotally,  he stated that  Alaska Airlines                                                              
learned  long   ago  that  its   front-line  people,   the  people                                                              
maintaining  the  airplanes must  be  aligned with  management  to                                                              
deliver a  quality product,  which he referred  to as  the "Alaska                                                              
Airlines model."                                                                                                                
                                                                                                                                
2:22:56 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE reviewed  slide 12,  titled "Task  3 -  Operations                                                              
Financial Model," which read [original punctuation provided]:                                                                   
                                                                                                                                
      ?Develop representative model to simulate the system                                                                      
      and demonstrate relative impact of proposed/possible                                                                      
     changes                                                                                                                    
     ?Identify primary cost drivers                                                                                             
                                                                                                                                
MR. WATERHOUSE  said the  reason to create  a financial  model was                                                              
to give "Elliott  Bay" the ability  to test different ideas.   For                                                              
example,  the  financial  model   allows  "Elliott  Bay"  to  test                                                              
whether  a route  to Bellingham  covers  its costs  or whether  it                                                              
makes more  sense to  have three or  four shuttle ferries  deliver                                                              
ferry service at levels expected by the communities.                                                                            
                                                                                                                                
MR.  WATERHOUSE reviewed  slide 13,  titled "Operations  Financial                                                              
Findings" which read as follows [original punctuation provided]:                                                                
                                                                                                                                
       ? Shifting to a modern fleet and governance system                                                                       
     provides more cost effective service                                                                                       
                                                                                                                                
      ? There are no scenarios whereby all operating costs                                                                      
        can be recovered through the farebox                                                                                    
     ? Bellingham service is required for system viability                                                                      
     ? Primary vessel fleet cost drivers                                                                                        
       ?Personnel & Travel  54% of system total expenses                                                                        
       69% of operating expenses                                                                                                
       ?Capital improvements & maintenance  13% of system                                                                       
       total expenses 16% of operating expenses                                                                                 
          ?Fuel    10% of system total expenses 14% of                                                                          
        operating expenses                                                                                                      
                                                                                                                                
MR. WATERHOUSE  said personnel  and travel  represent the  highest                                                              
cost factors.   Capital improvements  and maintenance  are ongoing                                                              
and increasingly challenging  as the fleet ages.   One bright spot                                                              
is that  fuel prices  have been  down, but prices  do not  tend to                                                              
stay down  forever,  he said.   He emphasized  that "Elliott  Bay"                                                              
believes  that  shifting  to  a  modern  fleet  and  changing  the                                                              
governance system  will provide  cost improvements in  the system.                                                              
Washington  State ferries can  cover 75  percent of its  operating                                                              
costs  through their  fares; however,  these  ferries serve  dense                                                              
urban  areas that  transport  significant numbers  each  day.   By                                                              
contrast, North  Carolina's state  ferry system covers  13 percent                                                              
of its  operating costs  through fares.   Other states  have taken                                                              
different  approaches to  public transportation  policy, he  said.                                                              
The "Elliott  Bay" consultants  believe the  AMHS can  improve its                                                              
"farebox"  recovery, but  it  must grow  the  revenue aspects  and                                                              
make the fleet more efficient, he stated.                                                                                       
                                                                                                                                
2:25:04 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE reviewed  slide  14, titled  "Task  4 -  Corporate                                                              
Structure  and   Benefits,"  which   read  as  follows   [original                                                              
punctuation provided]:                                                                                                          
                                                                                                                                
     ?Objective: Describe a governance structure that best                                                                      
     empowers management team to operate AMHS economically                                                                      
     and meet users needs                                                                                                       
                                                                                                                                
MR. WATERHOUSE  stated that  "Elliott Bay"  considered the  Alaska                                                              
Railroad  as a model  and reviewed  how the  AMHS is connected  to                                                              
other  state government,  in order  to validate  its opinion  from                                                              
Phase 1 that the  public corporation would be the  best model.  He                                                              
acknowledged that the "devil is in the details."                                                                                
                                                                                                                                
MR.   WATERHOUSE  reviewed   slide   15,   titled  "Governance   -                                                              
Findings," which read as follows:                                                                                               
                                                                                                                                
