Legislature(2017 - 2018)BARNES 124

03/08/2018 01:15 PM TRANSPORTATION

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Audio Topic
01:16:46 PM Start
01:17:48 PM Presentation: Proposal of Committee Sponsored Bill Regarding Alaska Marine Hwy/public Corp.
01:49:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Proposal of Committee Sponsored TELECONFERENCED
Bill Regarding AK Marine Highway/Public Corp.
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                         March 8, 2018                                                                                          
                           1:16 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Louise Stutes, Co-Chair                                                                                          
Representative Adam Wool, Co-Chair                                                                                              
Representative Matt Claman                                                                                                      
Representative Harriet Drummond                                                                                                 
Representative Chuck Kopp                                                                                                       
Representative Mark Neuman                                                                                                      
Representative Colleen Sullivan-Leonard                                                                                         
MEMBERS ABSENT                                                                                                                
Representative David Eastman (alternate)                                                                                        
Representative Gabrielle LeDoux (alternate)                                                                                     
COMMITTEE CALENDAR                                                                                                            
PRESENTATION: PROPOSAL OF COMMITTEE SPONSORED BILL REGARDING                                                                    
ALASKA MARINE HWY/PUBLIC CORP.                                                                                                  
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
SUSAN BELL, Principal                                                                                                           
McDowell Group                                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Gave a Presentation regarding the proposal                                                               
of a committee sponsored bill regarding the Alaska Marine                                                                       
Highway Corporation.                                                                                                            
ACTION NARRATIVE                                                                                                              
1:16:46 PM                                                                                                                    
CO-CHAIR LOUISE STUTES called the House Transportation Standing                                                               
Committee meeting to order at 1:17 p.m.  Representatives Neuman,                                                                
Sullivan-Leonard,  Drummond,   Claman,  Wool,  and   Stutes  were                                                               
present at  the call  to order.   Representative Kopp  arrived as                                                               
the meeting was in progress.                                                                                                    
^Presentation:  Proposal of  Committee  Sponsored Bill  Regarding                                                               
Alaska Marine Hwy/Public Corp.                                                                                                  
  Presentation: Proposal of Committee Sponsored Bill Regarding                                                              
               Alaska Marine Highway/Public Corp.                                                                           
1:17:48 PM                                                                                                                    
CO-CHAIR STUTES announced  that the only order  of business would                                                               
be the  presentation regarding proposal of  a committee-sponsored                                                               
bill regarding the Alaska Marine Highway Public Corporation.                                                                    
CO-CHAIR  STUTES reviewed  that during  the House  Transportation                                                               
Standing  Committee  meeting  held  on  February  15,  2018,  the                                                               
committee had heard from the  Southeast Conference and the Alaska                                                               
Marine  Highway Reform  Steering Committee  on the  necessity and                                                               
future  of  Alaska's  Marine  Highway   system.    The  Southeast                                                               
Conference  has  requested  legislation establishing  the  Alaska                                                               
Marine Highway  Corporation.   She stated  her intent  that after                                                               
the  committee  hears  the presentation,  it  would  then  decide                                                               
whether  to   go  forward  as   the  sponsor  on  this   type  of                                                               
1:18:58 PM                                                                                                                    
SUSAN BELL,  Principal, McDowell Group, stated  that the McDowell                                                               
Group  participated in  the Alaska  Marine Highway  System (AMHS)                                                               
reform  project,  which was  led  by  Elliott Bay  Design  Group.                                                               
There was a  more detailed review of phase 2  and an introduction                                                               
of phase 3  at the presentation given on February  15, 2018.  She                                                               
said that  in 2016, Elliott Bay  Design Group led phase  1 of the                                                               
project  to  consider  governance  structures  of  ferry  systems                                                               
throughout  the world.   A  statewide  transportation summit  was                                                               
held  in  Anchorage, Alaska,  to  gather  information before  the                                                               
Southeast Conference  meeting in Petersburg.   The recommendation                                                               
made was  to explore  governance more  thoroughly, with  the idea                                                               
that  a  public  corporation  similar   to  the  Alaska  Railroad                                                               
Corporation would benefit  the Marine Highway.  She  spoke of the                                                               
expertise  of  Elliott  Bay  Design Group  and  noted  that  John                                                               
Waterhouse, from the group, was present last month.                                                                             
1:20:50 PM                                                                                                                    
MS. BELL  discussed phase 2.   She noted that McDowell  Group led                                                               
the revenue analysis, which looked  at [the Alaska Marine Highway                                                               
System's] AMHS's  existing traffic, routes, and  revenue, as well                                                               
as nonoperating  revenue sources that  may need to  be considered                                                               
sometime  in the  future.    She said  that  makes  up the  first                                                               
section of  the PowerPoint  presentation.   She said  Elliott Bay                                                               
Design Group  looked at  the existing  operation and  developed a                                                               