     ? Convert AMHS to a public corporation                                                                                     
                                                                                                                                
     ? Maintains existing benefits                                                                                              
          ? Intradepartmental coordination                                                                                      
          ? Public purpose                                                                                                      
          ? Access to federal funding                                                                                           
          ? Access to shared services                                                                                           
               ? DOT&PF                                                                                                         
               ? Dept. of Administration                                                                                        
               ? Dept. of Law                                                                                                   
                                                                                                                                
     ? Addresses existing limitations                                                                                           
          ?Frequent turnover in senior leadership                                                                               
          ? Indirect labor negotiations                                                                                         
          ? Short-term planning horizon                                                                                         
          ? Political influence over operational decisions                                                                      
                                                                                                                                
     ? Additional benefits                                                                                                      
          ? Align labor and management interests                                                                                
          ? Reduce labor costs strategically                                                                                    
          ? Incorporate expertise of board members                                                                              
          ? Operate in more business-like manner                                                                                
                                                                                                                                
2:25:37 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE  advised that  converting  the  AMHS to  a  public                                                              
corporation  would  still maintain  access  to federal  funds  and                                                              
allow  intradepartmental coordination  between  the Department  of                                                              
Law  and   the  Department  of   Administration.    In   terms  of                                                              
limitations,  he  suggested  that with  strategic  thinking  labor                                                              
costs can be  controlled or reduced through automation  and system                                                              
efficiencies.                                                                                                                   
                                                                                                                                
2:26:30 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE  reviewed  slide 16,  titled "Task  5 - Public  and                                                              
Stakeholder   Engagement"   which   read  as   follows   [original                                                              
punctuation provided]:                                                                                                          
                                                                                                                                
      ?Objective: Guide a process to share information and                                                                      
     gather essential input                                                                                                     
          ? Public Engagement Plan                                                                                              
          ? Steering Committee and Sub-Committee input                                                                          
          ? Key stakeholder engagement                                                                                          
           ?Residents, employees, community/business leaders,                                                                   
           riders                                                                                                               
          ? Develop and maintain new project website                                                                            
          ? Public meetings ? Media outreach                                                                                    
                                                                                                                                
2:26:34 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE said  the AMHS relies on the goodwill  of Alaskans.                                                              
The public  engagement plan included  extensive meeting  to better                                                              
understand the  friction points.  For example, the  McDowell Group                                                              
created  a  website to  solicit  comments  and feedback  from  the                                                              
public.  The  results informed the "Elliott Bay"  report and guide                                                              
its recommendations.                                                                                                            
                                                                                                                                
2:27:05 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE  reviewed slide  17, titled "Stakeholder  Findings"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
       ? Public confirmed that AMHS is vital to community                                                                       
     economic well-being                                                                                                        
      ? Many suggestions for generating operating revenues                                                                      
     and controlling costs                                                                                                      
     ? Continued outreach is essential                                                                                          
       ? Inform Alaskans about the statewide benefits of                                                                        
     AMHS                                                                                                                       
          ? Educate and engage key stakeholders                                                                                 
                                                                                                                                
MR. WATERHOUSE again  referred to the "Alaska Airlines  model," to                                                              
illustrate  that the company  continues to  create "touch  points"                                                              
with  its  customers,  which  keeps  its  presence  in  customers'                                                              
minds.   These are lessons  that could  be learned and  applied to                                                              
the AMHS, he said.                                                                                                              
                                                                                                                                
2:27:38 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE  reviewed  slide   18,  titled  "Project  Steering                                                              
Committee,"   which   read  as   follows   [original   punctuation                                                              
provided]:                                                                                                                      
                                                                                                                                
     Chair: Dennis Watson - Craig                                                                                               
     ? Dave Kensinger - Petersburg                                                                                              
     ? Greg Wakefield - Anchorage                                                                                               
     ? Elizabeth Bolling - Ketchikan                                                                                            
     ? Shannon Adamson - Juneau                                                                                                 
     ? Josh Howes - Anchorage                                                                                                   
     ? Will Ware - Juneau                                                                                                       
     ? Sharon Hildebrand - Fairbanks                                                                                            
     ? John Whiddon - Kodiak                                                                                                    
     ? Dan Kelly - Ketchikan                                                                                                    
     ? Michael Anderson - Cordova                                                                                               
     ? Dennis Bousson  Skagway                                                                                                  
     ? Ex-officio  Commissioner Luiken                                                                                          
     ? Staff: Robert Venables                                                                                                   
                                                                                                                                
MR. WATERHOUSE thanked the steering committee.                                                                                  
                                                                                                                                
2:28:02 PM                                                                                                                    
                                                                                                                                
MR. WATERHOUSE reviewed the funding supporters, listed on slide                                                                 
1, titled "Project Sponsors" which read as follows"                                                                             
                                                                                                                                
     LEGACY CONTRIBUTORS                                                                                                        
     ? City & Borough of Juneau                                                                                                 
     ? City of Ketchikan                                                                                                        
     ? City of Valdez                                                                                                           
     ? First Bank                                                                                                               
     ? Haines Borough                                                                                                           
     ? State of Alaska                                                                                                          
                                                                                                                                
     BENEFACTORS                                                                                                                
     ? Alaska Committee                                                                                                         
     ? City and Borough of Sitka                                                                                                
     ? Lynden Inc.                                                                                                              
                                                                                                                                
     BRONZE SPONSORS                                                                                                            
                                                                                                                                
     ? Best Western Landing Plus                                                                                                
     Central Council Tlingit Haida Indian Tribes of Alaska                                                                      
     ? City and Borough of Wrangell                                                                                             
     ? City of Cordova                                                                                                          
     ? City of Craig                                                                                                            
     ? City of Pelican                                                                                                          
     ? City of Thorne Bay                                                                                                       
     ? City of Unalaska                                                                                                         
     ? Cordova Chamber                                                                                                          
     ? Greater Sitka Chamber                                                                                                    
     ? Huna Totem                                                                                                               
     ? Hyder Community Association                                                                                              
     ? Inter-Island Ferry Authority                                                                                             
     ? Madison Lumber & Hardware                                                                                                
     ? Marine Engineers ? Masters Mates and Pilots Union                                                                        
     ? Petersburg Chamber of Commerce                                                                                           
     ? Petersburg Economic Development Council                                                                                  
     ? Sitka Economic Development Association                                                                                   
     ? Sitka Tribes of Alaska                                                                                                   
     ? SouthWest Alaska Municipal Conference (SWAMC)                                                                            
     ? Travel Juneau                                                                                                            
     ? Wrangell Convention and Visitors Bureau                                                                                  
                                                                                                                                
     SILVER SPONSORS                                                                                                            
     ? City of Kodiak                                                                                                           
     ? Ketchikan Marine Industry Council                                                                                        
     ? Municipality of Skagway                                                                                                  
     ? Prince William Sound Economic Development District                                                                       
     ? Vigor, Ketchikan Alaska                                                                                                  
                                                                                                                                
MR.  WATERHOUSE commented  that  many communities  contributed  to                                                              
the AMHS Reform Project, as well as many government entities.                                                                   
                                                                                                                                
2:28:36 PM                                                                                                                    
                                                                                                                                
SUSAN BELL,  Principal, McDowell  Group, continued the  PowerPoint                                                              
presentation.   She reviewed slide  20, titled "Overview  of Phase                                                              
3," which read as follows [original punctuation provided]:                                                                      
                                                                                                                                
     ?Tactical Strategy                                                                                                         
     ?Interim Measures                                                                                                          
     ?Action Plan                                                                                                               
                                                                                                                                
          Challenging Times Require All Hands on Deck                                                                           
                                                                                                                                
2:28:46 PM                                                                                                                    
                                                                                                                                
MS.  BELL said  that "Phase  2"  concluded with  the draft  report                                                              
presented  in Haines  in  September (2017)  and  at the  Southeast                                                              
Conference that  met last week in  Juneau.  Throughout  "Phase 2,"                                                              
the initiative did  not have transition plan funding;  however, it                                                              
currently has  a lean transition  plan budget.  She  reported that                                                              
the tactical  strategy has been  completed.  It  largely described                                                              
for the  steering committee, the  Southeast Conference  board, and                                                              
others,  the  legislative  process, timing,  and  budget  process,                                                              
including how the  public can engage in that  process.  Currently,                                                              
the ["McDowell Group"]  has been identifying measures  that can be                                                              
done now  and whether the  system can begin  to move  towards some                                                              
of these  objectives  or implement  some of the  things that  were                                                              
learned in the "Phase 2" report.                                                                                                
                                                                                                                                