financial  model,  and  the  group  looked  at  ways  to  achieve                                                               
operational  savings.   Considering  the age  of Alaska's  fleet,                                                               
there could  be savings with a  newer fleet, for example  in fuel                                                               
or  operational costs.   Ms.  Bell said  she participated  in the                                                               
consideration  of the  public corporation  and governance  model.                                                               
She    named   other    corporations   that    have   significant                                                               
responsibilities  and   assets,  such  as  the   Alaska  Railroad                                                               
Corporation,  the  Alaska  Permanent Fund  Corporation,  and  the                                                               
Alaska Mental Health Trust Authority.   The result of the phase 2                                                               
report was the recommendation of  a public corporation because of                                                               
financial  expertise  and guidance.    She  said maintaining  the                                                               
Alaska Marine Highway as a  public corporation would maintain the                                                               
existing  strength  of   interdepartmental  coordination,  public                                                               
purpose,  access  to federal  funding  and  shared services  that                                                               
support  all state  agencies, and  it would  address some  of the                                                               
existing   limitations.       She   mentioned    indirect   labor                                                               
negotiations,  a shorter-term  planning horizon,  and recognition                                                               
of  turnover in  senior  leadership of  commissioners and  deputy                                                               
MS. BELL  said McDowell Group  supports public involvement.   She                                                               
informed the  committee that Marine  Highway documents  are found                                                               
on amhsreform.com.  She thanked  AMHS for the support provided to                                                               
produce this project.                                                                                                           
1:24:58 PM                                                                                                                    
REPRESENTATIVE NEUMAN mentioned the  Executive Budget Act, and he                                                               
expressed interest  in how  [the reform]  would work  through the                                                               
Department  of Transportation  & Public  Facilities (DOT&PF)  and                                                               
the legislature's budget process.                                                                                               
MS. BELL  answered that McDowell  Group made a  recommendation in                                                               
its  phase 2  report for  a  seven-member board  exempt from  the                                                               
Procurement Act with adherence to  the Executive Budget Act.  She                                                               
said the  group was  trying to  recognize "where  to draw  on the                                                               
strength of  existing organizations" - private  sector expertise,                                                               
as well  as other  state support.   She emphasized  that McDowell                                                               
Group did  not want to  jeopardize "some of the  other Department                                                               
of Law supports."                                                                                                               
REPRESENTATIVE NEUMAN asked how fees would be set.                                                                              
MS. BELL  answered that the corporation  should have rate-setting                                                               
authority,  but   she  recognized  the  legislature's   power  of                                                               
1:28:03 PM                                                                                                                    
REPRESENTATIVE NEUMAN  asked how the  board would be funded.   He                                                               
remarked that AMHS  is already under pressure because  of lack of                                                               
MS. BELL  said McDowell Group  studied other  public corporations                                                               
with significant  assets and  operating responsibilities,  and it                                                               
estimated  that  the seven-member  board  might  have a  cost  of                                                               
approximately $25,000.   She said the group  believes there could                                                               
be flexibility  in the rate  structure.  Further, she  said there                                                               
may be  the opportunity for other  non-operating revenue sources,                                                               
such  as   bonding  or  partnering  with   tribal  transportation                                                               
interest  in   ensuring  small  rural  communities   are  served.                                                               
McDowell Group also looked at what  it would take to have a fund,                                                               
which she  emphasized was not  a recommendation but was  a method                                                               
of helping  to answer  the questions that  might come  up through                                                               
this process, because "it probably  takes a package of things for                                                               
us to really fund this system."                                                                                                 
REPRESENTATIVE  NEUMAN  requested   committee  members  be  given                                                               
copies  of the  recommendations made  by McDowell  Group, and  he                                                               
said  he would  like to  know how  maintenance repair  and vessel                                                               
replacement would be structured.                                                                                                
MS.  BELL  speculated  that  if the  legislature  decides  to  go                                                               
forward with  this, it  would probably  require a  discussion the                                                               
length of a couple legislative  sessions, because it is a complex                                                               
issue.  Regarding  capital needs, she said, "Maintaining  it as a                                                               
public  corporation allows  that access  to federal  funds, which                                                               
are  critical to  the  system ...."    She said  phase  3 is  the                                                               
current phase,  and it is a  small one; it's about  $15,000.  She                                                               
said  phase  3  begins  to answer  some  of  the  forward-looking                                                               
questions.  She said McDowell  Group put together a memorandum to                                                               
help the  steering committee understand the  legislative process.                                                               
McDowell  Group is  looking at  what  can be  done now.   Key  is                                                               
stabilizing  funding  so  that  the system  does  not  fall  into                                                               
further  disrepair.   Second is  that AMHS  and DOT&PF  can begin                                                               
actions that align  with "where the public  corporation might be"                                                               