2:29:35 PM                                                                                                                    
                                                                                                                                
MS.  BELL  reviewed  slide 21,  titled  "Developing  Concepts  for                                                              
Interim  Measures" which  read  as follows  [original  punctuation                                                              
provided]:                                                                                                                      
                                                                                                                                
     ?Identify actions that can be taken now                                                                                    
          ? Enhance sustainability of the system                                                                                
          ? Align with larger objectives                                                                                        
                                                                                                                                
MS.  BELL said  if  enabling legislation  passes  that the  action                                                              
plan would  outline how  to get from  the current organization  to                                                              
the future.  The  group presented some of the  initial concepts at                                                              
Southeast Conference  last week  in Juneau,  she stated.   Another                                                              
concept  is  to   examine  whether  an  administrative   order  or                                                              
executive  order  is  needed  for  the  system,  and  if  not,  to                                                              
identify any other barriers.                                                                                                    
                                                                                                                                
2:30:18 PM                                                                                                                    
                                                                                                                                
MS.  BELL reviewed  slide  22,  titled "Stabilize  Funding"  which                                                              
read [original punctuation provided]:                                                                                           
                                                                                                                                
     ? System has no resiliency                                                                                                 
     ? Current actions will have long-term implications on                                                                      
     the fleet, employees, and market                                                                                           
                                                                                                                                
MS. BELL  emphasized that  funding to create  a corporation  is an                                                              
urgent  issue, although  she did  not wish to  belabor the  point.                                                              
She acknowledged that  "Elliott Bay" has more depth  in this area;                                                              
however,  the "McDowell  Group"  did want  mention that  decisions                                                              
made for  training, maintenance,  and port  operations have  long-                                                              
range implications and can help ensure consistent operations.                                                                   
                                                                                                                                
                                                                                                                                
MS.  BELL   reviewed  slide   23,  titled   "Fleet  and   Terminal                                                              
Standardization"  which  read  as  follows  [original  punctuation                                                              
provided]:                                                                                                                      
                                                                                                                                
     ? Standardization results in budget savings                                                                                
       Training, labor contracts, maintenance, port operations                                                                  
      ? Modern automations can reduce crew requirements by                                                                      
       10 percent                                                                                                               
                                                                                                                                
2:30:46 PM                                                                                                                    
                                                                                                                                
MS. BELL  acknowledged that "Elliott  Bay" has more depth  in this                                                              
area;  however,  the  "McDowell   Group"  did  want  mention  that                                                              
decisions  made for  training,  maintenance,  and port  operations                                                              
have  long-range  implications  and can  help  provide  consistent                                                              
operations.   The  group will  be  working more  closely with  the                                                              
DOT&PF,  the  Governor's office,  and  the  DOA to  identify  more                                                              
details.                                                                                                                        
                                                                                                                                
                                                                                                                                
MS. BELL  reviewed slide 24,  titled "Labor Relations"  which read                                                              
as follows [original punctuation provided]:                                                                                     
                                                                                                                                
     ? Shift negotiations from DOA to AMHS                                                                                      
          ? Enhance labor/management relations                                                                                  
     ? Establish Director of Labor Relations                                                                                    
          ? Free senior management from time spent in disputes,                                                                 
          discipline, and negotiations                                                                                          
       ? Build internal knowledge base and relationships                                                                        
          needed to lead contract negotiations                                                                                  
                                                                                                                                
MS.  BELL recalled  Co-Chair  Wool  previously asked  about  labor                                                              
relations.   She  concurred that  the DOA  leads the  negotiations                                                              
and  the AMHS  has been  a participant  in  an advisory  capacity.                                                              
She suggested that  if the AMHS was leading the  negotiations that                                                              
it could develop  expertise in leading negotiations;  however, the                                                              
"McDowell  Group"  also  recommends   that  a  Director  of  Labor                                                              
Relations  position be  contemplated.   This  would allow  Captain                                                              
Falvey  and  other  senior  management  time  to  focus  on  other                                                              
issues, including  to resolve disputes, engage in  discipline, and                                                              
be involved in  negotiations, which are all  important activities.                                                              
The  "McDowell  Group's" role  has  been  to review  other  public                                                              
corporations,  including  the  Alaska  Railroad  Corporation,  the                                                              
Mental Health Trust  Authority, and Permanent Fund  Corporation to                                                              
see  what lessons  are applicable,  she  said.   For example,  the                                                              
Alaska Railroad  has a  single Director  of Labor Relations  since                                                              
the  [labor relations]  process  involves  building knowledge  and                                                              
relationships.   She  pointed out  that impacts  from turnover  is                                                              
not just  within the  DOT&PF, but  also in  the Governor's  office                                                              
and the DOA.   She acknowledged that the learning  curve is steep.                                                              
She reiterated  that the system  would benefit from  continuity in                                                              
the labor relation's position.                                                                                                  
                                                                                                                                
2:33:12 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  STUTES related  her understanding  that there needed  to                                                              
be a  more continuity  in upper  management due  to the  political                                                              
effects.     She  offered  her   belief  that  a   public  private                                                              
partnership could offer more stability the whole process.                                                                       
                                                                                                                                
MS.  BELL  concurred,  stating  that it  ties  in  throughout  the                                                              
system,  that  a  change  in  vessel   affects  training  or  port                                                              
configurations resulting in budget implications.                                                                                
                                                                                                                                
2:34:26 PM                                                                                                                    
                                                                                                                                
MS. BELL  reviewed slide 25,  titled "Continue Market  and Revenue                                                              
Analysis" which read as follows [original punctuation provided]:                                                                
                                                                                                                                
         Need to understand markets to deploy resources                                                                         
     effectively                                                                                                                
          ? Bellingham = 44% of operating revenues                                                                              
          ? Non-residents = 42% of revenues                                                                                     
     ? Passengers have statewide impacts                                                                                        
          ? Non-residents travel throughout road system                                                                         
               ? 51% visit Anchorage                                                                                            
               ? 36% visit Denali                                                                                               
               ? 25% visit Fairbanks                                                                                            
                                                                                                                                
MS. BELL recapped  that market and revenue analysis  was performed                                                              
as previously  highlighted.   The "McDowell  Group" also  examined                                                              
non-revenue sources.   She said that the AMHS needs  to delve more                                                              
deeply  beyond  the  context  of   the  study  to  understand  the                                                              
markets,  and   to  deploy  market   resources  and   assets  more                                                              
effectively.    She  emphasized   the  passengers  have  statewide                                                              
impacts,  noting  that  nonresidents travel  throughout  the  road                                                              
system  and most  often visit  Anchorage,  Denali, and  Fairbanks.                                                              
In  fact, this  has  been  a consistent  finding,  she  said.   In                                                              
response to  a question, she  referred to  a map with  more detail                                                              
on  destinations throughout  Alaska.   She  acknowledged that  her                                                              
point was to  demonstrate the top three destinations  were outside                                                              
the coastal communities.                                                                                                        
                                                                                                                                
2:37:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL  asked for further  clarification on the  ferry port                                                              
used to access Anchorage.                                                                                                       
                                                                                                                                
MS.  BELL   answered  popular   disembarkations  are   Haines  and                                                              
Skagway.   She offered to  show him the  tables, which  are sorted                                                              
by revenue and numbers of passengers.                                                                                           
                                                                                                                                
2:38:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  WOOL  said  he  was  familiar  with  the  Haines  ferry,                                                              
although this  disembarkation requires  crossing the  border [into                                                              
Canada and  then to Alaska], which  makes it more cumbersome.   He                                                              
noted  the  Alaska   Railroad  route  links  the   communities  of                                                              
Anchorage,  Denali,  Fairbanks, and  Seward.   He  suggested  that                                                              
tying  the  AMHS  to  the  Alaska  Railroad  routes  could  create                                                              
synergy.                                                                                                                        
                                                                                                                                
                                                                                                                                
MR. VENABLES  responded, stated  that the  AMHS direct  service to                                                              
Seward  was discontinued.   The  AMHS  currently serves  Whittier.                                                              
He characterized  the inner-connectivity  that  the AMHS  wants to                                                              
promote.    For  example,  a  person  can  currently  travel  from                                                              
Fairbanks  to Miami,  by  rail, connecting  to  the ferry  system,                                                              
disembarking   in  Bellingham,  switching   to  Amtrak   rail  and                                                              
ultimately  arriving in  Miami.   He characterized  the AMHS  as a                                                              
vital connection the road system, the rail, and to airports.                                                                    
                                                                                                                                