in  terms of  decisions being  made about  fleet, terminals,  and                                                               
operational  standardization.   Ms.  Bell  related that  McDowell                                                               
Group also recommended a change  from labor negotiations from the                                                               
Department  of  Administration  (DOA) to  the  [proposed]  Marine                                                               
Highway Corporation.   She emphasized  the recommendation  is not                                                               
to undercut the  quality of DOA, but to allow  the corporation to                                                               
conduct   its  own   negotiations,  which   would  build   needed                                                               
expertise.  She said AMHS  currently supports those negotiations,                                                               
but  McDowell  Group envisions  one  new  staff member  would  be                                                               
necessary.   She said that  "gaining that experience  between now                                                               
and ... actual transition would be beneficial."                                                                                 
MS.  BELL said  there is  another beneficial  phase that  will be                                                               
more technical.   It  will address  the vessel,  risk management,                                                               
the  board, and  engagement.   If legislation  passed within  the                                                               
next  year, there  is  still  a transition  period  that will  be                                                               
needed, and  there needs  to be  a record of  this phase  so that                                                               
people understand it.                                                                                                           
1:35:50 PM                                                                                                                    
REPRESENTATIVE SULLIVAN-LEONARD  asked if there are  other marine                                                               
highway systems across the nation that run by corporation.                                                                      
MS. BELL noted that phase 1 was  a small phase.  She relayed that                                                               
BC Ferries, in  British Columbia, moved to  a public corporation.                                                               
In its history,  the Washington ferry system  had some structures                                                               
similar  to a  public  corporation.   She  said  there are  fully                                                               
privately-owned corporations.   She imparted that  a ferry system                                                               
in Scotland  was studied.   She said  she would  ensure committee                                                               
members had access to the related documents.                                                                                    
REPRESENTATIVE  SULLIVAN-LEONARD   mentioned  "a  long   list  of                                                               
supporters for the  study" and asked if there  was any discussion                                                               
as  to  whether   they  would  continue  their   support  of  the                                                               
corporation   concept.     She  described   stakeholders,  tribal                                                               
entities,  and communities  remaining engaged  in the  operations                                                               
and oversight of the operation.                                                                                                 
MS. BELL  responded that there  were approximately  40 supporters                                                               
[listed], and they wanted to  show that the marine transportation                                                               
system was important  to their businesses and  communities and to                                                               
the  state.   She  recollected  that  "the non-operating  revenue                                                               
portion  of this  report" contemplated  ... partnering  more with                                                               
tribal transportation entities; however,  she did not think there                                                               
was "a connection  where they feed together."   Nevertheless, she                                                               
stated,  "I  think  this really  demonstrated  ...  the  critical                                                               
nature  ... of  the system."   She  emphasized the  importance of                                                               
ridership and  said Alaskans throughout  the state  are utilizing                                                               
the   marine  highway   system   for   business,  pleasure,   and                                                               
REPRESENTATIVE SULLIVAN-LEONARD  responded that she thinks  it is                                                               
important  to  highlight that  [support],  because  the State  of                                                               
Alaska would  be investing  millions of  dollars for  this "semi-                                                               
private corporation."   She opined that the  stakeholders need to                                                               
have  not only  "a say  in it,"  but also  "a stake  in it,  both                                                               
financially and otherwise."                                                                                                     
1:40:43 PM                                                                                                                    
CO-CHAIR STUTES  invited committee  comments.  She  restated that                                                               
the final action  of the committee would be to  decide whether to                                                               
pursue the requested legislation to  discuss the possibility of a                                                               
public/private  partnership   with  the  Alaska   Marine  Highway                                                               
1:41:05 PM                                                                                                                    
REPRESENTATIVE  KOPP emphasized  his enthusiasm  for the  idea of                                                               
having  a  professional  board  rather than  "trying  to  get  60                                                               
legislators  up to  speed on  the  complex issues  of the  Marine                                                               
Highway System ...."   He asked committee members  to imagine the                                                               
legislature trying  to run  the Anchorage  International Airport.                                                               
He said it  would be a disaster.   He said it is  the number four                                                               
air cargo  airport in the world,  and it is self-sustaining.   He                                                               
highlighted  the  efficiency  of   working  out  labor  contracts                                                               
without the  Department of Administration.   He  concluded, "It's                                                               
hard  to imagine  ... the  various chambers  of commerce  and the                                                               
individual communities that  rely on this as a  business driver -                                                               
an economic driver - not ... being excited about this."                                                                         
1:42:27 PM                                                                                                                    
CO-CHAIR STUTES  said another huge  benefit would be in  having a                                                               
static   board,  as   opposed  to   the  potential   turnover  of                                                               