2:40:21 PM                                                                                                                    
                                                                                                                                
MS. BELL  continued by stating that  this analysis can  be used to                                                              
make decisions.   She referred to  slide 26, titled  "AMHS carried                                                              
Alaskans from  175 communities, "  and offered to provide  the map                                                              
and details in a larger format that could be more easily read.                                                                  
                                                                                                                                
MS.  BELL reviewed  slide 27,  titled  "Alaska Resident  Details,"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     ? Fairbanks North Star Borough                                                                                             
          ? 3,316 passengers                                                                                                    
          ? 1,409 vehicles \                                                                                                    
           From Fairbanks, Fort Wainwright, North Pole,                                                                         
          Eielson, Salcha, and more                                                                                             
     ? Bethel Census Area                                                                                                       
          ? 218 passengers, 52 vehicles                                                                                         
         ? From Aniak, Kipnuk, Kwethluk, Sleetmute, and                                                                         
     more                                                                                                                       
                                                                                                                                
2:42:23 PM                                                                                                                    
                                                                                                                                
MS.  BELL reviewed  slide 28,  titled "Additional  Considerations"                                                              
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     ?Operational Changes                                                                                                       
        ? Efficiencies available from vessel deployment,                                                                        
     planning, maintenance                                                                                                      
     ? Board and Staff Development                                                                                              
        ? Gain needed business knowledge and leadership                                                                         
     skills to run the organization                                                                                             
                                                                                                                                
MS. BELL characterized  these as interim measures.   She suggested                                                              
that the  AMHS system  could move  incrementally towards  the type                                                              
of  system   that  is   important.     What  warrants   additional                                                              
discussion,  is  what  type  of staff  and  board  development  is                                                              
needed  so  if  the  legislature  passed  the  bill  to  create  a                                                              
corporation  that   people  would   have  leadership   skills  and                                                              
knowledge to move  forward.  She suggested the  committee may wish                                                              
to  have a  follow-up  meeting.   She  said the  "McDowell  Group"                                                              
would  like to  take this  information  and have  the system  move                                                              
forward without waiting for some future date.                                                                                   
                                                                                                                                
2:43:34 PM                                                                                                                    
                                                                                                                                
MS. BELL  reviewed  slide 29, titled  "In Closing"  which  read as                                                              
follows [original punctuation provided]:                                                                                        
                                                                                                                                
          ?AMHS is a critical aspect of the statewide                                                                           
     transportation system                                                                                                      
     ? Statewide users and benefits                                                                                             
      ?Working to achieve a more sustainable, businesslike                                                                      
     operation                                                                                                                  
                                                                                                                                
MS. BELL  recalled earlier testifiers  who highlighted  the missed                                                              
opportunities with the current AMHS.                                                                                            
                                                                                                                                
2:44:22 PM                                                                                                                    
                                                                                                                                
MR.  VENABLES  thanked  committee  members for  listening  to  the                                                              
presentation.   He reported that  Southeast Conference  was formed                                                              
in 1958  and its first  objective was to  create the AMHS.   Sixty                                                              
years later, the  Southeast Conference has the same  passion as an                                                              
organization  to recreate  it.   The  Southeast  Conference has  a                                                              
[huge] stack of  studies articulating problems of the  AMHS.  This                                                              
has been  the first effort to  identify a solution set,  which may                                                              
not  be   perfect  yet,   he  said.     He  emphasized   that  the                                                              
organization would  like to engage with the legislature  to find a                                                              
more perfect  management  model going forward.   He  characterized                                                              
the consultants'  work  as amazing,  noting at  one point,  over 3                                                              
million data points  had been considered to pull  this information                                                              
together.                                                                                                                       
                                                                                                                                
2:45:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  STUTES  thanked  the  presenters.    She  said  she  was                                                              
excited  to see  that this  is a  statewide project  to address  a                                                              
statewide problem.                                                                                                              
                                                                                                                                
2:46:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP  said he was very excited  about the direction                                                              
the  Southeast Conference  was recommending.    He considered  the                                                              
concept of operating  the AMHS using a business  approach was very                                                              
significant.   He noted that allowing  a more direct,  rather than                                                              
a mediated  relationship  with the  labor sector,  and being  more                                                              
nimble, responsive,  and effective.   He  offered his  belief that                                                              
the  ability  to  allow for  partnerships  is  greater,  that  the                                                              
governor  has  granted a  waiver  for  Prince  Rupert on  the  Buy                                                              
America  Act  for  sourcing  steel  for  a dock.    He  said  that                                                              
goodwill  with Canada  is currently  very high.   He  acknowledged                                                              
some  things could  be  done with  British  Columbia ferries,  and                                                              
other  things that  are just  not  possible right  now [using  the                                                              
recommendations].   He  said he  was  excited.   He applauded  the                                                              
Southeast  Conference   and  the  consultants  who   brought  this                                                              
forward.                                                                                                                        
                                                                                                                                
2:47:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND said she  was excited  to hear  that this                                                              
was  moving in  the right  direction.   She  said she  has been  a                                                              
passenger on  the Inner-Island Ferry  from Ketchikan to  Prince of                                                              
Wales  Island.   She was  glad to  see  the stakeholders  involved                                                              
from all  areas of the  state.  She said  she was born  and raised                                                              
in New  York City, that  her grandmother  was raised on  a 10-acre                                                              
farm  on  Staten  Island,  and she  has  spent  considerable  time                                                              
riding  on the  Staten  Island  ferries.   She  said  she and  her                                                              
mother did  not learn to  drive until later  in life  because they                                                              
used public transportation.   Mr. Venables previously  mentioned a                                                              
person could  walk on in Fairbanks  and walk off in Florida.   She                                                              
said  it is  important to  consider every  user.   In fact,  every                                                              
DOT&PF  project needs  to consider  every user,  not just  cars on                                                              
highways,  but also  the walkers,  the strollers,  and the  bikes.                                                              
She liked  that the  project considered  how other states  recover                                                              
their costs.   She said she challenged the commissioner  of DOT&PF                                                              
to  demonstrate what  part of  the paved  highway system  recovers                                                              
revenues  to the  degree  that the  ferry system  does  now.   She                                                              
said, "It's not,  that's just not happening."   She commented that                                                              
Washington  state recovers  75 percent  of its  costs and  another                                                              
state recovers 13 percent of its costs.                                                                                         
                                                                                                                                
2:49:57 PM                                                                                                                    
                                                                                                                                
MR.  WATERHOUSE   commented  that  it  was  North   Carolina  that                                                              
recovers   13  percent   of   its   overall  costs   from   fares.                                                              
Incidentally,  his firm,  Elliott Bay Design  Group, designed  the                                                              
new Staten Island  ferries that are currently  under construction,                                                              
he  said.   Every system  is unique;  that Alaska  is more  unique                                                              
than  most.  He  encouraged  the   committee  to  understand  that                                                              
working  with complexities  is part  of  what needs  to happen  to                                                              
move  forward.   He was  pleased  that the  DOT&PF, the  executive                                                              
branch,  and  labor has  acknowledged  the  crisis, but  that  the                                                              
crisis could drive change in a positive direction for the AMHS.                                                                 
                                                                                                                                
2:50:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  WOOL said  he would  need more  time to  take a trip  to                                                              
Miami, that  his brother  is currently  on a  train trip.   Having                                                              
taken a  trip to Kodiak  via the  AMHS with Representative  Stutes                                                              
and reviewing  this today makes  him excited  about the AMHS.   It                                                              
also makes  him want to  take another trip  via the  ferry system.                                                              
He wishes  the AMHS was  more accessible to  the road system.   He                                                              
offered  his  belief  that  changing  the  model  to  a  corporate                                                              
structure is  important.  Although  many things need to  be sorted                                                              
through, it seems  like they were on the right track.   He thanked                                                              
the presenters.                                                                                                                 
                                                                                                                                
2:52:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  STUTES thanked  the  Southeast Conference,  the  Elliott                                                              
Bay Design  Group, the McDowell  Group and the steering  committee                                                              
for the AMHS for this presentation.                                                                                             
                                                                                                                                
2:53:15 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Transportation  Standing Committee meeting  was adjourned  at 2:53                                                              
p.m.                                                                                                                            
                                                                                                                                

Document Name Date/Time Subjects
AMHS Reform Presentation 2.15.18.pdf HTRA 2/15/2018 1:15:00 PM
Additional Documents - The Case for AMHS Reform 2.15.18.pdf HTRA 2/15/2018 1:15:00 PM
Alaska Marine Highway Reform Initiative