commissioner  every four  years, which  affects the  stability of                                                               
1:43:11 PM                                                                                                                    
REPRESENTATIVE CLAMAN  said he supports  moving forward  with the                                                               
public/private structure being  discussed.  He said  he thinks it                                                               
is  a positive  step.   In  the  last few  years,  AMHS has  been                                                               
restricted  in its  ability  to maximize  revenue  because it  is                                                               
waiting on the legislature to  approve its budget and cannot even                                                               
put a  schedule in place  without the  budget.  He  mentioned the                                                               
interest and value [of the  ferry system] to coastal communities,                                                               
and he said coming from Anchorage,  he hears more about people in                                                               
Prince William Sound accessing the  ferry, but "it is an enormous                                                               
part of how our entire  transportation structure works."  He said                                                               
that  he  strongly  supported  moving forward  with  a  bill  and                                                               
starting the process.                                                                                                           
1:44:08 PM                                                                                                                    
REPRESENTATIVE  NEUMAN  said he  would  like  to learn  more  and                                                               
receive more  information.   He said  there is a  lot to  know in                                                               
order   to  form   a  state   corporation,  for   example,  labor                                                               
negotiations and  the setting  of community  taxation rates.   He                                                               
credited former Representative  Peggy Wilson for her  work on the                                                               
Transportation Advisory  Board, which  ensures the  state gathers                                                               
information from communities  around the state.  He  said he does                                                               
not  think  he  has  enough   information  currently.    He  said                                                               
committee  members are  responsible for  reading the  information                                                               
from McDowell Group.   He recollected that Ms. Bell  had said the                                                               
legislature would  likely spend a couple  [legislatures] figuring                                                               
everything  out,  and he  said  he  could  understand that.    He                                                               
questioned  how  the legislature  would  come  up with  a  couple                                                               
hundred million  dollars for a fund.   He concluded, "I  like the                                                               
work  that  they're  doing  here,  and we'll  see  what  kind  of                                                               
questions come up next time."                                                                                                   
1:45:42 PM                                                                                                                    
REPRESENTATIVE DRUMMOND related  that she had ridden  the ferry a                                                               
couple of times  before she was elected in 2012,  and in just six                                                               
years  she has  seen  how the  scheduling has  changed.   It  has                                                               
become more difficult  for her to get herself  and her belongings                                                               
to Juneau  because of those  changes, which she said  were caused                                                               
by management and  budget issues.  She said she  can only imagine                                                               
the  frustrations of  people who  depend on  the ferry  for their                                                               
everyday  transportation.   She said,  "I think  we should  write                                                               
this bill, get  us all onboard, and let her  rip."  She commented                                                               
on the  number of individuals, organizations,  and communities on                                                               
the list  formerly mentioned by  Representative Sullivan-Leonard,                                                               
and she  opined that the  committee needs to "not  hamstring them                                                               
and just get to work on this as quickly as we can."                                                                             
1:47:23 PM                                                                                                                    
CO-CHAIR WOOL  said he thinks  this is a  good idea.   He offered                                                               
his   understanding   that   public/private   corporations   have                                                               
different  types of  funding available  to  them and  are not  as                                                               
attached to  state government, thus  they can  make negotiations.                                                               
For example,  they could  outsource the  beverage service  on the                                                               
ferries.   He echoed Representative Drummond's  statement to "let                                                               
her rip."                                                                                                                       
CO-CHAIR STUTES  stated that  she would  entertain a  motion from                                                               
the committee.                                                                                                                  
1:48:29 PM                                                                                                                    
REPRESENTATIVE Wool moved that  the House Transportation Standing                                                               
Committee draft committee  sponsored legislation establishing the                                                               
Alaska Marine Highway Corporation.                                                                                              
1:48:39 PM                                                                                                                    
REPRESENTATIVE NEUMAN objected.                                                                                                 
1:48:40 PM                                                                                                                    
A roll  call vote was  taken.  Representatives  Drummond, Claman,                                                               
Kopp, Wool,  and Stutes  voted in  favor of  the motion  that the                                                               
House   Transportation   Standing   Committee   draft   committee                                                               
sponsored  legislation  establishing  the Alaska  Marine  Highway                                                               
Corporation.   Representatives Sullivan-Leonard and  Neuman voted                                                               
against it.  Therefore, the motion carried by a vote of 5-2.                                                                    
1:49:57 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Transportation Standing  Committee meeting was adjourned  at 1:50                                                               

Document Name Date/Time Subjects
Southeast Conference Bill Sponsorship Request 3.6.18.pdf HTRA 3/8/2018 1:15:00 PM
Alaska Marine Highway
AMHS Reform Presentation 2.15.18.pdf HTRA 3/8/2018 1:15:00 PM
Additional Documents - The Case for AMHS Reform 2.15.18.pdf HTRA 3/8/2018 1:15:00 PM